Exploring Inclusionary Zoning to Support Affordable Housing

On Dec. 16, 2024 Kitchener City Council approved a January 2026 implementation date for the application of Inclusionary Zoning policies within major transit station areas (MTSAs). Inclusionary Zoning is one tool in a suite of initiatives that will help enable more affordable housing in Kitchener, as outlined in the City’s Housing For All strategy.

This will require developers to set aside a minimum percentage of affordable units in a new development of 50 units or more. Inclusionary Zoning is one of nine Housing Accelerator Fund (HAF) initiatives the City of Kitchener is committed to implementing as part of its contribution agreement with the Canadian Mortgage and Housing Corporation (CMHC). Kitchener is also advancing the building of hundreds of affordable housing units through other initiatives.

We are presenting a report to Kitchener City Council on the Inclusionary Zoning project. We will share the findings of a report on local market conditions and recommend that Inclusionary Zoning begin in 2026. The meeting agenda and staff report will be posted 10 days before the meeting.

The meeting will be held in Council Chambers at Kitchener City Hall, 200 King Street West. You can also watch live on the day of the meeting by going to kitchener.ca/watchnow

To see the agenda and report once they are available, visit calendar.kitchener.ca/council

If you would like to speak to the committee during this meeting, please register as a delegation.

Both Kitchener and Waterloo City Councils have adopted Inclusionary Zoning policies and provisions. This will permit the cities to require affordable housing units. This applies to certain new residential developments within Protected Major Transit Station Areas (“PMTSAs”).

Details about the planning amendments to carry out these policies are in:

• Kitchener’s Official Plan Amendment 48
• Kitchener's Amendment 2024-068 to Zoning By-law by law 2019-051
• Kitchener's Amendment 2024-069 to Zoning By-law 85-1
• Waterloo’s Official Plan Amendment 50 and Amendment 2024-058 to Zoning By-law 2018-050

Both Councils also directed staff to:

• prepare a report on local market conditions before the end of 2024
• continue engaging the development industry

Municipal staff from the Cities of Kitchener, Waterloo, Cambridge and the Region of Waterloo will hold a meeting later this month to hear comments from the development industry.

Waterloo City Council will hear comments from the public about proposed amendments to the City’s Official Plan and Zoning By-law to require affordable housing units in new development through Inclusionary Zoning.

Date: Monday, June 24

Time: To be determined, will be made available 12 days before the meeting date.

Location, in person: Council Chambers, 3^rd floor, Waterloo City Centre (100 Regina Street South)

Location, online: YouTube

The staff report and proposed amendments will be contained within the meeting agenda, available 12 days before the meeting date. To view the meeting agenda once available, please visit events.waterloo.ca/meetings

If you would like to speak at the public meeting, please register before the meeting. You can do so online on the City of Waterloo website or by calling our council coordinator at 519-747-8549.

About Inclusionary Zoning

Inclusionary zoning would require developers to include up to 5% affordable housing units within new, multi-unit housing developments. This would apply around ION stations.

The proposed Official Plan and Zoning By-law Amendments would:

• Apply to all new residential developments in Protected Major Transit Station Areas where 50 or more dwelling units are proposed
• Starting in 2025, require residential developments to include a minimum of 0-2% of their gross leasable residential floor area (GLA) as affordable units with increases to this minimum increasing to 5% no later than 2031
• Require that the affordable units be rented, whether located in a condominium or purpose-built rental building
• Set maximum rents at levels that are affordable to low- and moderate-income households (earning between $47,000 and $82,000 in 2023)
• Require that affordable units be maintained as affordable for a minimum of 25 years

Map of Major Transit Station Areas in Waterloo

Today, the City of Kitchener once again led the way both locally and nationally with the adoption of two major tools to address the housing crisis – the new Growing Together policy framework and the phased introduction of inclusionary zoning within major transit areas.

Last night and into the early hours of this morning, Kitchener Council unanimously approved the Growing Together plan, a policy framework that builds on Kitchener’s role as a national leader in addressing the housing crisis. Growing Together enables more than 100,000 new homes in all shapes and sizes, and at least 20,000 new homes in “missing middle” forms. Council also approved an inclusionary zoning policy, which allows cities to require private developers to include a certain percentage of affordable units within new, multi-unit housing developments. This includes as many as 4,500 affordable units secured through inclusionary zoning.

