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More not-for-profit organizations’ housing projects and households will become eligible for development charges exemptions under Bill 134, announced September 28, 2023 by the Minister of Municipal Affairs and Housing of Ontario (“Minister”). This will be done through a new definition of “affordable residential units” under the Development Charges Act, 1997, which will now recognize household income as being determinative of whether assistance should be provided.
The proposed amendments to provide exemptions from development charges proposed by Bill 23[1] only defined rental units and ownership units as “affordable rental units” if their rent or purchase price was no greater than 80% of the average market rental or purchase price. The focus was solely on price or market conditions for the housing itself.
The sea-change is the new definitions of “affordable residential units,” which add in consideration of the circumstances of the residents. Household income would become one of the criteria for determining whether a development charge exemption is available. The two new definitions will be:
Affordable residential unit, rented:
- The rent is no greater than the lesser of,
- the income-based affordable rent for the residential unit set out in the Affordable Residential Units bulletin, as identified by the Minister of Municipal Affairs and Housing in accordance with subsection (5), and
- the average market rent identified for the residential unit set out in the Affordable Residential Units bulletin.
Affordable residential unit, ownership:
- The price of the residential unit is no greater than the lesser of,
- the income-based affordable purchase price for the residential unit set out in the Affordable Residential Units bulletin, as identified by the Minister of Municipal Affairs and Housing in accordance with subsection (6), and
- 90 per cent of the average purchase price identified for the residential unit set out in the Affordable Residential Units bulletin.
Indeed, this means household income becomes the first criterion for consideration.
Bill 134 provides that the Minister will first determine the annual income of a household that meets the criteria by determining what the 60th percentile of gross annual income for renter and owner households is in the applicable local municipality. Then the Minister will identify the rent that is equal to 30% of that 60th percentile household income figure for rental units and, for owned units, the purchase price that would result in accommodation costs equal to 30% of household income.
This approach has the benefit of being extremely clear. Specific rental and price figures will be determined by the Minister for the local municipality based upon the needs of the residents.
Charities and not-for-profit organizations involved in the provision of housing will not just benefit from the monetary effect of these amendments. This regime provides a direct linkage to the considerations that many of them already use to determine which families to serve. While eligibility for the exemption is not tied to means-testing (which would be cumbersome), the dollar figures that the Minister will set will almost certainly become a clear starting point for the sector’s housing units. They will be the clearest indication of “affordability” available to the sector, at least in Ontario. The fact that they will be published and established municipality by municipality (at least where affordability is an issue) provides a very helpful level of particularity. What will be interesting is to see whether these figures can be applied across the country and what criteria can be referenced in determining whether a municipality in Nova Scotia or British Columbia is similar enough to a municipality in Ontario to employ the same figures.
In recent years, development charges have become a very significant component of the cost of developing housing, ranging from the mid-five-figures upwards. The timing of Bill 134 is no coincidence: not only have development charges skyrocketed, but calls for more affordable housing at a faster pace are being heard across the province.
It is important to remember the application of the exemption provisions is not limited to just non-profit housing providers but also applies to residential units required to be included in a development as a result of inclusionary zoning. If Bill 134 is passed, developers in the market of building affordable housing developments may see increased demand for these types of developments.
Miller Thomson LLP continues to monitor Bill 134 as it makes its way through the Legislature and to consider its implications for both the for-profit and not-for-profit sectors.
Should you have any questions regarding this article or any other matters, please feel free to reach out to a member of Miller Thomson’s Transactions & Leasing, Municipal, Planning & Land Development, or Social Impact Groups for more information.
[1] Bill 23 received Royal Assent on November 28, 2022, but the provisions pertaining to affordable housing are currently not in force.
