Inclusionary Zoning Is Here - How You Can Benefit

This week, Ontario passed legislation to increase access to affordable housing, and to “modernize the social housing system” in The Promoting Affordable Housing Act. I’ve included a link below for this press release directly from the province, which also contains the link for details of the Act.(1)

If you’re having trouble sleeping, you can go and have a read of the Act, but I've done the heavy lifting for you. ZZZ...ZZZ.

Here are the main parts that are interesting to me (and probably to you too):

1. Cities have the right to impose inclusionary zoning.

2. Secondary suites for both new and old houses will be easier, with development charges waived.

We’ll discuss where the opportunities are, but let’s first explain what inclusionary zoning is.

What Is Inclusionary Zoning (IZ)?

IZ a mandate requiring developers to include a certain percentage of their housing units available for lower income individuals and families. The stated goal is to have a mix of housing types and income levels for any new development.(2)

Secondary suites will have a big role to play in this new legislation.

In general, cities love this idea, because it means forcing more affordable housing units to be built; something every city is pressured to do. This is not a new idea. IZ has been used in communities around the world, most notably in the UK and the US. And it seems to work; alleviating some of the pressures built-up as a result of affordable housing.(3)

Essentially, instead of the government taking the initiative to provide affordable housing (we all know what an awesome job they're doing right?), they're relying on the private sector. Even they know that's a better idea.

Just sayin'

Just sayin'

What Incentives?

The cities will be asking the private sector to do it in two ways: By forcing them, and by also providing incentives.

Problem is if you strictly force developers and builders to do something, it might not happen. They will probably decide to pack up and go somewhere else. You'll likely need to give them something in return.

Buried in the provincial Planning Act is Section 37, a requirement which states that all new development also requires a certain amount of community infrastructure. IZ potentially exempts a lot of this.

You know those fancy playgrounds you see in all new developments? Well, stuff like that won't be needed in locations where IZ is enforced, nor some of the taxes used to build them. The idea from the provincial government is that if you're going to force developers to cut profits by including lower priced homes, you'll need to make it up to them somehow.

Developers usually foot the bill for these

Developers usually foot the bill for these

Cities Want To Eat Their Cake

Municipalities like IZ because it creates more housing, but they don't like the exemption, because it reduces the infrastructure surrounding the new developments.

Implementing IZ is an option for cities, not a requirement. Most cities will still likely use this policy, and cherry pick the locations where it will implement them within their official plans. But they won't be allowed to cherry pick the policies within the legislation.

Builders agree with the overall legislation perhaps because it's a net benefit for them. CEO Joe Vaccaro of the Ontario Home Builder's Association says, "it's unreasonable for the city to ask for both Section 37 and affordable housing....". (4) It may be also because builders are out of options now, given greenbelt legislation.

How Do YOU Benefit From This?

Thought you'd never ask.

If you consider yourself a "small-scale" investor or developer (I'd put myself in that camp), or if you're just a homeowner, you can benefit from this. Many of the outrageous development charges will be exempt.

For folks like us, we'll benefit with the lowest hanging fruit, such as secondary suites, duplexes, triplexes and even four units. As stated above with Item 2, secondary suites will likely be exempt from many charges, including new homes, which wasn't the case before.

Builders of traditional low-rise suburban homes (a dying business in the GTA) aren't going to be interested in doing the conversion projects. They're likely either going to work way outside the greenbelt, or get their hands on more townhouse or stacked townhouse projects. Those builders don't have the capability of getting into large scale condo developments.

I wrote a recent post titled, Time To Profit From Small Scale Intensification and outlined the various opportunities.

Summary Of Your Strategy

Here's a summary of what I'd recommend you do:

1.  Buy a single family home (investment or principal residence) in a great location (preferably close to a large street in a good city for a better chance of zoning changes).

2. Add in a secondary suite, or change it to a duplex, triplex, and earn income immediately or higher cash flow.

3. Build equity and wait for the right time to either redevelop to a larger scale project or sell it to a developer and have them do it.

4. Retire early, pursue your passions, and do work you love!

Or sit on a beach for six months a year.

I can live with this

I can live with this