New zoning by-laws may worsen the city’s housing crisis

Affordable housing has become a major concern for Torontonians. With a quickly growing population and a notably low housing supply, the city has a reputation for being too expensive for many home buyers. Toronto will soon be amending its zoning by-laws in hopes of solving this tenacious issue. Toronto’s Inclusionary Zoning Policy will require a certain percentage of affordable housing units in new residential developments, producing mixed-income housing. At a cursory glance, this approach may seem like a good idea. Toronto unquestionably has a housing problem and addressing this shortcoming is an important social responsibility. However, on closer inspection, this policy will create more housing troubles than benefits. Many critics point out that the plan will cause a rise in costs for new purchasers and a drop in new housing supply. The policy, beginning in 2022, states that in strong market areas, a minimum of 10% of new condominium residential Gross Floor Area (GFA) must be allocated to affordable ownership or rental housing. In moderate market areas, a minimum of 5%. Developers will achieve this mandate by increasing the prices of market units. With this plan, the city is placing the burden exclusively on purchasers of new homes who will have to pay more to subsidize the cost of having affordable, below-market units in the same building. As Dave Wilkes, president and CEO of BILD, put it: “It’s time for municipalities to realize that layering more costs into building housing is one of the root causes of our current housing crisis”. The restrictions will also make projects harder to sell, generating more failed projects and limiting new development activity in certain areas. Less housing and an increase in costs is the antithesis of a housing crisis solution. In jurisdictions where inclusionary zoning has seen some positive results, the government offers incentives to developers to include inexpensive units in their projects such as waiving or reducing development fees or other charges. Toronto’s policy is more uncompromising and does not offer similar incentives. Sometimes an idea is only good in theory: we need more affordable units, so we make developers build them. However, the ramifications of this market distortion will hurt home buyers more than it will help them. We need to think of a strategy that functions not just to superficially boost the supply of affordable units but fundamentally repairs the housing market so it works for everyone.