“The action we’re taking on the housing crisis is innovative, bold, balanced and forward-looking,” said Kitchener Mayor Berry Vrbanovic. “Growing Together is the most ambitious plan for transit-oriented design in Canada. Leading the way nationally with this first of its kind planning framework builds on the planning leadership continually shown by Kitchener Council. The issues of housing supply, housing affordability and climate change are so critical that the time is now to take the leap and establish a new set of rules for growth and change that will see us build a city for everyone where, together, we take care of the world around us – and each other.”

The Growing Together and Inclusionary Zoning plans feature new zoning rules that enables all housing types through:

• Full range of building types, including missing middle forms
• No density maximums
• No parking minimums
• Requirements for a minimum amount of affordable housing units through Inclusionary zoning
• Full mix of uses
• Flexible built form regulations, including a zone without height limits

These fundamental changes to Kitchener’s planning framework are game-changing and visionary; they will allow a lot more housing to be built, more affordably, on a lot less land.

This project’s four-time award-winning community engagement includes two major international awards. Throughout the process, staff held community and industry engagements totalling well over 100 hours and have spoken in-person with approximately 1,400 people.

“Growing Together and inclusionary zoning are a one-two punch to get more of the right kind of housing built in the right places,” said Ward 10 Councillor Stephanie Stretch. “I’m proud of the fact that Kitchener is adopting these top-notch housing policies – we’re setting a high standard that other communities can follow.”

More information about Growing Together can be found on the project's Engage Kitchener page.

Staff are bringing a supplemental report on the Inclusionary Zoning project to Council on Mar. 18, 2024 beginning at 1:30pm.

The meeting will be held in Council Chambers at Kitchener City Hall, 200 King Street West. You can also watch live on the day of the meeting by going to kitchener.ca/watchnow

The meeting agenda and staff report are now available.

A public meeting is being held by Kitchener City Council to hear comments about proposed Inclusionary Zoning amendments to the City of Kitchener’s Official Plan and Zoning By-law.

Date: Monday, January 29, 2024

Time: To be determined (will be included in the committee agenda, posted 10 days prior to the meeting)

Location, in-person: Council Chambers, 2nd Floor, Kitchener City Hall (200 King Street West)

Location, virtual: Zoom (link will be in the committee agenda)

The staff report and proposed amendment will be contained in the agenda, available approximately 10 days prior to the meeting. To see the agenda and report once they are available, visit calendar.kitchener.ca/council

If you would like to speak at the public meeting, please register in advance at: kitchener.ca/delegations. You may also call the City Clerk’s Office at 519-741-2200

About Inclusionary Zoning

Inclusionary zoning would require developers to include up to 5% affordable units within new, multi-unit housing developments. This would apply around ION stations.

The proposed Official Plan and Zoning By-law Amendments would:

• Apply to all new residential developments in Protected Major Transit Station Areas where 50 or more dwelling units are proposed
• Starting in 2025, require residential developments to include a minimum of 0-2% of their gross leasable residential floor area (GLA) as affordable units with increases to this minimum increasing to 5% no later than 2031
• Require that the affordable units be rented, whether located in a condominium or purpose-built rental building
• Set maximum rents at levels that are affordable to low- and moderate-income households (earning between $43,000 and $65,000 in 2022)
• Require that affordable units be maintained as affordable for a minimum of 25 years

We’ll have more to share soon on the timing of Council meetings in Waterloo and Cambridge soon!

We presented our Discussion Paper outlining our draft policy and program directions to Waterloo City Council and Kitchener City Council in June. We will be engaging with Cambridge City Council at a future date. Read the Discussion Paper

We would appreciate your thoughts and feedback on the directions outlined in our Discussion Paper. The Discussion Paper is long and you may prefer to read the Executive Summary instead. The summary is below and available as a PDF.

Please share your ideas with us by sending us an email by September 30, 2023.

The team is available at the following emails:

• Tim Donegani, City of Kitchener: Tim.Donegani@kitchener.ca
• Michelle Lee, City of Waterloo: Michelle.Lee@waterloo.ca
• Judy Maan Miedema, Region of Waterloo: JMannMiedema@regionofwaterloo.ca
• Matthew Blevins, City of Cambridge: BlevinsM@cambridge.ca

Executive Summary

View as a PDF

The Cities of Kitchener, Cambridge and Waterloo, in partnership with the Region of Waterloo are exploring Inclusionary Zoning (IZ) as a means to increase the amount of affordable housing near the ION rapid transit stops. IZ is a tool that allows municipalities to require a certain percentage of affordable housing units within new private developments containing 10 or more dwelling units in Major Transit Station Areas (MTSAs). The tool has been implemented successfully in a number of jurisdictions across North America.

