Ontario proposes to pause rule that lets cities require affordable housing units

New homes are built in a housing construction development in the west-end of Ottawa on Thursday, May 6, 2021. THE CANADIAN PRESS/Sean Kilpatrick

TORONTO — Ontario is proposing to temporarily ban three major cities from requiring a certain percentage of affordable units in new buildings near transit stations, citing a downturn in the housing market.

Critics say now is not the time to pull away from affordable housing, but the government argues in its proposal that the policy known as inclusionary zoning works well in a strong housing market. That is not what Ontario is seeing right now.

"Beginning in 2022-23, market conditions in Ontario have undergone a series of shifts that have negatively impacted housing starts and costs, including significant increases in the costs of financing (i.e., interest rates) and construction," the government writes in its proposal.

"The residential development market continues to be strained and many municipalities considering IZ are finding that is not viable under present economic conditions."

The pace of building new homes in Ontario has slowed in recent years and has caused the government to back away from its goal of building 1.5 million homes in 10 years.

The policy is only in effect in Toronto, Kitchener and Mississauga. Other cities have been considering implementing it, but the province says it is planning to pause inclusionary zoning requirements until July 1, 2027.

"(The government) has heard from stakeholders expressing concerns that implementing IZ at this juncture, particularly in Toronto, could have a negative impact on overall housing supply and could result in the cancellation or pause of projects," the proposal says.

Toronto Mayor Olivia Chow said the current rules allowing cities to place a maximum five per cent requirement of affordable units on development were already not enough. She had been pushing for 20 to 30 per cent, she said this week.

"People need homes they can afford," she said at a press conference.

Mississauga Mayor Carolyn Parrish said in a statement that the city is "deeply concerned" by the province's proposal.

"We understand this zoning puts an extra burden on builders to finance their projects," she wrote. "But it is impossible for municipalities like Mississauga to subsidize those IZ units, no matter how desperately they are needed."

A spokesperson for Municipal Affairs and Housing Minister Rob Flack suggested inclusionary zoning requirements hamper building.

"Now is not the time to be adding unnecessary red tape and requirements that only increase the cost of building a home," Michael Minzak wrote in a statement.

"These temporary measures will help to ensure project viability so more people can call the City of Toronto home."

Builders are welcoming the pause. Richard Lyall, president of the Residential Construction Council of Ontario, said inclusionary zoning sounds good but doesn't work.

"It has a chilling effect on projects, and then it delays projects ... and the problem with it as well, too, is that it's kind of like a beggar-thy-neighbour policy," he said.

"We'll get these (affordable) units in a building and who pays for that? Well, it's the other occupants of that building, whether it's new rental or condo. There's no free lunch there, but it's an easy way for governments to try and look like they're really doing something here, when in fact, they're not."

Liberal housing critic Adil Shamji says by dropping inclusionary zoning, the province will miss a crucial window of opportunity for building affordable homes close to transit.

"I really struggle with this government, because on the one hand, they will tell us that they're doing an amazing job in housing, and then on the other hand, use their abysmal record on housing to justify short-sighted decisions," he said in an interview.

"The reality is that the opportunity to build around new subway lines and subway stations really only exists once. It's right now, as you're seeing the Finch West LRT open up, the Eglinton Crosstown open up in short order, the Ontario Line open up. Once those developments are built, the opportunity to have affordable housing in those areas will essentially be gone forever."

NDP housing critic Jessica Bell said the government's proposal shows a failure to take responsibility.

"By refusing to greenlight inclusionary zoning, the Conservatives have blocked the construction of at least 3,000 affordable homes a year in Toronto alone," she wrote in a statement.

Green Party Leader Mike Schreiner noted that the government's proposal comes as the Association of Municipalities of Ontario reported this week that about 85,000 people in the province experienced homelessness last year, up from the year before.

“Instead of giving municipalities more tools to make communities more affordable, the Ford government is taking them away," Schreiner wrote in a statement.

The government proposal is open for public comment until Monday.

This report by The Canadian Press was first published Jan. 15, 2026.

Allison Jones, The Canadian Press