CBC Ottawa explains: How the city can force developers to build cheaper housing

Ottawa is starting to feel the squeeze of its tight rental market, and many housing advocates are eyeing a fancy new weapon to combat the problem: inclusionary zoning.

It's a dull-sounding name for what some consider a silver bullet in the battle for affordability. For the first time, city councillors have the ammunition to force developers to build cheaper housing.

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It's also something advocacy groups including the Association of Community Organizations for Reform Now (ACORN), a social justice advocacy group for low-income families, and the City for All Women Initiative (CAWI), have been calling for.

It was also mayoral candidate Clive Doucet's first campaign promise, and a whopping 95 per cent of candidates who responded to the CBC's survey question said they support it.

Actually using this new tool will be complicated, however, and those candidates who get elected will have some difficult decisions to make. Critics warn the policy could actually make housing more expensive in Ottawa.

Inclusionary zoning: How it works

If a developer wants to build a new housing development of more than 10 units, council can require that they make a certain percentage of them affordable.

Exactly how affordable, how long they must remain affordable, and how much compensation — if any — the builder is entitled to is up to council.

There are approximately 10,500 families waiting for subsidized housing in the city, making it virtually impossible for the city to build enough units to meet demand. So it makes sense to make builders part of the solution.

There's the added benefit of creating a mixed community, so low-income families don't always wind up in low-income neighbourhoods.

Supply and demand

Making that policy work to make housing more affordable will come down to the most basic of economic theories: supply and demand.

Ottawa's rental vacancy rate has been dropping since 2015. Housing experts in Ottawa seem to agree that stems from a lack of new rental units built years ago.

That makes for higher rents.

Every affordable unit the city demands from new projects takes a bite out of the developer's profit, according to Jason Burggraaf of the Greater Ottawa Home Builders' Association. Those costs could be passed on to the people paying market rents.

He argues developers are already part of the solution, because with every new project they create more supply, which drives prices down across the city.

Other critics worry that if inclusionary zoning is enforced, developers will scale back, suppressing available housing in Ottawa and driving prices up.

A happy medium

Inclusionary zoning doesn't have to lead to confrontation, said Steve Pomeroy, a senior research fellow at the school of public policy at Carleton University. Other jurisdictions are making it work.

One way is to only ask for affordable units when the builder wants something that's taller or more dense than the city allows. That way council can let the developer have a little extra profit in exchange for cheaper housing.

In Ottawa, a similar strategy was employed in February when councillors OK'd a project at 979 Wellington St. W.

"It doesn't have to be a tax on developers," Pomeroy said. "It's a win-win because you substantially increase the profit to the developer by increasing the density."