IZ is unique from other affordable housing programs in that it can provide new affordable units over time without reliance on significant government subsidies. It also can help ensure the creation of new affordable units in areas near light rail transit, which can help to counter the impacts of rising land values and gentrification that are typically associated with large transit investments. While IZ can’t address all the region's housing challenges, it can be used to create a sustainable supply of affordable units for moderate income households who are unable to afford market rents. More moderate cost housing can take pressure off the subsidized housing system by providing affordable housing options for those households who have the capacity and desire to leave the subsidized housing system. Used in combination with other tools, such as ongoing government investments in emergency, temporary and subsidized housing, and adopting planning policies and regulations that enable an appropriate housing supply, IZ is a promising tool to support a healthy housing system.

This discussion paper reviews and recommends policy options for a coordinated, Regional IZ policy and program. Policy recommendations are based on legislative requirements, a review of best practices from other jurisdictions, feedback obtained through public engagement, and modelling of the potential financial impacts on the local housing market. Key recommended policy and implementation directions and rationale are identified below:

1. Locations: An IZ policy should apply to new residential developments in all 24 MTSAs in Waterloo Region. Policy requirements should be tailored to the market for each MTSA. Rationale: To ensure the program maximizes IZ unit potential in strong markets and signals policy intentions to emerging markets to inform private market land transactions.

2. Building size: IZ should apply only to buildings with 50 or more residential units (exact threshold to be determined as part of development of draft zoning). Rationale: Focus program on larger developments to avoid potential negative impacts on the financial feasibility of missing middle and medium density housing types, recognizing that these built forms already face significant financial obstacles in MTSAs.

3. Affordable unit tenure: Affordable units should be provided as rental units within a condominium building (see 10. Administration) , within a purpose-built rental building or offsite. Rationale: Proposed Provincial IZ regulations set limits on minimum affordable rents and prices. While the proposed minimum of 80% Average Market Rent (AMR)[1] is affordable to households in the moderate income range, the proposed minimum of 80% Average Market Resale Price (AMRP) for an affordable ownership IZ unit would be affordable to only those households in the top 20^th percentile of the income range. Ownership units within the 80% AMRP bracket are already provided by the market without the need for an IZ policy and associated administration and enforcement.

4. Set-aside rate: Proportion of units or Gross Floor Area to be affordable should start low and transition slowly upward to a maximum of 5%, in accordance with the local market conditions. MTSAs considered to fall within Prime Market Areas should start at 2% and increase to 5% by 2031; MTSAs within Established Market Areas should start at 1% and increase to 3% by 2031; MTSAs within Emerging Market Areas should start at 0% and increase to 2% by 2031. Rationale: Proposed amendments to O. Reg. 232/18 limit set-aside rate to 5%. A low initial set-aside rate and relatively slow transition to the maximum rate will help avoid market disruption and signal to the market future policy intentions. Financial feasibility modeling suggests that stronger (prime) markets can better absorb the costs associated with an IZ policy compared with weaker (emerging) markets.

5. Level of Affordability: Affordable rental units in condo buildings should not exceed 100% Average Market Rent. Affordable rental units in purpose-built rental buildings should not exceed the greater of MLI select rent (currently $1,425) or 100% of average market rent. Rationale: A minimum affordability threshold of 100% AMR (proposed for condominiums) falls within the limits proposed by the Province and provides rental units that are affordable to most moderate income households. The proposed affordable rents balance city objectives for greater affordability with financial feasibility for housing providers. The slightly higher proposed affordable rent for purpose-built rental buildings aligns with Canadian Mortgage and Housing Corporation’s (CMHC) Mortgage Loan Insurance Select program for rental developments. Alignment with this program can help streamline project planning and design, and limit financial impact on purpose-built rentals which are typically more financially challenging to develop than condominium developments. This approach can ensure the provision of some units that are affordable to moderate income households in purpose-built rentals.

6. Eligible households: Households eligible for the affordable units should be low or moderate income households, having a gross annual income at or below the 60^th percentile of regional renter household income range; and with a maximum monthly income at time of occupancy of 3.3 times the IZ unit rent. In 2021, low and moderate income household would have a before tax income of less than $58,900.

7. Duration that units would be affordable: Affordable units should be maintained as affordable for 25 years. Rationale: Proposed amendments to O.Reg 232/18 limit duration of affordability to 25 years. A shorter term of affordability would limit the positive impact of the program on the affordable housing supply. The implementation program will support options for affordability beyond 25 years where IZ units are owned by the third (non-profit, co-operative and other mission-aligned) sector (see #10).

