The Ontario government’s plan to allow municipalities to mandate affordable housing in new developments will hurt homebuyers by jacking up prices, a key local industry advocate says.
The legislation proposed in mid-March would allow cities to establish so-called inclusionary zoning policies, meaning builders would have to include a certain percentage of affordable units in every new development.
Montreal and Vancouver already have similar policies, as do many cities in the United States. But John Herbert, the executive director of the Greater Ottawa Home Builders’ Association, argues there are “much better tools” to deliver more affordable housing.
He says developers will end up passing the costs of constructing affordable units on to new homebuyers, making an investment that’s already out of the reach of many young families even less attainable.
“Let’s forget this illusion that builders and developers can absorb constantly increasing fees, charges, taxes and levies,” Mr. Herbert said. “That’s an illusion some politicians might have, but it’s not reality. If we’re going to build affordable housing projects, they should be paid for through the tax base at large, whether it’s through a municipal tax base or the provincial tax.”
Advocates of the new policy say it wouldn’t solve the province’s affordable housing woes, but it would help create a more balanced socioeconomic mix in new developments. Some local builders agree the plan has merit on those grounds.
“Subject to the details, that is not necessarily a bad idea,” said Jeff Westeinde, founding partner of Windmill Development Group, the company behind high-profile mixed-use projects such as Zibi.
“The thinking around social housing historically was there were buildings for social housing and then there was market housing, and never the two shall meet. I think having mixed-used buildings makes for a much healthier community.”
Still, he said it would be tough to support such a policy if it drove up condo costs substantially for buyers.
“Is there an offset on (development fees)? Is there are offset on building permit fees? Those are going to be the key considerations,” Mr. Westeinde said. “At the end of the day, it’s not builders that end up picking up that cost, it’s the homebuyers themselves. In the absence of those details, it’s difficult to fully determine whether there will be an impact or not.”
Mr. Herbert said many U.S. cities with inclusionary zoning offer tax incentives to developers as well as planning enticements such as “density bonuses” in which builders are allowed to exceed prescribed height limits in exchange for including affordable units. In New York City, he said, the policy is voluntary.
The Ontario government has yet to release any details about its proposal, such as percentage requirements or definitions of “affordable.” The province plans to consult with members of the public, homebuilders and interest groups before introducing legislation, and it will probably be years before inclusionary zoning is an option for municipalities.
Ottawa Mayor Jim Watson said he needs to know more about the proposal before deciding whether inclusionary zoning is something he would push at council.
“I think we need to have a clear indication as to what the province’s intentions are,” he said. “From there, I think we’d have to hear from the many different sides – from the builders, from the advocates for affordable housing. I’d like to see how it’s worked in other jurisdictions. I haven’t really followed how effective it’s been in other jurisdictions, to see if it does in fact create a significant increase in affordable housing options. I want to keep an open mind. The devil is always in the details when we get these kinds of tools from another level of government.”
Mr. Herbert also questioned the need for new legislation when Ontario cities already have the power to exchange density for affordable units under Section 37 of the provincial planning act. The clause allows the owner of a property who wants to build something that violates existing zoning bylaws to negotiate with a city to provide community benefits in exchange for approval.
Most of the time, Mr. Herbert said, Section 37 ends up being used to build parks and recreation facilities rather than affordable housing.
“That’s a tool that’s available right now if (cities) wanted to use it,” he said. “But historically, municipalities really haven’t used it for affordable housing.”
The inclusionary zoning plan is part of the province’s long-term affordable housing strategy, which includes an investment of $178 million over three years announced in the recent Ontario budget.