Committee recommends adopting a market-based approach to inclusionary zoning

The Planning and Housing Committee today approved an inclusionary zoning framework in Ottawa that ensures transit-oriented housing can move forward while retaining the option to increase affordability requirements pending future market feasibility. 

Inclusionary zoning would require developers to set aside a minimum number of units for affordable housing when they build large new residential projects near major transit stations. These developments would need to provide affordable units at a rate set by the City. Establishing an inclusionary zoning framework responds to direction from Council and is a commitment under City’s agreement with the Canadian Mortgage and Housing Corporation that enables Ottawa to access funding through the Housing Accelerator Fund. 

While the intent of the policy is to ensure that affordable units are being constructed near transit, the costs associated with inclusionary zoning are borne by increasing costs on market units. Requiring a new development to offer a portion of planned units at a reduced price directly impacts the financial viability of a housing project. Depending on market conditions, this could slow overall housing development. In the context of high housing costs, inclusionary zoning could have the unintended consequence of rendering some transit-oriented developments unviable, preventing the development of both affordable and market units. 

While the Province permits municipalities to introduce inclusionary zoning frameworks, it has suspended inclusionary zoning programs from taking effect in other municipalities. This is due to market conditions that indicate that inclusionary zoning is preventing projects from being financially viable in Ontario. A mid-2025 housing market assessment for Ottawa shows that inclusionary zoning is not currently an economically feasible way to increase housing affordability near transit.

As a result, the recommendations approved today establish a set-aside rate of zero per cent for Ottawa, meaning there would be no mandatory requirement to provide additional affordable units under inclusionary zoning at this time. Approving the framework today will allow Council to respond quickly in the future, when market conditions stabilize.

The City has other tools, like the Affordable Housing Community Improvement Plan, to help encourage the provision of more affordable housing within market developments in Ottawa. Today’s approval will simply ensure the City has the flexibility to activate inclusionary zoning as another such tool, if feasible under future market conditions. 

In anticipation of that future time, the amendments approved today would align the City with the Province’s definition of affordable housing. For rental units, this means the lesser of average market rent or the reasonable housing and shelter costs for a household with middle incomes in Ottawa. For ownership, it means 90 per cent of the average market purchase price. Units would need to remain affordable for at least 25 years. 

Before the set-aside rate could increase, the City would need to complete a reassessment of the housing market, demonstrating more stable conditions. The City is planning to complete a housing market assessment and an updated housing needs analysis by Q2 2028. Council would need to approve any change to the set-aside rate for inclusionary zoning.

If Council approves today’s recommendations from the Planning and Housing Committee, City staff would develop detailed implementation guidelines for inclusionary zoning in Ottawa, bringing them to committee for consideration by Q2 2027.

The Urban Design Review Panel is an independent body of design professionals that provides peer review of selected development applications. The panel was established in 2010 as a permanent part of the City’s development review process. It offers non-binding recommendations on building and public space design.

To help streamline development review in line with the recommendations of the Housing Acceleration Plan, the City has reviewed and made changes to the panel’s reporting requirements, offering more flexibility around the timing of review. The Committee approved removing the requirement for an associated Urban Design Panel Report as part of a completed development application. Instead, recommendations from review sessions will be posted online as part of the formal review process.

City Council will consider the recommendations from today’s meeting on Wednesday, April 8.