Inclusionary zoning simply shifts the cost burden
Without financial incentives for developers, entry-level buyers are subsidizing units
Often, when I’m out, whether at a party with friends, a networking event or some other function, the conversation turns to the price of housing. Most are surprised by the rate at which housing prices continue to climb, and wonder if it will peak or max out.
People say: How can my kids afford to buy a house? Or: My wife and I have separated and neither of us can afford a place to live where we want to raise our kids. Several say: I’ve just given up and I’ll rent. Affordability is an issue — one that is talked about with all levels of government by our association and our provincial and national counterparts — because affordability is an issue that affects us all.
One of the government’s concerns (and rightly so) is the ability to provide housing that is affordable at price points lower than the cheapest of units for sale. This is because many buyers f all into a category that just can’t make ends meet and buy or rent a house at current prices.
The reality is that all levels of government need to play an active role in resolving this issue, and coming to the table with an affordable housing strategy that works across the nation. It’s been needed for a long time, and to date a cohesive and unified strategy really hasn’t panned out.
One item talked about a lot recently is “inclusionary zoning” and that it is a way to solve the problem. The idea is that a project be mandated to provide a certain number of units that are “affordable.” While that word isn’t defined, we know it means cheaper than the typical or other units in the same development. Some municipalities have suggested that a way to do this is to allow an increased number of units i n the same apartment building, as long as those units are affordable. Others suggest that a certain number of houses in a new development would be affordable. And on first look, some might say, Yes! That’s a great idea!
But how do you provide a housing unit more affordably? It costs what it costs to build. The studs and HVAC systems aren’t cheaper, nor are the appliances. Develop- ment charges, parkland dedication, and other fees are still payable. Let’s take the example of an apartment building. To entice the developer to build a number of affordable units, the city grants them permission to build an extra floor. So they build the units they originally planned, plus the extra floor. Those units may be smaller or less flashy, but many of the construction costs remain the same. Once it’s done, the original units sell for $300,000 and these new “affordable” units are intended to sell for $200,000 but are valued at $260,000. Who picks up the additional $40,000 per unit? Well, it’s the other unit holders in the building. So their units now cost them $300,000 plus their share of the difference not paid for by the affordable units.
That brings the cost of a standard “entry level” unit up beyond the $300,000 mark. So for those just entering the marketplace, or just able to afford a unit, who don’t qualify for “affordable,” the costs have now just gone up. Does it make sense that one part of the population — those buying newly constructed housing units — pays the cost of providing social housing in our country by themselves? Because, unless the government pairs the inclusionary zoning with a financial incentive, like they do in New York City, for example, where the program is successful, it just shifts the cost from one set of buyers to another. In reality, in a country like ours, if there is to be assistance provided to a group of people to help them with housing, doesn’t it make more sense that these costs be borne by everyone?
There are other issues: people who are in need of affordable housing are often renters. So who owns those units in the building? Is a developer now required to be a long-term landlord? Or perhaps the condominium board who takes over the building on behalf of the owners that will take on those duties?
Inclusionary zoning, if done with the respective financial package, can be a valid way of dealing, in part, with providing affordable housing. But it needs to be planned out carefully.
By simply putting the responsibility on developers to build it, and new homeowners to pay for it, doesn’t make it a successful venture. It just shifts the responsibility and exacerbates another affordability issue for those trying to pay for their home, whether purchased or rented, themselves.