It has long been the objective of the governments of Ontario and Toronto to look for ways to promote the development of "off market" or affordable housing in addition to the market housing units that were being delivered from 2000-2022. Since 2022, Ontario has experienced a year-over-year downturn in condominium sales, driven by factors including rising interest rates, lost confidence and broader macroeconomic uncertainty. This has led to a dramatic change in the housing market in Toronto with new home sales hitting new lows over the past few months.
The recent changes to the inclusionary zoning laws in Ontario reflect this shift. While inclusionary zoning was once seen by governments as a way to deliver affordable housing without direct costs to the public purse (pushing the costs onto developers and new home buyers), things have changed since 2022 as the housing market has struggled. In this regard, on January 29, 2026, the Province of Ontario amended O. Reg 232/18 to temporarily exempt developments and redevelopments in Kitchener, Mississauga, and Toronto from inclusionary zoning requirements where the developer has, before July 1, 2027, applied for the necessary zoning amendments or for a building permit or site plan approval.
By pausing inclusionary zoning requirements, the Province is recognizing that while it may have been possible at one point to direct the burden of delivering affordable housing on a specific group/industry, the current housing market will not support this.
In this new reality, affordable housing continues to advance through active projects and other initiatives led by stakeholders in both public and private sectors. Below are some of the ways in which such housing is currently being delivered in Toronto.
Housing Now and Toronto Builds
In 2019, the City of Toronto launched the Housing Now initiative to redevelop prime City-owned lands into mixed-income, transit-accessible housing that prioritizes affordability. Then, in 2025, the City introduced the Toronto Builds Policy Framework (Toronto Builds), which integrates prior program policies to guide the development of new affordable rental homes.
Today, most of the 22 sites approved under the Housing Now initiative are progressing under the Toronto Builds framework, while 6 projects remain in the Housing Now portfolio due to existing development partnerships.
Projects under both programs are typically structured to allow the City to retain ownership of its lands while private sector proponents finance, design, construct, operate and maintain housing delivery. Once a proponent is selected, the parties enter into negotiations on the commercial terms. Typically, each project is governed by three core agreements:
- a long-term ground lease—commonly for a term of 99 years—whereby the proponent leases from the City the lands on which affordable and market rental units will be built;
- a contribution agreement governing the terms and conditions pursuant to which the City will extend financial assistance to the proponent in support of the development; and
- a project agreement setting out the proponent's planning and development obligations for the leased lands.
Ancillary to these core agreements are additional contracts governing matters including site plan approval, development, construction, financing (for example, through the Canada Mortgage and Housing Corporation), and where the proponent consists of multiple entities, co-ownership or joint venture arrangements. Together, these documents establish the legal and commercial framework for housing delivery under the Housing Now and Toronto Builds programs. In our experience, each project within these programs uses a similar template for their agreements, but with bespoke provisions around the details of the same.
Direct Incentives
Another way the City and the private sector collaborate to create affordable housing is through a variation of the housing delivery models described above. In this scenario, the City directly incentivizes landowners to construct affordable rental homes, with incentives that may include grants in the form of forgivable loans and property tax exemptions.
These arrangements are governed by contribution agreements substantively similar to those used under the Housing Now and Toronto Builds programs. Generally, these agreements set out the particulars of the project, the benefits to be conferred, conditions precedent to funding, and the proponent's obligations both generally and during the period affordable housing is provided.
The key difference in this arrangement is the ownership of the land – the direct incentives model relates to land where the landowner comes to the City with a proposal to deliver affordable housing, not the use of City owned land. Another difference we have observed with the direct incentives model is the length of the affordability—unlike the ninety-nine years that is standard in Toronto Builds, there is much more diversity in the timeline for affordability in the direct incentives program.
Direct Investment in Existing Properties
In addition to new construction, another approach to affordable housing delivery being explored by stakeholders is the direct acquisition of existing housing stock for repurposing as affordable housing. One example is the recently announced initiative between our client High Art Capital (High Art), a private investment firm focusing on Canadian real estate, and the Building Ontario Fund (BOF), an independent, board-governed Crown agency. Under this initiative, High Art—supported by BOF's commitment of up to C$300 million in mezzanine financing and a nominal equity investment—will acquire newly completed and unsold condominium units across the Greater Toronto Area to deliver approximately 2,200 long-term rental units, including an estimated 550 that will become long term affordable rental units.
This approach represents a pragmatic policy response to current market conditions. The recent downturn in condominium sales and the significant amount of unsold inventory, has created opportunities to implement this strategy, which aligns public policy objectives with current market realities by expanding affordable housing supply while enabling developers to monetize excess inventory during a period of softer demand. The acquisition of the existing housing stock will allow for the quick expansion of the supply of affordable rental homes, suck up excess condominium inventory, while also delivering a return for both the public and private sectors.
Creativity Could Continue to help in the Delivery of Affordable Housing
Toronto’s affordable housing programs—from Housing Now and Toronto Builds to innovative initiatives involving direct incentives—represent just a snapshot of the approaches being explored by stakeholders. Across Ontario and Canada, a wide range of delivery methods and funding models are being implemented and evaluated, reflecting the diversity of local market conditions and policy objectives. Stakeholders will benefit from guidance in navigating the complexity of these programs and structuring projects that balance both policy objectives and business goals. Our real estate team works alongside players to provide insight and practical support, helping them meaningfully contribute to developing more affordable and inclusive projects.
Bennett Jones