A condominium building under construction in Toronto
A condominium building under construction in Toronto Aaron Harris/Reuters

Toronto housing activists and politicians say a draft policy doesn’t go nearly far enough to provide affordable housing.

Politics in Ontario, as CityLab’s Richard Florida recently pointed out, has become something of a liberal lovefest, especially on issues of equity and inclusion. Long before Canada elected its feminist Prime Minister Justin Trudeau, the province of Ontario elected Premier Kathleen Wynne—the first woman and first openly gay person to hold the position, and a savvy politician. Her administration’s accomplishments range from expanding rent control to raising the minimum wage to implementing a basic income pilot in 11 cities and counties across the province. “At a time when … a large number of [U.S.] states [are] held by the GOP,” Florida wrote, “Wynne’s agenda is a model of more inclusive prosperity.”

One of Wynne’s legislative victories was the Promoting Affordable Housing Act, a law passed in December 2016. It contained a particular provision that got affordable housing activists dancing in the streets: The law authorized municipalities to implement inclusionary zoning, which requires developers to make a certain percentage of residential units available at below-market rates. Some 500 U.S. municipalities have enacted IZ policies as an antidote to expensive housing, but the tactic had never before been used in Canada.

However, the legislation said that cities had to hold tight on implementing IZ until the minister of housing had a chance to come up with the rules of the road. He did so just before Christmas 2017, publishing a draft version of the rules. The draft is inclusive with regard to developers—but with regard to lower-income city-dwellers, not so much.

Most IZ policies require somewhere between 10 and 30 percent of new units to be rented or sold at “affordable” rates (generally defined as a price point at which total monthly housing costs do not exceed 30 percent of median household income in the area). The Ontario proposal not only doesn’t require that, it prohibits cities from mandating affordable rates for more than 5 percent of units built in low-density areas; in higher-density areas, the cap is 10 percent.

A sold sign in front of a house in Toronto. The average home price in greater Toronto in November 2017 was $761,757. (Hyungwon Kang/Reuters)

It also would prohibit IZ on rental properties, although renting is the only housing option for most folks of modest means in Toronto, where the average price of a detached home is roughly $1.3 million ($1 million U.S.). About 90,000 households in Toronto are currently on the waiting list for the city’s subsidized housing. (These units are subsidized through a combination of city, province, and federal funding, and administered by the city.)

The advocacy group Social Planning Toronto estimates that the new policy, if enacted, would produce a maximum of 200 affordable units per year in the city—and the rules would allow the units to revert back to market rates after 30 years. By contrast, New York City’s new IZ policy, adopted in March 2016, resulted in 4,700 proposed affordable units in its first year.

Sean Meagher, the executive director of Social Planning Toronto, said that 99-year terms are increasingly common in IZ policies, and many cities, including New York, are opting to maintain IZ-designated properties in perpetuity. “Some cities that were early pioneers of inclusionary zoning had 20- or 30-year terms, which are now expiring, which means they are stuck with a double housing crisis,” Meagher said. “Kicking the can down the road to the next generation makes no sense from a public-policy point of view.”

Inclusionary zoning is not a silver bullet, and it has its fair share of critics. They point out that IZ policies often produce a modest number of below-market units compared to the number of households that need them. But inclusionary zoning is politically popular as a way to finance affordable housing without raising taxes, and it can help integrate neighborhoods by social class. Setting low standards for IZ in such a large jurisdiction—Ontario has a larger population than all but four U.S. states—threatens to dilute the meaning of the term.

In California, the real estate industry has exhaustively litigated inclusionary-zoning policies, so far to no avail. Opponents may see Ontario’s cautious approach as a win. As the CEO of the Ontario Home Builders’ Association, Joe Vaccaro, remarked to the Toronto Star, the proposal sends a clear message: Cities can no longer “command and demand” affordable housing.

Ontario housing activists aren’t the only ones who are angry about the draft. Local elected officials have banded together in protest. (One called it “a monstrous failure in public policy.”) The highly prescriptive nature of the regulations doesn’t grant cities the courtesy of thinking for themselves, and that alone is enough to rankle any city councilor. But there’s more: If Ontario cities want to implement inclusionary zoning, they will be required to reimburse developers for 40 percent of their lost profits. Cities with IZ policies often offer incentives or subsidies to soften the blow to developers’ bottom lines, but usually in the form of a density bonus or fast-tracked permits, not outright cash.

“This locks us into a set of parameters that favors developers and robs cities, who are perpetually short on resources,” said Mike Layton, the city councilor for a downtown Toronto ward where new high-rise luxury condos are sprouting fast, when reached by phone on a snowy February morning. He said he has little sympathy when developers complain about affordability initiatives. “They are in it for profit. It’s unreasonable to expect developers to make decisions that are to the benefit of society at large.”

Why structure the rules as a cap? Why not let cities design their own policies based on local conditions? I contacted the minister of housing, Peter Milczyn, to ask him why, given the premier’s relentless push on other equity issues, the bar for inclusionary zoning was not set higher. “This is something very new in Ontario that neither municipalities or builders are familiar with,” he said. “The thinking was, let’s put something out that …[will generate] dialogue about what people want, what they would accept. It is admittedly the minimal base for an IZ regime.”

Pressed for a rationale, he said, “We need to encourage more housing to be built. So I’m mindful of doing something that might have a negative impact on supply.”

Milczyn was referring to the theory that regulations can deter development to the point of reducing housing supply, and thus drive up overall housing costs in a given area. This is a common criticism, but research, for the most part, doesn’t back it up. Studies do show that the required percentage of affordable units must be in tune with what the local real estate market will bear. In Toronto’s in-demand neighborhoods, Meagher argued, that would be much higher than 10 percent.

Milczyn said he is receptive to the concerns of local activists and officials, and that in the finalized rules, the 5-to-10-percent cap will likely be revised a notch upwards, “[but] the basic framework won’t be much different.” He expects the final rules to be issued in a matter of weeks.

Meagher’s take-home message is one of missed opportunity. “We were overjoyed with the legislation when it passed in 2016,” he said, “but then the advocacy community fell quiet—whereas the development community got quite vocal, because they were so unhappy with it. I think the lesson is that we have to be noisy all the time.”

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