Sometimes, a well-intentioned idea can turn out terribly. Ever try to remove wallpaper yourself instead of hiring a pro? Or get a flat tire on your car and try driving on the wheel rim to the closest garage instead of changing the tire or calling for a tow?
Mandatory inclusionary zoning is another one of those things that seem like a good idea initially but fall apart when put into practice. The idea behind inclusionary zoning is for new residential developments to include a certain percentage of affordable housing units.
In Toronto, developers have been given notice that beginning in 2022, projects will be subject to mandatory inclusionary zoning. In “strong market areas,” a minimum of 10% of new condominium residential Gross Floor Area (GFA) must be set aside for affordable ownership or rental housing, and as much as 30% GFA as amended by the Planning and Housing Committee; in “moderate market areas,” a minimum of 5% GFA must be earmarked for affordable ownership/rental housing and as much as 20% as amended.
Strong and moderate market areas are those within proximity of major transit areas that have experienced an influx of new housing and significant price increases in both purchaser and rental pricing. Strong market areas include downtown Toronto, East York, York, south Etobicoke, south North York and southwest Scarborough; moderate market areas are in select pockets along Yonge Street, Dundas Street West, Bloor Street West, Kipling Avenue and Islington Avenue. If you take a look at the map of the Official Toronto Inclusionary Zoning Plan, you’ll see these market areas are a sizeable chunk of the City’s total area.
This all sounds fair and reasonable so far though, doesn’t it? We know there is an affordability issue in Toronto, and mandatory inclusionary zoning seems like a turnkey solution to fix the problem and allow for continued expansion of the City’s affordable housing stock. In addition, it seems like a smart way to create vibrant, mixed-income communities instead of the segregated swaths of low-income housing the city used to develop – such as in the previous version of Regent Park.
If we gaze eastward across the Atlantic Ocean at London, England, however, we see that inclusionary zoning isn’t as successful as the city had hoped. Instead of “have” and “have-not” residents living together in perfect harmony, there’s still a divide because the “have-nots” can’t afford to use condo amenities such as the swimming pool and lounge. Critics also point out that mandatory inclusionary zoning unfairly shifts the responsibility and cost of providing affordable housing from the city on to developers.
There’s also an unfortunate two-pronged business reality that comes into play. First of all, inclusionary zoning increases the price of the condominium suites available for sale to the general public because these units have to subsidize the cost of the affordable/rental units. Ironically, this price escalation creates additional upward pressure on housing affordability.
Secondly, the increased pressure on pricing can erode the feasibility of the project to begin with, especially in moderate market areas that can only accommodate mid-rise development. If the development isn’t financially viable, developers are likely to abandon their business initiative, which puts additional strain on supply. If supply is limited, once again, this drives up housing prices and increases the divide between those who can afford housing and those who cannot.
“Inclusionary zoning is going to have a significant impact on development economics,” said Brandon Donnelly, Managing Director of Slate Asset Management, “The cost of providing affordable housing will need to come from somewhere. Unfortunately, that somewhere is likely higher prices and rents on the remaining market-rate units.”
There’s no question that Toronto needs a solution to affordable housing. Perhaps instead of being an arbiter, the City of Toronto could be a collaborator. Public/private partnerships in Regent Park and Alexandra Park have been nothing short of a success. Is there an opportunity to continue exploring such partnerships across Toronto?
With a little world-leading problem-solving, creativity and initiative from both the public and private sector, anything is possible. Collectively, the last thing we want is to make the city less affordable by legislating that it be more affordable. To borrow from our transit commission’s slogan, there has to be a better way.
This article was produced in partnership with STOREYS Custom Studio.
