Randy Gladman: The hidden costs of inclusive zoning

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Ensuring affordable housing for some should not mean less affordable housing for everyone else

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In November of last year, the City of Toronto approved an inclusionary zoning (IZ) by-law which will come into effect in September of this year. IZ requires that a percentage of residential space in new housing projects include affordable housing for low- and middle-income households. The IZ can be a valuable zoning tool, but there are issues with how it is implemented in Toronto. While this may well result in the creation of new affordable housing, it will come at a cost to the entire city.

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The IZ will apply to large swaths of the city divided into three tiers of “strong market areas,” based on land value, proximity to public transportation, and locations with the greatest need for housing. affordable, as determined by planning staff. In these areas, developers will need to provide affordable units in projects built within 500 to 800 meters of “protected areas of major transit stations,” 16 of which have been defined, with many more to come. The intention is to ensure that there are affordable units near metro and light rail stations, where they are needed most. This requirement will only apply to projects with more than 99 units.

For qualifying condo projects, the regulation mandates, beginning in September, that 5-10% of the gross floor area (GFA) of residential buildings be provided as affordable housing. This requirement will increase each year so that by 2030, up to 22% of new residential gross living space must be affordable — and remain so for 99 years.

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To encourage the development of purpose-built rental projects, the city has given rental stock developers a deadline until the end of 2025. After that, however, three to five percent of the GFA in new apartment buildings apartments will have to be in affordable housing. units. For condo and apartment developments, the percentage of GFA required to be affordable depends on the “strong market area” in which the site is located.

There is no doubt that we have a housing affordability crisis — across Canada, but especially in Toronto. Government action can help, and ZI policies usually produce affordable new units. But big rule changes invariably have unintended consequences. Someone has to pay for IZ fonts.

The IZ represents another new tax on developments and as such will eventually be paid by buyers and tenants. Government fees and taxes already account for 20-24% of the cost of a new home in the Greater Toronto Area. As in a game of molesting, securing affordable housing for one segment of the population will create further price spikes for other segments, while reducing developer interest in building homes in key neighborhoods supported by public transportation.

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The worst-case scenario is that IZ will render some planned projects unprofitable and lead to their cancellation, resulting in zero new units where there would have been at least 99. The regulations will also encourage developers to turn more units into accommodation. luxury by adding design features, finishes, and amenities that will allow them to raise rents enough to subsidize below-market-rate housing. The result will be pressure on mid-market units as their construction is discouraged. And because the definition of “affordable housing” targets families between the 40th and 60th percentile of household income, IZ does nothing to create housing for the city’s poorest and most vulnerable families.

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There are viable alternatives to IZ. An effective way to reduce housing costs would be to tackle construction and labor costs. Prioritizing the immigration of skilled tradespeople and increasing education in the trades would increase the construction workforce, increase site efficiency, increase capacity and reduce labor costs artwork.

Developers would also welcome government initiatives to fix broken rights approvals, eliminate spurious heritage requirements and prioritize the need for housing supply over questionable design regulations.

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Cities could also offer density bonuses as well as rebates on development charges so that the costs of affordable housing are not borne by those who acquire homes at market price. Currently, Toronto offers nothing to developers in return for the affordable housing mandate.

More boldly, Toronto could open single-family housing areas to densification. These neighborhoods cover more than 70% of the city. Allowing medium and high density in these areas, especially near public transit, would significantly reduce land costs. Toronto has no shortage of land; it lacks political courage.

Other municipalities seem ready to follow the example of the ZIs in Toronto. They should take a closer and more critical look at the pros and cons. Ensuring affordable housing for some should not mean less affordable housing for everyone else – the result we may soon see happening in Toronto.

Randy Gladman is Senior Vice President, Development Consulting, at Colliers in Toronto.

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