Province Introduces Bill 204, "Promoting Affordable Housing Act" to Permit Inclusionary Zoning

The Minister of Municipal Affairs and Housing introduced Bill 204, Promoting Affordable Housing Act, 2016.

Bill 204 at First Reading

On May 18, 2016, the Minister of Municipal Affairs and Housing introduced Bill 204, Promoting Affordable Housing Act, 2016. Bill 204 is intended to address affordable housing issues by providing a legislative framework that enables inclusionary zoning in Ontario. Inclusionary zoning allows municipalities to require affordable housing units to be provided in new development projects and to ensure the affordability of these units over time.

In addition to Bill 204, the Ministry released the Inclusionary Zoning Consultation Discussion Guide. The Discussion Guide sets out a list of matters that the Ministry intends to address by regulation. The deadline to submit comments on Bill 204 and its regulations is August 16, 2016.

To address affordable housing issues, amendments to both land use planning and housing assistance legislation are required. As a result, Bill 204 proposes changes to six acts. This Bulletin provides a review of the key changes to the Planning Act and the Development Charges Act, 1997, a summary of the proposed Planning Act regulations and our initial thoughts on Bill 204.

Proposed Changes to the Planning Act

Inclusionary zoning is not currently permitted under the Planning Act . As a general principle, municipalities are not allowed to pass zoning by-laws that zone for the user, as opposed to the use, to avoid promoting discrimination. However, this general principle also precludes municipalities from requiring developers to provide affordable housing units as a condition of zoning approvals. Although the Bill 51 amendments to the Planning Act granted municipalities the authority to pass zoning by-laws with conditions, this authority was limited to "prescribed conditions". To date, a regulation proposed to define the prescribed conditions has not been established by the Minister.¹

Bill 204 grants a narrow exception to this general principle for the limited purpose of providing affordable housing. In fact, the Province may through regulation require municipalities to adopt inclusionary zoning practices. There is no appeal of inclusionary zoning policies in official plans or zoning by-laws to the Ontario Municipal Board (the "OMB"), except by the Minister.

Significant changes to the Planning Act are required to implement inclusionary zoning. Key changes proposed by the First Reading of Bill 204 include:

1. Prescribed municipalities must authorize inclusionary zoning through official plan policies. Other municipalities may choose to adopt this practice: Municipalities prescribed by regulation must amend their official plan to contain policies that authorize inclusionary zoning. Inclusionary zoning policies are official plan policies that a) authorize the inclusion of affordable housing units within buildings or projects containing other residential units, and b) provide for such units to be maintained as affordable housing units over time.
2. Prescribed local municipalities must pass zoning by-laws to give effect to inclusionary zoning policies. Other municipalities may choose to adopt this practice: Subject to requirements as prescribed by regulation, a by-law passed by a municipality to give effect to inclusionary zoning policies (the "inclusionary zoning by-law"):

• must include requirements as to the number of affordable housing units to be provided, the period of time affordability must be maintained and the requirements and standards that must be met for affordable housing units;
• may include measures and incentives to support inclusionary zoning;
• may set the price at which affordable housing units are sold or rented; and
• must require that the owners of the new development enter into agreements with the municipality to implement the requirements set by the by-law. Such agreements may be registered on title and enforced on subsequent owners.
1. If an inclusionary zoning by-law is passed, council must establish procedures to monitor and report on the state of affordable housing units: The monitoring procedure established must ensure that the affordable housing units are maintained as affordable housing units for the time period set by the by-law. Council must also provide reports and information on affordable housing units in accordance with the regulations.
2. If an inclusionary zoning by-law applies to a new development, municipalities are generally prohibited from requiring a Section 37 agreement for that development, requesting cash-in-lieu, or requiring that affordable housing units be built off-site: Municipalities are prohibited from passing a Section 37 by-law with respect to the same property if an inclusionary zoning by-law applies, except as permitted by regulation. Municipalities also have no authority to accept cash-in-lieu of the affordable housing units or to require the developer to provide affordable housing units on properties other than those specified in the by-law.
3. Only the Minister may appeal second unit policies and inclusionary zoning policies: Unlike most decisions under the Planning Act, there is no right of appeal to the OMB for decisions, by-laws and conditions relating to second unit policies and inclusionary zoning policies, except by the Minister. Challenges to such policies will typically require an application for judicial review. The power to quash a by-law for unreasonableness is narrowly defined under the Municipal Act; one could also challenge the by-law on the basis of illegality. 
4. Minor variances cannot be granted to an inclusionary zoning by-law: Committees of adjustment are specifically prohibited from authorizing a minor variance from provisions of an inclusionary zoning by-law.
5. New developments that are subject to inclusionary zoning may be required to comply with additional requirements: Depending on the municipality's inclusionary zoning policies, applicants:
• must show on drawings the exterior access to each building containing affordable housing units, if the development is subject to site plan control and both the official plan and by-law designating the site plan control area contain exterior access requirements or standards related to inclusionary zoning;
• must show the shape and dimensions of each proposed affordable housing unit and its approximate location in relation to other residential units, if the units are located in a plan of subdivision; and
• may be required to enter into a shared facilities agreement to the satisfaction of a municipality, if the affordable housing units are located in a condominium.
6. Maintenance of loading or parking facilities in a zoning by-law must include provisions prescribed by regulation. Affordable housing units may be exempt from minimum parking requirements: Zoning by-laws may require owners or occupants to provide and maintain loading or parking facilities on land that is not part of a highway. These by-laws must now contain the provisions, if any, that are prescribed by regulation. The Minister is also authorized to make regulations respecting minimum parking requirements, including providing that there is no minimum parking requirement.
7. Long-term leases of new developments containing affordable housing units are exempt from subdivision and part-lot control: Lands that are leased between 21 to 99 years for the purpose of constructing or erecting a building or project that will contain affordable housing units are not subject to subdivision or part-lot control under Sections 50(3) and 50(5) of the Planning Act.

