Would Olivia Chow’s affordable-housing plan actually work as advertised?

THE IDEA

Toronto is mired in an affordable-housing crisis. As of June, almost 170,000 people were waiting for a place in some form of subsidized housing. If that weren’t enough, the Toronto Community Housing Corporation’s repair backlog is now estimated at $914 million, and the amount of capital funding needed over the next decade has been pegged at $2.6 billion. In July, mayoral candidate Olivia Chow offered a solution she says will help bridge the widening housing gap: as mayor, she would ask developers to voluntarily set aside 20 percent of new residential tower developments for low-income renters, creating around 15,000 new, affordable units over four years. Chow says she would defer development charges on the affordable units for 10 years, or longer if the properties stay accessible to low-income renters (lest developers snap up the promised benefits and hike the rent), saving builders almost $12,000 per one-bedroom unit. Developers that improve existing tower sites would get different kinds of incentives too.

WOULD IT WORK?

In cities like Washington D.C. and San Francisco, there are what are known as “inclusionary zoning” rules—bylaws, often mandatory ones, that try to engineer roughly what Chow is proposing. In essence, inclusionary zoning tells developers to allocate a certain percentage of new residential units to moderate- or low-income people. In New York City, newly elected mayor Bill de Blasio is trying to implement mandatory inclusionary zoning.

Closer to home, in 2005 Montreal adopted voluntary inclusionary zoning for projects of more than 200 units. The program seems to be working: a 2007 report put the number of affordable units under construction at the time at 1,875, and a progress report prepared by the city a few years after the change went into effect says affordable housing went from 32.9 per cent of all new residential construction in 2004 to 39.4 per cent in 2006.

But those numbers don’t bode well for Chow’s plan, which calls for a much larger increase in affordable-housing construction. According to the city’s Affordable Housing Office, 3,266 affordable homes, some of them rentals and some of them affordable-ownership units, have been completed in Toronto between 2011 and 2014, for an average of 816 each year. (2014’s number of completions is an estimate.) To make her 15,000-unit target, Chow would have to get Toronto building almost five times as many affordable units per year, and on a voluntary basis, at that. (Toronto lacks the legal authority to make setting aside affordable housing mandatory. And so Chow couldn’t promise mandatory inclusionary zoning, even if she wanted to.) To meet the city’s definition of “affordable rental,” the apartments would have to be priced at 80 per cent or less of market rates.

Toronto real estate megabroker Brad Lamb thinks easing development charges isn’t going far enough. “While I think it’s a great idea to reduce development charges,” he said, “it’s not going to do anything to create affordable housing in the city, because it’s not enough of a subsidy.…To make housing affordable, we have to find a way of taking one-bedrooms at $300,000 down to the range of the low $200,000s. Development charges are not a big enough number to make a dent in the cost of housing to make it affordable. So, it’s a noble idea, but I don’t think it going to do anything to increase the amount of developer-built affordable housing.”