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 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

  • Degree 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 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

  • Degree 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?

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