As we prepare to enter 2019, newly elected governments at all levels think solutions the “affordable housing crisis” might it be found in a new regulation — inclusionary zoning. Are we on our way for a severe collision course and another regulatory disaster?
In the dying days of the Kathleen Wynne government, Toronto was given the regulatory authority of what’s being called inclusionary zoning — the right of a municipality to designate or impose a certain number of units of a new development as “affordable.” The definition of affordable and how the inclusion is to be effected have yet to be defined — and may never be — but a negotiated settlement may be part of a site plan approval or subdivision agreement.
This may be the collision course. The unintended consequence will lead to higher prices for market housing and ultimately less affordable accommodation to subsidize the designated affordable units.
And many questions remain: Is inclusionary product contained within an existing building or allocated as cash in lieu of a separate affordable housing project? Are these rental or ownership units and who manages or owns the block of units? These questions are yet to be answered, and that may be a good thing. Let the creativity of each developer and municipality come together to find innovative solutions on a site-specific basis — much better than an arbitrary set of rules.
I recently met with Fred Heller, a long-time friend of the housing industry, who is part of a relatively new non-profit builder called Trillium Housing, which is advocating for modest income families to provide “housing affordability.” The Trillium model may help avoid an inclusionary zoning collision and, in fact, provide a viable alternative to affordable product with little or no market price distortion.
What Trillium does is provide financing that bridges the gap between the house price and what the families can afford for a first mortgage, all within the province’s affordable housing income guidelines. The beauty of the program is that the Trillium Mortgage doesn’t have to be repaid until the house is sold or refinanced and, better still, the consumer makes no scheduled payments on their Trillium Mortgage. Trillium gets repaid when the property is sold, plus Trillium earns its portion of the equity appreciation. The consumer down payment is as low as 5 per cent and the Trillium loan is considered equity, so there is no CMHC insurance fee on the first mortgage. A $100,000 Trillium mortgage applied against a $400,000 condo means $600 per month lower carrying costs and $24,000 lower qualifying income. This means a family of a modest total household income of about $70,000 per year could afford this home, even with the tough new bank qualifying rules. Not only does Trillium bring financing to the table, it works with the developer, the municipality and others to source the funding. Just imagine for a moment a municipality suggesting that in order to meet affordable housing targets they might just waive all fees and charges associated with a new home — currently these charges range from $100,000 to $150,000 per unit — and imagine the developer, who has to front these charges anyway, instead participates in a non-profit foundation that funds a Trillium-like mortgage. A WIN-WIN-WIN for government, developer and consumer — and no inclusionary zoning collision.
Interesting times ahead for 2019. With programs like Trillium, innovation and creativity will soar and the objective of providing more affordable housing is achieved!