What you need to know about Ontario’s new housing policy – Bill 23 

November 2, 2022

On October 25, Ontario’s provincial government tabled Bill 23 under its More Homes Built Faster plan. The bill proposes significant reforms to Ontario’s Planning Act, the Municipal Act, and the City of Toronto Act, among other legislation.  

According to Minister of Municipal Affairs and Housing Steve Clark, the measures in Bill 23 will contribute to the province’s plan to build 1.5 million homes by 2031. The broad range of initiatives rolled into the bill include tax incentives and measures to deregulate and streamline development and planning processes. The Ontario government suggests that these measures will incentivize private market investment in housing, in turn increasing the supply of housing, including rental housing. As currently articulated however, the bill falls short in including specific initiatives that would effectively incentivize the construction of affordable rental housing, and in particular “deeply affordable” rental housing – housing that is within reach for households living on lower or fixed incomes. Bill 23 also does not commit the Ontario government to any direct investment in the creation of deeply affordable public and non-profit housing.  

The Ontario Government has stated that the objective of the More Homes Built Faster plan – to be legislated through Bill 23 – is to provide more “attainable housing options” for Ontarians in light of housing supply shortfalls. Recently released census data from 2021 provides some insight into who in Ontario needs housing, and what type of housing they need. The data shows that around one third of Ontario households are renters, and almost 33% of these renters pay unaffordable rents, where they are forced to spend more than 30% of their income on housing. Renters are almost twice as likely as homeowners to face affordability challenges. Unsurprisingly, the vast majority of households facing affordability challenges are living on lower incomes, with those living on fixed income facing particularly acute housing affordability challenges.  

Below we provide a summary and analysis of some of the key initiatives proposed by Bill 23, with a focus on initiatives intended to impact current and future rental housing supply, reflecting that renter households in Ontario consistently experience the greatest housing need. In this context, increasing access to adequate, affordable and secure rental housing is essential to implementing the right to housing in Canada.   

This is not a comprehensive review of all measures included under the More Homes Built Faster plan. For more, read the government’s backgrounder introducing the bill and the draft bill.  

Key initiatives in Bill 23 

Challenging municipal rental replacement policies  

Bill 23 proposes changes to the Municipal Act and the City of Toronto Act that would empower the province to limit or impose conditions on municipalities’ authority to adopt rental replacement policies. These policies regulate the demolition or conversion of rental properties of six units or more. They are currently in place in Toronto and Mississauga, and under consideration in several other municipalities.  

Through rental replacement by-laws, municipalities can require developers or landlords to replace rental units impacted by renovation or redevelopment at a similar affordable rent. This is an important policy tool that allows municipalities to maintain the existing stock of affordable rental housing, and in doing so, protect renters from displacement. In 2022 alone, the City of Toronto has ensured the replacement of 907 rental units, including 485 affordable units, using its demolition and conversion by-law. Since 2007, the City of Toronto has ensured the replacement of over 4,000 rental units, protecting Toronto’s affordable rental housing supply.  

In its current form, the bill does not propose alternative measures to protect existing rental housing, nor does it propose a new plan to maintain affordable rentals that are at risk of demolition or conversion. The removal of the rental replacement policy and absence of alternative measures is alarming, leaving many renters across Ontario at potential risk of losing their homes and being displaced from their communities.   

Imposing standardized Inclusionary Zoning rules  

Bill 23 proposes regulatory changes that would establish standardized rules for Inclusionary Zoning (IZ). Municipalities across the province would be required to apply these rules when developing IZ policies in their community. The proposal allows a maximum affordability period of only 25 years and caps the set aside rates (i.e. the proportion of units provided at an affordable rate in a development covered by IZ) at five per cent. It also determines a standardized definition of affordability, with rental affordability set at 80 per cent of average market rent.   

The proposed regulatory changes contrast with the current approach that requires municipalities to develop IZ frameworks based on findings from feasibility studies and stakeholder consultations. These independent reports provide localized analyses about how communities can maximize the construction of new affordable units without discouraging development. For example, based on independent feasibility studies and stakeholder consultations, the City of Toronto has adopted an IZ policy that includes targeted set aside rates based on building type and geography, which are set to progressively increase. For condo units, the set aside rates almost always exceed 5% regardless of geography, and progressively increase to higher rates. In addition, the period of affordability in Toronto is set at 99 years, making the City of Toronto’s IZ policy a permanent arrangement. 

The Inclusionary Zoning measures proposed in Bill 23 significantly limit municipalities’ ability to develop IZ frameworks based on local needs and economic conditions. More concerningly, the bill threatens to weaken the effectiveness of IZ as a key tool for creating much-needed affordable housing for the many Ontarians struggling to find secure and affordable homes.  

Allowing gentle density across neighbourhoods and more density around transit hubs 

Bill 23 includes changes to the Planning Act to allow for an increase in housing available across residential neighbourhoods and around transit hubs.  

