Frequently Asked Questions
How do Kitchener’s proposed IZ requirements compare to other jurisdictions?
Kitchener’s proposed IZ program percentage of affordable units (set aside rate), depth of affordability, and duration of affordability are dramatically out-of-step with prevailing best practices on IZ rental units, as seen in the table below.
Comparative Approaches to Inclusionary Zoning Rental Housing
Notes and Sources 1 Kitchener. 2 Toronto. 3 99 years is commonly used as a placeholder for perpetuity in Ontario law. 4 Vancouver. 5 San Francisco. 6 Prevailing Best Practices.
One reason the IZ measures proposed for Kitchener are so out-of-step with prevailing best practices is because of Provincial limitations. In 2019, the Province limited IZ, under Bill 108, Schedule 12, Section 2 (2), to PMTSAs. In 2022, the Province proposed amendments to Regulation 232/18 which limit a) the set aside rate to no more than 5%, b) the depth of affordability to 80% of market rates and c) the duration of affordability to 25 years. While the proposed amendments to the regulation have not been implemented, municipalities may be hesitant to invest in developing policies that may be undone by the Province.
Who would IZ help? Why should we support IZ when it does not address our most vulnerable community members?
The IZ program is geared toward renters with 2022 annual household incomes of $43,000-$65,000. For example, under the program, a household including two full-time minimum wage earners could afford a two-bedroom IZ unit (while spending less than 30% of their gross earnings on housing).
As can be seen from the diagram below (2020 Kitchener Housing Strategy, page 8), such households are ineligible for Supportive or Community Housing but can still struggle to afford Market Rental Housing.
IZ does not address our most vulnerable community members – those with incomes of less than full-time minimum wage. The plan as shown in the diagram is to accommodate these individuals via Shelters, Supportive Housing and Community Housing. The hope is that, via IZ, we keep more people from falling out of housing and that vulnerable people moving on from Supportive and Community Housing are able to find an affordable home.
Would we be better off investing public assets into publicly-owned and -operated social housing – as opposed to incentivizing private industry to build and operate affordable housing?
Many advance good arguments that we would. Even the Waterloo Region Home Builders Association weighed in to assert “Kitchener should get back into housing business. Sustainable non-profit housing sector is needed.”
One of the intrinsic advantages of IZ programs is that they do not require government funding. The costs of IZ programs are absorbed into the sale price of land.
Do all jurisdictions attempt to trade upzoning for IZ programs?
No. Most IZ programs in the US are not tied to upzoning. It is simply a requirement. Other jurisdictions, including Singapore, the Netherlands, Hong Kong, and parts of Australia and Brazil, sell upzoning rights after determining that increased density is desired in a particular location.
Is there merit to the developers’ argument that the IZ program is inequitable?
Of course, the desire for equitability has merit. Land use planning redistributes public assets and alters the uses and benefits of private property. If it is not deemed as fair, it is unlikely to secure the cooperation needed of many sectors of society.
The developers advanced at least two arguments about the inequitability of the IZ program. They argued that it is unfair to a) place the burden of subsidizing housing on a subset of society, as opposed to the general public and b) only require developments inside PMTSAs to participate in the IZ program.
While it is true that only lands within the PMTSAs are proposed to be subjected to the IZ program, only the lands within the PMTSAs are being upzoned so extensively. Moreover, while some may argue that the entire Ontario land-use system is unfair, perhaps it is worth assessing whether a given policy would make matters more or less fair.
Would developers’ pro forma business plans no longer satisfy lenders and investors?
The private details of developers’ holdings are not available to the general public. Nonetheless, it is quite conceivable that developers’ pro forma business plans may no longer satisfy lenders and investors for the following reasons:
a) Pricing on real estate was very high until recently. Many developers and speculators bought land at a high point in the market, and prices have now dropped.b) Inflation has raised the cost of goods and services.
c) Interest rates have risen.
d) Investors’ profit expectations may not be falling.
To reduce developers’ construction costs on qualifying projects, our governments are extending the following support:
* The Federal government is providing funding and subsidized loans and mortgage insurance via the Housing Accelerator Fund, the Apartment Construction Loan Program and other initiatives;* Federal and Provincial governments are waiving HST from Purpose-Built Rentals;
* The Provincial government has reduced or capped Development Charges (DCs) and Parkland Dedication Fees across the board, further reduced DCs collectable on Purpose-Built Rentals and waived DCs and Parkland Dedication Fees entirely on IZ and ‘affordable’ housing units.
How has the public underwritten private ventures during other industry downturns?
When the Federal and Ontario governments bailed out Chrysler and General Motors in 2009, they received equity stakes in return. (One can question the amount of equity received and the amount of the loan that was returned.)
Is this a bad time to implement IZ?
This question is also raised frequently when considering IZ programs. Will there ever be a better time, other than now, while we are upzoning the MTSA lands?
How would the IZ program respond if the real estate market softens further?
The Staff proposal for Kitchener’s IZ program includes a requirement for a program review every two years.
How will we ensure that IZ units remain in the hands of income-qualified renters?
The Region of Waterloo has indicated a willingness to take a leading role in monitoring and waitlist management.
Why does the petition call on Council to implement IZ more fulsomely than the Staff recommendation? And why does the petition include the possibility of settling for the Staff recommendation?
The Staff Report recommends phasing in IZ. In contrast, the petition is premised on the understanding that a phase-in period is not needed and would forgo hundreds of desperately needed IZ units. GT proposes to deliver tremendous value to developers and owners of lands inside the seven MTSAs. Federal and Provincial governments are providing sizeable assistance to developers. These credits offset transitional costs of IZ.
Notwithstanding the above, the petition includes the possibility of settling for the Staff Report recommendation because Council displayed such substantial reservations about the Staff-proposed IZ program. The petition responds to the possibility that Council may be inclined to reject implementing any IZ program whatsoever. The petition takes a pragmatic, as opposed to a moral, position.
Moreover, the petition is premised on the hope that, once an IZ program is in place and all parties witness its success, the terms of the IZ program can be adjusted. The Staff proposal includes a requirement for a program review every two years.
Special thanks to Affordable Housing Consultant Richard Drdla.