Evaluating affordable housing outcomes in Toronto: An analysis of density bonusing agreements

This paper is part of the IMFG Papers on Municipal Finance and Governance series. For a full list of papers, please visit http://bit.ly/2ylAa2D.Owing to limited public-sector funding, municipalities have increasingly relied on the private sector to help build affordable housing. Some cities have employed value capture tools – such as incentive zoning (which may involve density bonusing and other incentives) – to address housing affordability problems. These tools use the increase in land value that results from public actions (such as rezoning) to pay for affordable housing. In Toronto, the City has secured such affordable housing contributions largely through the development approvals process and individual negotiations with developers. This process has been facilitated through Section 37 of Ontario’s Planning Act, which permits the City to approve increases in height or density or both above the limits allowed by current zoning in exchange for community benefits. Very little research has examined how effective this density bonusing approach has been in producing affordable housing in Toronto. This paper examines Section 37 agreements from 1988 to 2018 that contain affordable housing benefits to show the housing outcomes achieved through Toronto’s approach. In November 2021, the City of Toronto adopted a new inclusionary zoning policy that requires developers to set aside a percentage of new housing units as affordable housing. So it is important to analyze Section 37 data and map where, how many, and what type of affordable units were produced under the previous affordable housing governance structure to create a baseline against which a future approach could be evaluated. The results of the analysis show that while Section 37 has managed to generate some physical affordable units, the tool has been more successful at securing funding (more than $65 million) for affordable housing. Unfortunately, these cash contributions translate into relatively few units. Moreover, the funds have been received in many small amounts over the years, further reducing the effectiveness of this approach to creating new affordable housing.Institute on Municipal Finance and Governanc