8. Incentives: Affordable units provided through IZ are exempt from Development Charges. IZ units (prorated portion) will also be exempted from Community Benefits Charges and Parkland Dedication Charges but these exemptions are not yet in force. The minimum required parking rates for developments within MTSAs should be as low as possible and should range from 0 to no higher than 0.7 spaces/unit where possible, with no parking requirements for IZ units. Additional heights and densities for developments in MTSAs should be considered through comprehensive updates to the planning framework as well as on a site-specific basis, where appropriate. Rationale: The high cost of providing structured parking has a significant impact on the financial feasibility of a development and limits the potential yield of affordable and regular units in areas well served by transit. Reduction in overall residential parking rates, combined with the removal of parking minimums for affordable units would help to offset the cost of providing affordable units and is appropriate given the proximity of the developments to rapid transit and alignment with other city objectives (e.g., greenhouse gas emissions reduction targets and commitments). Increases to development heights and densities concurrent with the introduction of an IZ program can help offset the financial impact of the program, particularly for developers who purchased properties prior to IZ program adoption.

9. Offsite units: The required affordable units identified through a development application may be provided in a development located on an alternative site, provided that the alternative site is in an MTSA within the same municipality. Rationale: Offsite units are a crucial option to make IZ rental units work for condominium developments. They provide opportunities for creativity, partnerships and cost-sharing to create efficiencies and minimize pro forma impacts of the affordable units, while still achieving the intent of the IZ program to create high quality affordable units in mixed income communities near transit. Opportunities could include developers partnering with non-profit organizations to create offsite units within a non-profit owned building, and locating affordable units within buildings having lower construction costs, or on lower cost sites. The provision of offsite units was a concept that was widely supported by both representatives from the development industry and affordable housing providers as a tool to create affordable units that could be constructed and maintained in a cost-effective manner. This approach can leverage more affordable units, more deeply affordable units, longer affordability periods and opportunities for on-site support as compared to onsite units alone.

10. Administration and implementation: The Region of Waterloo has expressed an interest in taking a leading role in monitoring, enforcement and waitlist management. The Cities of Kitchener, Cambridge and Waterloo will secure affordable units through the development review process, in accordance with IZ Implementation Guideline Document (to be developed). Should the IZ program require rental as the tenure for affordable units (see item #3), implementation should include pathways for a third sector (non-profit, co-operative or other mission aligned housing provider) to own affordable units created in a condominium building. The Region may be able to assist with financing to support third sector ownership. Rationale: Centralized administration by government or a single mission-aligned, arm's length organization with sufficient operational funds is required to ensure consistent monitoring and enforcement of the program. Enabling third sector ownership and operation of affordable rental units within condo developments will address condominium developers’ concerns about capacity to operate affordable units and will ensure affordability beyond 25 years.

11. Monitoring and reporting: An IZ program should be reviewed and modified as necessary, every two years to respond to land development economics and changing market conditions. If requirements are too lax during periods of strong development economics, the program will miss opportunities to deliver on affordability outcomes. If it is too demanding in weak economic conditions, it could stifle the development of much needed housing supply, affordable or otherwise. The Partners will report biennially on the IZ program and table potential amendments to these programs to optimize the program and respond to emerging issues and trends.

Recommended Set-aside Rates

* Set-aside rate applies to total GFA of proposed development

Recommended Maximum Rents for IZ units

* Calculated as the greater of 100% AMR or MLI Select definition of affordability (currently $1,425).
** Calculated as 100% AMR

Footnote

We have completed our proposed inclusionary zoning policy and program directions discussion paper and will present the findings to the City of Kitchener and the City of Waterloo Councils.

• Kitchener City Council will meet on Monday, June 19, at 4:30 p.m. You can watch the meeting live on the day of the meeting by going to kitchener.ca/watchnow.

• Waterloo City Council will meet on Monday, June 26, at 2:00 p.m. You can watch the meeting live on the day of the meeting on the City’s Youtube channel.

The discussion paper looks at best practices from other municipalities and feedback from key stakeholders to recommend a framework for inclusionary zoning in the Region of Waterloo. Read the report

Thank you to everyone who shared their feedback and ideas on inclusionary zoning.

We are presenting an update to Kitchener City Council, including a report on the public's feedback. The meeting takes place Monday, March 6 between 2:00-4:30p.m.

To view the agenda and staff report, please visit the calendar entry for the Community and Infrastructure Services Committee meeting (March 6, 2023).

You can also watch the meeting live on the day of the meeting by going to kitchener.ca/watchnow