Inclusionary zoning and municipal rental protections

The housing affordability crisis continues to drive policy discussion at all levels of government. Amid new federal funding sources, and the ongoing overhaul of provincial planning legislation, Ontario municipalities are more concerned than ever with housing stock, affordability, and tenant protections. The housing by-laws now appearing in headlines and council agendas cover a varied set of legal powers, sometimes involving new interactions between statutes. Municipalities and housing providers will need to understand the distinct features and uncertainties of these tools, which can affect all stages of the development process.

This article seeks to distinguish and clarify three such tools – inclusionary zoning, rental replacement by-laws, and so-called renoviction licensing.

I. Requiring affordable units through inclusionary zoning

Inclusionary zoning (“IZ”) is a high profile policy tool. It has been adopted in Toronto (2021), Mississauga (2022), and Kitchener (March 2024), and several other southern Ontario municipalities are actively considering it. IZ which allows official plan policies and zoning by-laws to require a proportion of affordable units in any new for-profit development or redevelopment that:

• involves 10 or more residential units; and
• takes place within areas that are designated as “major transit station areas,” or subject to community planning permits.[1]

Municipalities adopting inclusionary zoning policies have considerable flexibility in determining the required details, including:

• scope – the size and location of developments captured;
• affordability – the range of targeted household incomes and housing types, and the method for determining affordable prices or rents;
• proportion or number of affordable housing units required, or gross floor area to be set aside;
• duration of affordability;
• the municipality’s percentage of sale proceeds from an affordable unit (not to exceed 50 percent); and
• the ability to use offsite affordable units to satisfy IZ requirements.[2]

As more municipalities test IZ in practice, its details and results will also be of interest for developers looking to build and sell economically, and for the owners and managers of rental properties. Ontario’s  Planning Act provisions require early consideration of where affordable units will go and who will operate them. Before a policy is adopted, the municipality must prepare an assessment report analyzing local incomes, housing supply and pricing, and likely economic impacts.[3] After adoption, the municipality must conduct public reporting on policy results at least every two years.[4]

Previous legal challenges have already shown that IZ-style policies must strictly adhere to the Planning Act’s reporting and monitoring requirements, or risk being overturned. In a 2023 decision, the Ontario Land Tribunal found that where a municipality opts out of these steps, the resulting policies cannot be upheld as IZ and can only be justified if they satisfy a more stringent provision covering “such policies and measures as are practicable” – including for developers. In that context, the Tribunal disregarded a municipality’s high-level studies in favour of a developer’s site-specific concerns. [5] To prevent or address such challenges, municipalities will need to prioritize IZ reporting and monitoring.

II.  Regulating replacement of rental units

Beyond zoning, single- or lower-tier municipalities can use “rental replacement” by-laws to directly prohibit or regulate the demolition of existing rental units, or their conversion to other uses. Such by-laws have already been enacted by the City of Toronto under the City of Toronto Act, 2006, and by the City of Mississauga and Town of Oakville under the Municipal Act, 2001.

Rental replacement by-laws can apply to any development affecting six or more rental units. A municipality may require permits and impose conditions doing the following:

• controlling the type, size, cost, duration and location of replacement rental units; and
• requiring an agreement to be registered on title for enforcement against present and future owners.[6]

Rental replacement by-laws and permits are separate from Planning Act approval processes  and the appeal jurisdiction of the Ontario Land Tribunal. However, they must be administered with a close eye on the Building Code Act, 1992 (the “BCA”) and Building Code, which will overrule any parts of a rental replacement by-law that “treat[s] the same subject-matter [as them] in different ways.”

The interaction between permits regimes also requires care, since the Municipal Act provides that obtaining a rental replacement demolition permit will remove the requirement for a BCA demolition permit.[7] Existing rental replacement by-laws seek to respect BCA requirements by allowing conditions requiring BCA compliance,[8] or delegated decision-making to the Chief Building Official.[9] However, those are matters of staff discretion and may also vary between municipalities. A thornier situation would arise if a developer obtained a rental demolition permit that simply did not cover off all BCA requirements (e.g. requirement for full review by a professional engineer[10]), and then resisted attempts to impose such requirements afterward.

