Item - 2021.PH28.4

The Planning and Housing Committee recommends that:

1. City Council amend the Official Plan in accordance with the recommended Official Plan Amendment appended as Attachment 1.

2. City Council authorize the City Solicitor to make such stylistic and technical changes to the recommended Official Plan Amendment as may be required.

3. City Council direct the Executive Director, Housing Secretariat to report back to the Planning and Housing Committee in 2022, following further consultation with affordable housing developers, with: 

a. a detailed financial analysis outlining impacts of the recommended definition on City programs such as the Housing Now Initiative and Open Door;

b. recommended program changes and/or other actions to mitigate impacts to development projects; and

c. a recommended transition plan including timelines for implementation of the new definition.

4. City Council direct the Executive Director, Housing Secretariat to engage with the Government of Canada, including Canada Mortgage and Housing Corporation, and the Province of Ontario and report back in 2022 on how current or future funding and financing programs from each order of government could support implementation of the proposed new definition and also meet HousingTO 2020-2030 targets.

5. City Council direct the Executive Director, Housing Secretariat to report back to the Planning and Housing Committee, within 12 months of the Planning and Housing Committee's consideration of the report referenced in recommendation 3 above and after the recommended Official Plan Amendment comes into effect, with recommended changes to the Municipal Housing Facility By-law, including transition provisions.

The Senior Planner, Strategic Initiatives, Policy and Analysis, City Planning gave a presentation on Updating the Definitions of Affordable Rental and Ownership Housing.

The Planning and Housing Committee held a statutory public meeting on October 28, 2021 and notice was given in accordance with the Planning Act.

This report recommends an Official Plan Amendment which proposes to revise the following housing definitions in Section 3.2.1 of the Official Plan:

(1) affordable rental housing and affordable rents (affordable rental housing);

(2) mid-range rents, including adding two new mid-range rent tiers; and

(3) affordable ownership housing.

The recommended definitions are intended to better respond to the needs of low and moderate income households by establishing definitions of affordable housing that are aligned with incomes instead of solely on market rents/prices. The development of the definitions has been informed by extensive public and stakeholder consultation throughout 2020 and 2021 as well as through consultations on Inclusionary Zoning and the HousingTO 2020-2030 Action Plan ("HousingTO Action Plan") in 2019. During those consultations, participants felt that the City's current affordable housing definitions, which are based on average market rents/prices, had left many low-income residents unable to afford housing and that this problem would continue to worsen over time given average market rents have grown faster than incomes over the past decade.

This report, which proposes updates to the Official Plan's housing definitions, is the first step in moving towards an income-based approach for affordable housing, as directed by Council through adoption of the HousingTO Action Plan in December 2019. In addition to revising the Official Plan definitions, the HousingTO Action Plan provides direction for the City to adopt a new income-based approach in the administration of affordable rental housing programs. In accordance with this direction, a future report to Council will be brought forward by staff in 2022 recommending changes to City programs and support implementation of the revised definition of affordable housing.

The recommended revised definitions will also be used to update the City's Municipal Housing Facility By-law. The Municipal Housing Facility By-law is used to provide fee and property tax exemption for affordable housing units. Updates to the by-law, including specific transition provisions for projects that have received or initiated funding approvals, will be brought forward after the Official Plan Amendment is in effect, and within a year following the 2022 staff report.

In addition to Council direction and stakeholder input, the proposed revised definitions have been informed by the Provincial Policy Statement (PPS). The PPS directs that affordable rental housing should be affordable to households with incomes in the lowest 60 percent of the income distribution for renter households for the regional market area. The PPS also directs that affordable ownership housing should be affordable to households with incomes in the lowest 60 percent of the income distribution for the regional market area.

Furthermore, the proposed revised definitions align with the Canada Mortgage and Housing Corporation (CMHC) affordability threshold which sets affordability at no more than 30% of a household's before-tax income. This definition is currently being applied to the federal Rapid Housing Initiative (RHI) projects which provide affordable housing for people experiencing or at risk of homelessness. RHI projects set an affordability requirement whereby tenants pay no more than 30% of their gross income on rent. This level of affordability is being supported by federal investments which fund 100% of capital costs of projects under the program.

The recommended changes to the affordable rental housing definition in this report would lead to a reduction in affordable rents for studio units, one-bedroom units, and three-bedroom units compared to affordable rents under the current definition. These reductions in rents are the result of tying affordable rent for each unit type to the lower of average market rent or indicator household incomes. For example, affordable one-bedroom rents are recommended to be set at the lower of average market rent for a one-bedroom unit or what a one-person renter household at the 60th percentile of income can afford. The previous market based definition meant that affordable rents were out of reach for low and moderate income households. For example, under the current definition one-person households earning at or below the 60th percentile of income cannot afford either an affordable studio or one-bedroom unit.

Affordable rents for two-bedroom units currently remain unchanged using the recommended definition. This is because what is affordable to incomes for 2-person households in 2021 exceeds the current average market rent for two-bedroom units. However, if average market rents continue to rise faster than incomes, rents for two-bedroom units would be set at what is affordable to the 60th percentile 2-person household, instead of average market rent for two-bedroom units.

The recommended mid-range rents definitions in this report have been established to maintain the existing rent thresholds used when implementing rental replacement requirements and in other unique circumstances. Two bands of mid-range rents are recommended. Mid-range rents (affordable) would secure rents higher than affordable rents and up to average market rent. Mid-range rents (moderate) would secure rents up to 1.5 times average market rent. Existing social housing programs that have historically used average market rents could use the mid-range rents (affordable) definition when securing future fee exemptions.

As the recommended affordable rental housing definition would lead to lower affordable rents, it would also lead to lower revenues in buildings that provide affordable rental units. Staff will report to Council in 2022 with recommended policy and program changes to help support implementation of the proposed new definition and ensure the delivery of new affordable housing across the city.

In terms of affordable homeownership, the recommended definition will lead to changes in affordable ownership prices for all unit types. These proposed changes will tie affordable ownership prices to low and moderate income households in the City of Toronto. The recommended changes also update the total monthly shelter cost used to establish affordable ownership prices. Notably the new definition includes condominium fees as part of the monthly shelter cost. This has the impact of reducing the mortgage payments that can be supported by a given income, leading to a reduction in affordable ownership prices.

The affordable housing definitions recommended in this report reflect a human rights-based approach to the development of housing legislation, policy and programs. The recommended definitions which tie affordable rents and affordable ownership prices to incomes rather than market rents/prices, will help ensure that affordable housing secured or developed by the City stays affordable to low and moderate income households. The proposed affordable rental housing definitions also ensure that household sizes used to determine rents for specific unit types align with CMHC's National Occupancy Standard.

Increased financial investments from all orders of government and adjustments to policy and programs will be required to support implementation of the new definition as well as to offset any potential impacts to the delivery of new affordable housing. In addition, the proposed changes will help align municipal, provincial and federal housing policies and programs, and support the shared objectives of all governments to increase the supply of affordable housing, promote housing stability for residents and end chronic homelessness.