Toronto has taken an unprecedented step to help provide affordable homes in the city. Condominium developers will eventually have to dedicate as much as 22% of their new builds to affordable rentals and ownership units. The Inclusionary Zoning (IZ) vote was almost unanimous at 23 to 2 in favour of the policy. It is scheduled to begin in 2022. Here is what you need to know.
100 or More Units
Initially, condo developers with 100 or more units will need to provide 5% to 10% of their total square footage to the affordable units. However, this is expected to increase to as much as 22% by 2030, depending on the condo’s location and type of unit.
Who Qualifies for the Units?
Households with an income between $32,486 and $91,611 per year will be eligible to rent or purchase the units. Pricing is based on residents spending no more than 30% of their income towards rent or mortgage payments. This ensures people can pay for shelter and still be able to afford food, utilities, clothing, etc. The costs breakdown as follows:
- One Bedroom: Rent $1,090, ownership $190,100
- Two Bedroom: Rent $1,661, ownership $242,600
- Three Bedroom: Rent $1,858, ownership $291,700
Compare this to the average condo price in the GTA in September 2021 at $789,983, and $837,047 in the city of Toronto and you see what a huge difference this will make for qualified buyers. As well, average rent in the GTA at around the same time this year was $1864 to $2845 depending on the number of bedrooms. Again, the dedicated rental units come in at close to half the price of the going rates.
Increasing Supply
Because the development industry continues to enjoy financial success, the city believes they play a key role in contributing to affordable housing by increasing supply. Although developers continue to provide jobs, they can also make it difficult to find affordable housing with little land and money going towards affordable units. As well, the policy targets condos because purpose built rentals are difficult to find. Therefore, the city wishes to reduce any barriers that would keep developers from choosing to build rental units. However, there is still the possibility that a modest requirement might be introduced for purpose-built rental units by 2026.
Where IZ Applies
So far IZ will apply to:
- The former City of Toronto
- North Toronto
- The western part of North York
- The North Yonge corridor
- South Etobicoke
- Scarborough City Centre
- Southwest Scarborough
These areas are experiencing both increasing development and shelter costs. Most of these areas will probably be at the lower end of the required units, reaching about 8% to 11% by 2030.
How Does This Affect Downtown Condos?
Developers in the downtown core will dedicate 7% to 10% of all units to affordable housing to start. This is the area also likely to face as much as 16% to 22% of their units going towards affordable housing by 2030. Estimates point to 12,000 additional below-market units in the city within five years, and 40,000 by 2030.
How Long Will Units Remain Affordable?
Affordable units will maintain adjusted pricing for 99 years following completion of construction. The plan is designed to remain forward-thinking, so that Toronto experiences improved affordability for both home owners and renters.
If you are interested in learning more about affordable housing options in Toronto, I am here to help. Let’s chat about how you can reach your goals of home ownership. If you want to learn more about today’s market and understand where this decision came from, check out this blog.
Photo by Maarten van den Heuvel on Unsplash
