Homebuilders want Toronto to offer more incentives to building affordable units
June 15, 2021
It’s a planning tool being used by cities across North America to encourage the creation of affordable housing. But Toronto’s version of inclusionary zoning could have the opposite effect, says the association that represents the region’s homebuilders.
The Building Industry and Land Development Association (BILD) says the city’s proposed policy will discourage the construction of affordable ownership and rental homes, potentially shifting development away from transit nodes and out of Toronto altogether.
It would also penalize the buyers of market rate housing by $66,000 to $116,000 over the life of the home and unfairly burdens the development industry with paying for affordable homes.
In a report on Tuesday, BILD accuses the city of “artificially keeping property taxes low and placing the financial responsibility (for affordable housing) solely on the backs of new homeowners instead of the broad property tax base.”
“The proposals put forward by Toronto are unique in that they place the entire burden on one sector, on one group of consumers,” said BILD CEO David Wilkes.
Developers should be able to build more homes or fund other projects in lieu of homes to offset the costs of inclusionary zoning, and the policy should be phased in rather than bluntly enforced in a single year, he said.
“Toronto is proposing what would be the most aggressive initial inclusionary zoning approach of any jurisdiction in North America,” said Peter Milczyn of PM Strategies.
A former Toronto city councillor and one-time provincial Liberal housing minister, his research shows that Toronto is the only jurisdiction that isn’t offering any financial incentives to builders to offset the expense of affordable units.
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BILD says 6.4 per cent of the city’s development charges are allocated to “subsidized housing”: $2,900 on a large unit and $1,900 on a smaller apartment. The new community benefits charge that comes into effect in September 2022 will raise another $3,840 per unit.
Toronto has been discussing inclusionary zoning for at least a decade, but final policy recommendations are expected to go before the city’s planning and housing committee in September.
In May 2019 the city proposed inclusionary zoning in areas of the city where development supported the inclusion of affordable units. A month later, through Bill 108, the provincial Conservative government limited inclusionary zoning to developments 500 to 800 metres from major transit hubs.
The city is now proposing that developers set aside five to 10 per cent of the gross floor area in market-rate condo buildings for affordable units and three to five per cent of the area in purpose-built rentals. The policy would apply to buildings with 140 units and 10,000 square metres of floor area, and smaller projects of 100 units and 8,000 square metres in the downtown and waterfront neighbourhoods.
BILD is also arguing for a phased-in approach to the new policy rather than a wholesale implementation in the first year.
“Initially there should be some level of offsets or incentives to be put into the (municipal) IZ regulations … that’s consistent with best practices in other municipalities,” said Milcyzn, whose research is a key part of BILD’s report.
The two cities he found to be closest to Toronto’s goal of encouraging affordable development around transit nodes were New York and Los Angeles.
New York gives developers density bonuses for including affordable units in their buildings. That allows the developer to build more units than the building is zoned for to offset the cost of the below-market homes. If they are building rentals, they get a 35-year property tax holiday on the entire project and the state helps compensate the city for the revenue loss.
In Los Angeles there are automatic density bonuses for building affordable units.
In Toronto, Milczyn said, “there are probably some councillors that would be perfectly happy to not have any development occur and then no affordable housing occurs either.
“You have to have an environment in which you’re encouraging development,” he said.
Homebuilders aren’t alone in objecting to Toronto’s approach. Housing advocates say the proposed policy doesn’t demand enough units from housing developers.
“The reality is that Toronto could set much more ambitious IZ requirements and developers would still be able to make their buildings - and their profit - happen,” said an opinion piece in the Toronto Star last year by city councillor Mike Layton and Alejandra Ruiz Vargas of East York ACORN.