Exploring Inclusionary Zoning to Support Affordable Housing

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Housing in Region of Waterloo - photo Adam Clarke


Safe and affordable housing is an issue of increasing concern both within Waterloo Region and more broadly across Canada. In recognition of the importance of affordable housing to our communities, the Cities of Kitchener, Waterloo and Cambridge have partnered, with support from the Region of Waterloo, to explore the feasibility of adopting a new tool to increase the supply of affordable housing. The tool, called inclusionary zoning, would allow the Cities to require private developers to include a certain percentage of affordable units within new, multi-unit housing developments built within Major Transit Station Areas (around ION stations; See map at right)

Before adopting an inclusionary zoning program, municipalities must conduct an assessment of the potential impacts of inclusionary zoning on the housing market. The three Cities and the Region of Waterloo have begun this work with the help and expertise of N. Barry Lyons Consultants (NBLC). Background information and preliminary results from the study are presented here for community review and feedback.

How Does Inclusionary Zoning Work?

Inclusionary zoning works by leveraging increases in land value achieved through development approvals, investment in ION and increasing demand for centrally-located housing to provide affordable housing. In this way inclusionary zoning programs typically don’t need to rely on government subsidies.

Because inclusionary zoning programs result in lower revenues for developers through lower rents or sales prices than would otherwise be the case, programs have to be carefully designed to ensure that residential development continues to be financially viable for private market housing providers. Where the economics of site development cannot support inclusionary zoning on its own, inclusionary zoning programs can include a range of measures to reduce the financial impact on the development industry. These measures could include the phasing in of the program, increased planning permissions, or financial incentives to help offset the cost of providing affordable units. Other considerations in designing an inclusionary zoning program that can influence development feasibility include the “set aside” rate (proportion of units required to be affordable), the duration of affordability, depth of affordability, and the tenure of affordable units (rental vs. ownership).

Other Considerations and Limitations of Inclusionary Zoning

Inclusionary zoning can complement other affordable housing initiatives, such as Region of Waterloo community housing and not-for-profit affordable housing, by providing an ongoing, sustainable supply of affordable housing that is not reliant on federal and provincial government grants. Despite its potential to leverage private investment for affordable housing, inclusionary zoning is subject to a number of regulatory and financial constraints that limit its ability to address the full range of affordable housing needs. These limitations include:

  • Location: Provincial regulations limit inclusionary zoning to Major Transit Station Areas

  • Scale of development: Provincial regulations limit inclusionary zoning to residential developments of 10 units or more

  • Depth of affordability: Research suggests that inclusionary zoning works well for creating affordable housing for households in the 30th and 60th percentile of income distribution. These households tend to earn too much to be eligible for community (government subsidized) housing, but not enough to afford market rents/prices.


Safe and affordable housing is an issue of increasing concern both within Waterloo Region and more broadly across Canada. In recognition of the importance of affordable housing to our communities, the Cities of Kitchener, Waterloo and Cambridge have partnered, with support from the Region of Waterloo, to explore the feasibility of adopting a new tool to increase the supply of affordable housing. The tool, called inclusionary zoning, would allow the Cities to require private developers to include a certain percentage of affordable units within new, multi-unit housing developments built within Major Transit Station Areas (around ION stations; See map at right)

Before adopting an inclusionary zoning program, municipalities must conduct an assessment of the potential impacts of inclusionary zoning on the housing market. The three Cities and the Region of Waterloo have begun this work with the help and expertise of N. Barry Lyons Consultants (NBLC). Background information and preliminary results from the study are presented here for community review and feedback.

How Does Inclusionary Zoning Work?

Inclusionary zoning works by leveraging increases in land value achieved through development approvals, investment in ION and increasing demand for centrally-located housing to provide affordable housing. In this way inclusionary zoning programs typically don’t need to rely on government subsidies.

Because inclusionary zoning programs result in lower revenues for developers through lower rents or sales prices than would otherwise be the case, programs have to be carefully designed to ensure that residential development continues to be financially viable for private market housing providers. Where the economics of site development cannot support inclusionary zoning on its own, inclusionary zoning programs can include a range of measures to reduce the financial impact on the development industry. These measures could include the phasing in of the program, increased planning permissions, or financial incentives to help offset the cost of providing affordable units. Other considerations in designing an inclusionary zoning program that can influence development feasibility include the “set aside” rate (proportion of units required to be affordable), the duration of affordability, depth of affordability, and the tenure of affordable units (rental vs. ownership).

Other Considerations and Limitations of Inclusionary Zoning

Inclusionary zoning can complement other affordable housing initiatives, such as Region of Waterloo community housing and not-for-profit affordable housing, by providing an ongoing, sustainable supply of affordable housing that is not reliant on federal and provincial government grants. Despite its potential to leverage private investment for affordable housing, inclusionary zoning is subject to a number of regulatory and financial constraints that limit its ability to address the full range of affordable housing needs. These limitations include:

  • Location: Provincial regulations limit inclusionary zoning to Major Transit Station Areas

  • Scale of development: Provincial regulations limit inclusionary zoning to residential developments of 10 units or more

  • Depth of affordability: Research suggests that inclusionary zoning works well for creating affordable housing for households in the 30th and 60th percentile of income distribution. These households tend to earn too much to be eligible for community (government subsidized) housing, but not enough to afford market rents/prices.

