Inclusionary Zoning
Understand inclusionary zoning in Canadian real estate — what it is, how it works, and its role in housing affordability.
July 29, 2025
What is Inclusionary Zoning?
Inclusionary zoning is a municipal planning tool that requires or incentivizes developers to include a percentage of affordable housing units in new residential projects.
Why Inclusionary Zoning Matters in Real Estate
In Canadian urban planning, inclusionary zoning is used to increase the supply of affordable housing and promote mixed-income communities.
Key aspects:
- Policies may be mandatory or voluntary with incentives
- Can apply to rental or ownership housing
- Helps address housing affordability challenges
Understanding inclusionary zoning is essential for developers planning projects in municipalities with these policies.
Example of Inclusionary Zoning in Action
The city’s inclusionary zoning bylaw required 10% of units in the new condo development to be priced below market.
Key Takeaways
- Requires or incentivizes affordable units in new projects
- Helps address housing affordability
- Creates mixed-income communities
- Can be mandatory or incentive-based
- Affects project design and financial feasibility
Related Terms
- Affordable Housing Program
- Density Bonus
- Urban Planning
- Official Plan
- Sustainability
Canadian respondents were more likely to expect an undersupply of development/redevelopment equity capital (63%) than debt capital (46%) in 2027. These are survey expectations, not measured financing volumes. Source: PwC and ULI, Emerging Trends in Real Estate 2027, pp. 136–137. Original chart.
Toronto census metropolitan area housing starts fell from 37,718 units in 2024 to 26,087 in 2025, a 30.8% decline (rounded to 31%). Starts measure construction begun, not completed homes. Source: CMHC, as cited in PwC and ULI, Emerging Trends in Real Estate 2027, p. 145. Original chart.
Illustrative calculation: a $4.5-million value ceiling versus income-based capacity of about $4.25 million at 4%, $3.62 million at 5% and $3.13 million at 6%. Assumes 50-year amortization and 1.15 debt coverage.
Source: Department of Finance missing-middle backgrounder and Budget 2026 Chapter 3, November 5, 2026. Fiscal-year funding starts are not home-completion dates.