Perhaps the largest area of uncertainty around rental replacement is whether, when and how the Ministry of Municipal Affairs and Housing might exercise its recently introduced power to make regulations shaping almost all aspects of rental replacement by-laws.[11] The Ministry has sought, received, and summarized comments on potential regulations, but those remain under consideration while municipalities continue to introduce rental replacement by-laws.

III.  Regulating renovictions

Finally, municipalities concerned about rental affordability have also been turning their attention to so-called “renovictions” – a landlord’s termination of a tenancy citing extensive repair or renovation plans. The Residential Tenancies Act, 2006 (“RTA”) already regulates such evictions at the provincial level, including a tenant’s right of first refusal to re-occupy the unit at the same rent after renovations.[12] Tenants may challenge phony or bad faith renovictions after the fact,[13] but both tenants and landlords still face notoriously long backlogs at the Landlord and Tenant Board (“LTB”).

In this context, the City of Hamilton passed a by-law tackling renovictions under its business licensing power,[14] and there has since been municipal interest in London[15] and Toronto.[16] Hamilton’s by-law comes into force in 2025 and includes the following provisions:

• a landlord will require a municipal licence to complete an eviction relating to a renovation;
• licence preconditions will include the landlord helping to arrange and subsidize comparable, temporary accommodation for the tenant during the renovation or repair; and
• the City’s enforcement options for non-compliance will include municipal prosecution in Provincial Offences Court (alongside the tenant’s option to apply to the LTB).[17]

Time will tell how the courts enforce and interpret current and planned renoviction by-laws. Case law has found the RTA to be a “complete code” on at least some aspects of the landlord-tenant relationship,[18] and one of its express purposes is “to balance the rights and responsibilities of residential landlords and tenants.”[19] When a more general rental licensing by-law survived legal challenge in 2011 and was found not to frustrate the RTA’s purpose, it was because the Superior Court found that the by-law focusing on landlord information only regulated “the rights of landlords vis-à-vis the City,” as opposed to “the rights between landlords and tenants.”[20] Courts may be asked to revisit that question for renoviction by-laws intended to bolster tenant rights (e.g. temporary accommodation) and address the balance of the landlord-tenant relationship.

Please reach out to a member or our Municipal, Planning & Land Development Group if you have any questions.

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[1] Planning Act, s. 16(5).

[2] Planning Act, s. 16(7); O. Reg. 232/18, s. 3.

[3] Planning Act, s. 16(9)-(13); O. Reg. 232/18, s. 2.

[4] O. Reg. 232/18, s. 7.

[5] Calloway REIT (Mississauga) Inc. v. Mississauga (City), 2023 CarswellOnt 14070 (O.L.T.) at paras. 90 and 99

[6] Municipal Act, 2001, s. 99.1

[7] Municipal Act, 2001, s. 99.1(4)-(5).

[8] Town of Oakville By-law No. 2023-102, Part 12, s. (D)(11)(a)

[9] Mississauga By-law No. 0121-2018

[10] O. Reg. 332/12, s. 1.2.2.3(1)

[11] Municipal Act, 2001, s. 99.1(7), introduced in Bill 97 (the Helping Homebuyers, Protecting Tenants Act, 2023).

[12] Residential Tenancies Act, 2006 (“RTA”), ss. 50-54

[13] RTA, ss. 57 and 168(2).

[14] Municipal Act, 2001, s. 151

[15] https://globalnews.ca/news/10368687/draft-bylaw-renovictions-london-ont/

[16] https://www.cbc.ca/news/canada/toronto/study-hamilton-renoviction-bylaw-1.7128075

[17] Hamilton Renovation Licence and Relocation By-law, ss. 9 and 25.

[18] Boardwalk General Partnership v. Fraser, [2013] O.J. No. 963 (Sup. Ct) at para. 26

[19] RTA, s. 1

[20] London Property Management Assn. v. London (City), 2011 ONSC 4710 (Sup. Ct) at para. 50.