Share your issues and concerns with us

What issues or concerns do you have about what you've learned so far? What issues should we consider as we move into the policy development phase of this project?

Please share your comments here.

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I like that the City and Region are looking at affordable housing from many angles, but it still feels like IZ is a small stop gap that may backfire.
1) Even with incentives, I fear developers will still price their market units even higher out of reach. IZ is aimed to help those within 30-60th percentile of household income, but being in the ~70th percentile (as of 2015 census), we are already priced out of home ownership altogether and are fortunate we do not have to move apartments as we would also be priced out of our desired communities.
2) I am concerned that using Gross Floor Area for the set-aside rate will not help to keep our communities diverse by encouraging developers to create more 1 bedroom units. So few buildings have 3 or 4 bedroom units. Families do want to live in these denser areas but have no choice but to move elsewhere. It would be great id there could be some sort of mix of requirements - Gross Floor Area and Unit Types.
3) Currently about 65% of residential zoning in Kitchener is for single family homes. THAT IS YOUR KEY PROBLEM. I agree that we need density but it does not have to be only downtown or only adjacent the LRT. Other areas of the city need to densify too. We need more low-rise and mid-rise buildings everywhere, and more mixed-use buildings. (I loved my building in Montreal that had a bakery, pizza place, flower shop, convenience store and more at its base). I actually think this would be even more amenable to developers as it may offset any losses from affordable units as business rentals usually charge more. Have Mixed-Use apartments allowed throughout the city would also encourage community engagement - it's a lot easier to get to know neighbours if you pop into the same convenience store in your building, rather than driving/taking bus to the nearest grocery store.

Jelsie 25 days ago

Requiring developers to provide permanent lower cost housing is only going to drive up the sale or rental prices of the other units because the developers are not going to sacrifice their profits. So instead of only the 60th percentile and lower earners having problems finding affordable housing, now it's the 65th percentile or maybe even the 70th who have problems finding affordable housing.

Better to redesign our zoning bylaws to encourage building "missing middle" housing, and to get rid of single-family-home-only zones that take up 70% of out city's residential lands.

Cory 25 days ago

The new proposed RES-x residential zones to replace the R-x don't go far enough. All they really do is collapse 9 zone types into 7 and add duplexes, which is ludicrously inadequate to increasing the housing supply, especially since most lot size, setback, height limit and coverage rules are retained. Zones need to be designed to encourage the "missing middle".

In *all* residential zones triplexes, fourplexes and low-rise apartments should be allowed; along with allowing low-density commercial like cafés, restaurants, and small stores to encourage walkability.

All traffic arteries should be zoned multi-use midrise to encourage commercial on the bottom and residential up top.

Cory 26 days ago

I am aging and walking is a big concern for the aged and disabled persons. How are you going to address these issues for the affordable housing and for the transportation hub? I also need to be with people that are in the senior age group for housing I would think that it should be subdivided as well. How are you doing the planning for these issues for the community? I am on a waiting list for housing and need it ASAP. I can not continue to do stairs and pay high rent that leaves me with $200 a month for food and expenses? How are you getting thru the housing lists for people like myself age 55 plus who are physically impaired etc?

jacquelinepope18 3 months ago

Most of the condos in the core are owned by investors who rent them for a profit. This is the problem. There are all kinds of affordable condos however the developers and agents sell them to investor keeping first time buyers out.

cpursel 3 months ago

This will cost everyone. Don't do it

ward 6 months ago

Less density and modern integrated architecture will make this more acceptable.

duct tape 9 months ago

As shared in the description, Inclusionary Zoning can be performed with minimal to no impact to the budget for other initiatives, so we should make sure that other initiatives are not reduced if Inclusionary Zoning is implemented.

And as others have shared, we should take care that this doesn't end up creating "segregated" spaces between affordable housing developments and developments offered at market prices.

Peter 9 months ago

With the anticipated transformation of St Mark's into low cost housing carried out by INDWELL, we have a good example of what, where and how it should be done. Indwell have been working at transforming cities around Ontario to develop affordable, holistic housing for people for several decades. Their track record navigating Covid-19 is stunning. Through years of experience they know how to make these initiatives work for everyone. Let's invite them onto our planning committees as we figure out a way forward in the Tri-cities.

DaveK 9 months ago

I would love to see any such zoning fleshed out with community-oriented policy, eg, not creating an inferior or segregated component of a development designated "low income" but rather looking at integration to combat gentrification and walled-off portions of communities. I hope any such by-laws/policies would dovetail with current ones protecting greenspace, heritage, POPs, and walkable/livable communities - in that, affordability should be designed into existing planning and policy, not become a "tradeoff" that just moves disadvantage to another element (encroachment on existing homes, sacrifice of parks or the City allowing other profit-favouring variances "in return" for inclusion).

JohannaB about 1 year ago