Proposed Planning Act Regulations

Many of the details for implementing inclusionary zoning may be addressed by regulation. Official plan policies and zoning by-laws must reflect the regulations unless specifically permitted to go beyond the requirements or standards set by the regulations.

The proposed regulations have not been released by the Province. However, the Ministry has provided a list of matters that it intends to address, which includes regulations that prescribe:

1. the content of inclusionary zoning policies in an official plan;
2. the content of inclusionary zoning by-laws;
3. the content of agreements required to maintain the affordable housing units over time;
4. the procedures for monitoring and ensuring affordable housing units are maintained for the required period of time;
5. the circumstances under which Section 37 of the Planning Act may be used when an inclusionary zoning by-law is in effect;
6. the content, timing and distribution of municipal reports and information on affordable housing units;
7. a transition date in relation to proceedings started before or after the effective date and/or the date of municipal adoption of inclusionary zoning policies and/or zoning; and
8. maximum fees for the processing of development applications where affordable housing units are provided.

The Discussion Guide mentioned earlier in this Bulletin provides further guidance as to the types of issues that the Ministry intends to address by regulation.

Proposed Change to the Development Charges Act

Bill 204 only proposes one change to the Development Charges Act, 1997. This change would prohibit municipalities from imposing development charges when a second dwelling unit is created in prescribed classes of proposed new residential buildings. The existing exemption only applies to prescribed classes of existing residential buildings.

Initial Thoughts

Inclusionary zoning is a form of conditional zoning. Although inclusionary zoning has been widely adopted by municipalities in the United States (where this term originates), this planning tool is still a relatively new concept in Canada and has been met with mixed results. For example, the City of Vancouver adopted this approach in 1988, but studies have shown that the subsidized housing units actually built due to this policy amounts to less than 1% of all housing constructed in Vancouver.²

Bill 204 has been met with both interest and skepticism from the public and private sectors. The City of Toronto is approaching the proposal with cautious optimism, with City Council recommending that Toronto's Housing Advocate lead the City's response in consultation with the City's Planning and Community Development committees. On the other hand, the Federation of Rental-housing Providers of Ontario (FRPO) has expressed its concern that inclusionary zoning will result in fewer rental housing units being built. The Ontario Home Builders' Association cautions against the elimination of official plan appeals to the OMB, noting that removing the right to appeal may create a "very toxic environment" when a municipality determines the location of affordable housing units.

In our view, many of the implications of Bill 204 will not be fully understood until the regulations are released by the Province. Although Bill 204 provides the framework for allowing municipalities to pass inclusionary zoning by-laws, many of the critical components are set by regulation. For example, the regulations may determine the "must-haves" in an inclusionary zoning by-law, including the number of affordable housing units, the requirements and standards for such units and the period of time such units must be kept affordable. They may also determine the limited circumstances when a municipality may "double-dip" and require a developer to enter into a Section 37 agreement, a municipality's monitoring and reporting obligations, and the types of incentives that may be offered to developers in exchange for affordable housing units. In our view, the viability of the regime will depend on the economic factors established via regulation. What does appear likely is that municipalities will inherit substantial ongoing administrative burdens in program implementation and management.

It is also interesting to note that despite the potentially large impact that inclusionary zoning policies will have on planning and development matters, only the Minister may appeal these matters to the OMB. In effect, inclusionary zoning will be dictated by the Ministry or by local municipalities, with limited opportunities for other stakeholders such as the development industry, community groups and existing residents to be heard. The balance between what the Ministry prescribes and what will be deferred to local decision-making has yet to be determined, but there is the potential for significant provincial regulation over inclusionary zoning policies and by-laws.

In sum, inclusionary zoning provides municipalities with a powerful tool in their planning toolbox to address affordable housing concerns. However, the effectiveness of this policy approach in increasing the amount of affordable housing in Ontario remains to be seen. The challenges faced by municipalities and developers alike in implementing inclusionary zoning as part of the development approval process are also difficult to assess at this time, although it is clear that the potential impacts can be significant. We will be reviewing the regulations with keen interest.

Please contact a member of our Municipal Planning Law Group for more information about Bill 204 and its implications.

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¹ Although a Regulation Proposal Notice was posted on the EBR Registry in July 2006, the Minister has not made a decision on the regulation (see EBR Registry No. RF06E0004). Proposed prescribed conditions included measures identified in studies completed prior to enactment of the zoning by-law, measures that would ensure the orderly development of lands, buildings and structures and measures that relate to the provision of transportation and public transit infrastructure.

² "The Potential Effects of Inclusionary Zoning in Canada, 2010 Report" prepared by Altus Group Economic Consulting for the Canadian Home Builders' Association, October 2010.