More on inclusionary zoning

I’ve written about this planning magic trick before, where with just a wave of a legislator’s pen, new affordable housing stock can be secured at no cost to taxpayers. I recommend that you read that piece if you’re not yet familiar with the concept.

Of recent interest is this petition that’s being circulated by Progress Toronto demanding that the City be aggressive when establishing its inclusionary zoning requirements.

Specifically, the petition calls for three things:

  • A minimum 20-30% of all new residential developments with 60 or more units are set-aside for permanently affordable rental housing;
  • Affordable units are kept affordable forever, not for just 25 years;
  • Inclusionary Zoning to be required in all parts of Toronto, not only near transit hubs.

I’ll save a longer critique for a longer post and will just comment on one interesting aspect of this petition.

Let’s start with the third point above. Inclusionary zoning requirements are currently only permitted within so-called Protected Major Transit Station Areas (PMTSAs)–areas that can be delineated by the City within 800-meters of transit stations.

The logic behind that restriction is that inclusionary zoning is something like a tax on real estate development, and that tax makes most sense when applied to real estate development taking place on land that has benefited from close proximity to government-funded transit. Real estate developers might still continue to build in these strong market areas despite the tax.

But Progress Toronto doesn’t want inclusionary zoning to be limited to strong market areas. It wants it to be applied citywide.

It also wants to ensure that it’s sufficiently aggressive. That’s what the first two points say. An inclusionary zoning program that secures 20-30% of a new building’s Gross Floor Area (GFA) for below market rate housing, that must remain below market rate housing forever, is aggressive,

Here’s the interesting part.

The petition references a study that the City had commissioned from planning and market research firm NBLC to support its position. This is what NBLC had to say about all of that:

If an aggressive IZ policy was applied in weaker market areas without offsets such as density increases or tax incentives IZ policies could have negative impacts on affordability in two inter-related ways:

  • By eroding the feasibility of projects, thus reducing the supply of housing, which at a macro level can put upward pressure on net demand (and pricing) of available units; and,
  • Assuming land values cannot be reduced below the base land value, the cost of delivering an entry-level apartment unit would increase.