If passed, the bill would permit up to three residential units per lot on most land zoned for residential use, without requiring municipal by-law amendments – this is called “as-of-right” zoning. New units built on these lots would be exempt from development charges and could include basement suites, laneway or garden homes. This could generate more and different kinds of housing, introducing a very gentle form of density in residential neighbourhoods that previously did not allow any form of density.  

The Ontario government has framed this approach as an initiative that addresses the “missing middle,” but what density it could achieve would be commensurate with the low end of missing middle style density, when compared with other approaches across the country. For example, the recently-adopted Vancouver Plan allows for “ground oriented missing middle builds,” which include multiplexes and townhouses up to three stories across the city and apartment buildings up to six stories in areas covered by the City’s Secured Rental Policy. A more ambitious missing middle approach for Ontario was recommended by the Ontario Housing Affordability Taskforce, which called for “as-of-right” zoning up to four units and four stories on a single residential lot. The “missing middle” density proposed in Bill 23 does not go far enough to allow the kind of gentle density needed to build more homes faster across the province.  

The bill also proposes changes to the Planning Act which would increase “as-of-right” zoning around major transit hubs, in line with planned minimum density targets. Municipalities would have one year to update their zoning by-laws in compliance with new density targets. This would be a positive step in leveraging investments in key infrastructure to create complete and walkable communities.  

Reforming development-related charges and curbing municipal housing budgets    

Bill 23 proposes changes to the Planning Act, the Development Charges Act and the Conservation Authorities Act that either exempt or reduce development charges and other fees across the spectrum of rental housing construction. Specifically, developers of affordable and inclusionary zoning units and non-profit housing developments would be exempt from municipal development charges, parkland dedication levies and community benefits charges. Developers of other types of market rental housing would benefit from reduced charges, with additional discounts applied to family-sized rental units. According to the provincial government, these measures would decrease the costs associated with the construction of market and non-market rental housing, incentivizing new builds.   

At the municipal level, development charges, community benefits charges and parkland dedication levies are key growth funding tools (GFTs), which fund key infrastructure and services needed to support growth. Proposed reductions in development charges and other GFTs could have the secondary effect of reducing the revenues that municipalities generate through these tools to support local communities.  

Concerningly, the bill will limit municipalities from funding affordable housing development and services with revenues from development charges. This will reduce the already scare resources available to create new affordable rental housing and fund existing housing programs. 

Additionally, under Bill 23, the Government of Ontario has proposed to explore reforms to the property tax assessment methodology for rental housing, with the objective of reducing the tax burden on rental housing providers. Framed as another measure to incentivize the provision of rental housing, this initiative would decrease the revenue generating capacity of property taxes – a core revenue stream for municipalities.  

As it is currently articulated, the bill does not propose any measures that could offset revenue losses for municipalities caused by reduced GFTs and property taxes.   

Streamlining the Ontario Land Tribunal 

Bill 23 proposes several measures to speed up processing of cases at the Ontario Land Tribunal (OLT). They include regulations that empower the provincial government to prioritize cases that meet certain criteria (for example, those that may create the most housing); regulations that would empower the Tribunal to dismiss appeals where it deems a party has failed to meet certain conditions; and regulations that impose timelines on various stages of a case. The bill also includes a proposal to limit third parties, including any individuals or groups beyond the developer and municipality, from challenging a project at the OLT. This would eliminate the opportunity for a range of groups, including community groups, environmental groups, and housing advocates, to submit an appeal to the OLT.  

Loosening municipal and regional control over the planning process   

Several interventions proposed under Bill 23 would loosen municipal controls when it comes to the development of buildings with fewer than 10 units. This includes proposed limitations on the application of site plan control and a reduced role in the planning process for some regional governments, with full responsibility for housing delegated to specified “lower-tier” municipalities.  

Key takeaways  

Ontario’s new housing bill falls short on proposing solutions that can alleviate the housing needs of low- to moderate-income Ontarians, who are most impacted by the affordable housing crisis. It further removes protections in place that ensure Ontario’s rental housing stock is preserved while restricting municipalities from adopting locally sound Inclusionary Zoning policies and limiting their revenue sources to promote affordable housing initiatives. 

Here are some of the key takeaways:  

  • Ontario’s Bill 23 includes a broad range of measures that will impact how and what type of housing is built in the province.  
  • Proposed initiatives that allow new housing options and greater density and reduce development costs for non-profit housing providers may contribute to the creation of diverse and more affordable housing options.  
  • Taken as a whole, measures proposed in the bill significantly constrain options for building new affordable rental housing and seriously jeopardize the affordable housing that exists.  
  • The measures in Bill 23 leave municipalities with fewer policy tools and resources to address housing challenges in their communities, with those in the greatest housing need left worse off.  
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