Cities to gain new tool for creating affordable housing by policyfix

by Josh Brandon

The ability of municipalities to regulate, permit or prohibit certain types of development activities within their boundaries is one of the most powerful tools of local government. Through proper planning, local governments can help encourage development that fosters healthy diverse and socially sustainable communities. Bill 7, THE PLANNING AMENDMENT AND CITY OF WINNIPEG CHARTER AMENDMENT ACT (AFFORDABLE HOUSING), will provide local governments, and particularly the City of Winnipeg, a further tool to ensure new residential developments meet the need of all citizens through inclusionary zoning. I argue that inclusionary zoning benefits communities in several ways:

It leverages valuable and scarce land to create affordable housing. It promotes more diverse communities; It passes on the costs of affordable housing to the developer, while continuing to provide room for reasonable profits from their investment.

I will provide some examples of where inclusionary zoning has worked in other jurisdictions. Finally, while inclusionary zoning is a useful tool, more needs to be done by all levels of government to continue to meet the affordable housing needs of our communities.

The basic principle behind inclusionary zoning is that municipalities can require that developers construct a certain percentage of affordable housing, often in the range of 10 to 30 per cent, in exchange for being given the license to build.

Residential development, like all economic activities has impacts that affect parties external to the transaction, including neighbours, the wider community or the environment. These effects can be both positive and negative. Economists call these impacts externalities. When developers propose new projects, they can affect parking, traffic, use of city services and how existing residents enjoy their homes. Development can also bring new life into communities and augment existing resources and infrastructure. Zoning bylaws are one way that local governments can manage externalities in favour of existing and future residents.

In the past, zoning bylaws were often too blunt to handle the needs of growing communities. Minimum lot sizes, set backs and other restrictions effectively blocked the construction of housing affordable for low-income families in many neighbourhoods. Some suburban communities lost out on the benefits of diversity, with low-income households concentrated in a few inner city neighbourhoods. As a result, traditional zoning practices have been criticized as exclusionary. In US cities, and to a lesser extent in Canada, this exclusion too often had a racial dimension as well.

Moreover, so long as bylaw restrictions are purely negative or prohibitive, municipalities lose out on the opportunity to use zoning to promote positive externalities that are in the broader public interest, like affordable housing. Inclusionary housing, as proposed in Bill 7, helps to redress some of these limitations by empowering municipalities to include affordable housing as a condition for new development.

Inclusionary zoning can also be a practical step for governments to promote affordable housing in a period of fiscal constraints. By making affordable housing a condition of zoning approval, it passes on some of the costs of providing affordable housing to developers. This is a reminder that the license to build is never absolute. Increasingly, industries recognize that operations require also a social license from their community to operate. Part of the social license for developers must be to meet the needs of the community. If developers obtain profits, they have an obligation to return something of value to their community.

Inclusionary zoning has been practiced in jurisdictions across North America. One of the best examples is in Vancouver, BC. Various forms of inclusionary housing have been in practice there since the 1980s. Many new developments since 1988 are required to have 20 per cent affordable housing. This policy was particularly relevant to the redevelopment of the former Expo lands along False Creek and the Olympic Village site. The program in Vancouver is flexible and permits density allowances, so that developers may build higher projects with more units in exchange for creating social housing.

In Vancouver, inclusionary zoning has contributed to the creation of about 2500 units of affordable and social housing. Across the US, more than 200 cities have some form of inclusionary zoning. A comparative study between Vancouver and San Francisco found that in some cases, inclusionary zoning, when combined with density allowances, can even increase the market value for developers.

All this is to say, that Bill 7 could provide some useful tools for municipalities. However a couple of caveats are worthwhile. Firstly, it should be remembered that this is only enabling legislation. This tool will only be beneficial if municipalities make use of it. Manitoba Local Government must continue to work with municipalities to ensure that they see the value in adopting inclusionary zoning in new developments. In Winnipeg, the City expects to run short of land to develop in the next few decades. Here it is essential that the City make use of this limited resource to provide as much affordable housing as possible.

Finally, inclusionary zoning is only a small piece of the puzzle. It relies on leveraging the capital gains earned by landowners in a tight market where land is of limited supply. By granting zoning permission, municipalities may substantially increase a property’s value. This can be an important source of capital for creating some of our missing affordable housing. However, to solve the housing crisis in Winnipeg and across Manitoba, it is also necessary for all levels of government to step forward with funding. If we acknowledge that housing is a right for all citizens, then we must make the best use of every tool at our disposal to make sure every Manitoban has a home they can afford.

Josh Brandon is a Housing and Community Development Researcher with the Canadian Centre for Policy Alternatives. This is an adaptation of a presentation to Manitoba’s Standing Committee on Social and Economic Development, Oct 15, 2013.