In a move likely to send shock waves through Ontario’s development industry, Queen’s Park is giving cities the power to make builders include affordable housing in new residential projects.

So-called “inclusionary zoning,” which would require developers to set aside a percentage of their new units for low- to moderate-income households, is part of Ontario’s updated affordable housing strategy, being unveiled in Toronto Monday.

“It’s a planning tool that many municipalities have been requesting, with the potential to create thousands of new affordable units,” said a source familiar with the strategy. “The province will make it available for municipalities that wish to use it.”

Details on the long-awaited legislative change will be subject to consultation with local councils, the development industry, affordable housing advocates and the public, the source said.

But it is likely the province will give municipalities some latitude to set the rules based on local markets and housing needs, according to the source.

This could include the size of developments subject to the new rules, whether they would apply citywide, the percentage of affordable units required and how affordability will be determined and maintained over time, the source said.

In Toronto, where the city has been seeking inclusionary zoning powers for more than a decade, the planning tool could have created 12,000 new affordable homes in the past five years, Chief Planner Jennifer Keesmaat told a community forum on the issue last spring.

“If the city required 10 per cent of new units to be affordable in developments with over 300 units . . . we would have secured 12,000 affordable housing units,” she said.

Instead, fewer than 3,700 affordable rental and ownership units have been added since 2010 through a modest federal-provincial affordable housing program and local planning act provisions, according to city officials.

“From my perspective, this is a very critical part of meeting broad, city-building objectives,” Keesmaat said. “It would be transformational.”

The housing strategy, being announced by Municipal Affairs and Housing Minister Ted McMeekin and Deputy Premier Deb Matthews at the Fred Victor Mission, includes last month’s budget allocation of $178 million over three years for new housing subsidies and benefits.

The money, largely tied to initiatives aimed at helping the province meet its 10-year commitment to end homelessness by 2025, will also support the construction of 1,500 new supportive housing units.

The new funding also includes $45 million in 2017-18 to boost the Community Homelessness Prevention Initiative used by cities to tackle local needs, such as emergency shelters, transitional housing and other supports.

A $2.4 million pilot project, also announced in the budget, will test a new portable housing benefit for those fleeing domestic violence with a view to expanding it to other groups. About 500 households would benefit initially.

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Inclusionary zoning, which was introduced in the early 1970s in the United States, has been used to create affordable housing in more than 400 communities including Chicago, San Francisco, Denver, New York and Washington. The measure has created more than 150,000 affordable units in the past 10 years.

The Ontario Homebuilders’ Association has warned that inclusionary zoning would push up the price of new homes and be unfair to new homebuyers who would be saddled with the cost. But U.S. studies have shown that hasn’t happened, according to city officials.

Social Planning Toronto, a non-profit social policy research group which has been urging Queen’s Park to adopt inclusionary zoning for many years, estimates the initiative could create between 1,000 and 1,200 affordable home ownership or rental apartments in the city every year, at no cost to the public.

Governments could provide subsidies to make the units affordable to lower-income residents. Non-profit groups could buy the units to rent to their clients and provide programs and support if necessary.

When universally applied, inclusionary zoning ensures affordable housing is integrated into every community and becomes a regular part of every development, said executive director Sean Meagher.

There are currently two private member’s bills on inclusionary zoning before the provincial legislature. One was introduced by NDP MPP Cheri DiNovo (Parkdale-High Park) and the other by Liberal MPP Peter Milczyn (Etobicoke-Lakeshore,) a former Toronto city councillor. DiNovo has introduced five bills on the issue since 2009.