Proposed Inclusionary Zoning By-law in the City of Ottawa:

Background:

On January 29, 2020, the City of Ottawa declared an Affordable Housing and Homelessness Crisis and Emergency, after which an updated Housing and Homelessness Plan was approved on July 15, 2020. As part of implementing this 10-year plan, the City is hoping to add 5700-8500 affordable housing options, which are targeted at low-income and middle-income households. The City has a variety of implementation tools and strategies for providing affordable housing that are currently underway or being studied, including housing subsidy programs, capital investment in affordable housing projects, and inclusionary zoning, which will help increase the supply of affordable housing stock. Inclusionary Zoning is also noted as being a priority measure for implementation in the new Official Plan.

In a Special Joint Session of Planning Committee and the Community and Protective Services Committee held on June 16th, 2022, committee members carried the staff report submitted on June 7th, 2022, which recommended further study of inclusionary zoning policy, with a target of introducing Official Plan Amendments, Zoning By-law Amendments, and an implementation strategy for inclusionary zoning in 2023. In preparation of this strategy, staff consulted with internal stakeholders, external stakeholders, developers, the Affordable Housing Working Group, and members of Council.

Report Recommendations:

The report recommended that 10% of the building area be set aside for affordable units in condominiums, with 0% set aside for affordable units in purpose-built rental developments. The 0% set-aside rate for purpose-built rentals is based on the shortage of purpose-built rental units currently under construction compared to “for sale” units. Staff have proposed this reduced set-aside rate in order to incentivize developers to build more rental housing, moving the City closer to its target of having 25% of new construction be purpose built rentals. Staff recommended that the provision of affordable units through inclusionary zoning only apply to the development of buildings with 50 or more units (including additions to buildings with 50 or more units) or buildings with 3,500 m2 of GFA. Additionally, inclusionary zoning will be restricted to sites located within the 26 Protected Major Transit Station Areas (PMTSAs) as identified in the new Official Plan, where the greatest concentration of height and density is anticipated.

Figure 1: Protected Major Transit Station Areas (PMTSAs) (in green) in the new Official Plan. (Source: City of Ottawa).

Affordable units set aside through inclusionary zoning will be intended for middle income households, which are within the 40th and 60th percentile of income distributions. Staff note in their report that these units are not intended to provide deeply affordable housing such as social housing, rent-geared-to-income units, rent supplement units, and other community housing options. These units are to remain affordable, with an affordability period of 99 years for condominiums and 25 years for purpose built rental housing. Rental units will be considered “affordable” if they are equivalent to 30% of the gross monthly income for households in the 60th income percentile. Purchasable units will be considered affordable if they are affordable to households in the 60th income percentile. Despite being targeted at middle income households, units will be available for non-profit affordable housing providers, who may choose to purchase or rent units to provide deeply affordable housing.

Staff anticipate that inclusionary zoning agreements would be entered into prior to the issuance of a building permit and would arise alongside Community Benefits Charges, Parkland Dedication, and Development Charges. Following the anticipated implementation of the by-law in 2023, a one-year grace period is recommended in order to allow developers and the City to adapt to the new requirements.

Figure 2: Image showing the implementation of inclusionary zoning. (Source: City of Ottawa).

Overall, the City’s strategy is one likely to provide mixed results and will have to be adjusted over time. Recognizing this, the City has recommended that set-aside rates be increased or decreased within five years based on their analysis of the policy’s success and following market analyses of the 26 PMTSAs. Following this market analysis, the City hopes to develop more tailored set-aside rates based on the individual characteristics of the PMTSA. The City hopes that its recommendations will lead to a by-law that increases the supply of affordable units for middle income households, while ensuring that inclusionary zoning policies do not significantly limit developers and increase the cost of other housing units.

Notably, the set-aside rates proposed by the City are not as ambitious as those implemented in Toronto, which requires that 22% of condominiums and 5% of purpose built rentals be set aside through inclusionary zoning within three market areas. However, unlike in other jurisdictions, the preliminary recommendations in the staff report do not appear to offer developers or housing proponents any height bonuses or development charge fee reductions in exchange for the affordable units.

Conclusion:

Thus, while the City is still early in the process of implementing inclusionary zoning, its preliminary recommendations seem to yield mixed results, exacerbating issues of housing affordability for middle income residents while trying to make housing more affordable for those very residents.

A copy of the staff report can be found here, with other agenda items for the joint Planning Committee session found here.

Figure 3: Table of staff recommendations for inclusionary zoning. (Source: City of Ottawa).