Inclusionary zoning (IZ) is a planning tool that requires certain new residential developments to include a prescribed percentage of affordable housing units.
IZ was introduced as a unique zoning tool for Ontario—it would use zoning bylaws not only to dictate the uses permitted in a given area, but also as a tool to control the market price of what that zoning permits.
Adoption of Inclusionary Zones
IZ has been evolving in Ontario since it was first proposed by the Liberal government in 2018. The original vision was quite different from today, with the government at the time proposing a required minimum of 5% to 10% affordable housing units per development, though it ultimately removed any such minimums at adoption. The subsequent Progressive Conservative government next tied IZ to protected major transit station areas (PMTSAs) and in 2021 the City of Toronto adopted their own IZ bylaws.
Under the approved Inclusionary Zoning Official Plan and zoning bylaw amendments, affordable housing requirements applied to developments that:
- Are located within an Inclusionary Zoning Market Area;
- Fall within an approved Protected Major Transit Station Area; and
- Meet minimum size thresholds of 100 units and 8,000 square meters of new residential gross floor area (GFA).
Amendments in 2025
At the time of adoption, Toronto's bylaws would bind units for 99 years and could require as much as 22% of a residential building's GFA to be affordable housing units.
Reflecting a very different housing market in Ontario, in May 2025 the province significantly reshaped the regime through amendments to O. Reg. 232/18. These amendments imposed caps that override municipal policies, limiting:
- affordable housing requirements to no more than 5% of units or residential GFA; and
- affordability terms to a maximum of 25 years.
On August 15, 2025, the Minister of Municipal Affairs and Housing issued decisions on Toronto Council-adopted Official Plan Amendments related to 25 MTSAs and 95 PMTSAs bringing IZ in force in the city for the first time.
Current Status and Legislation
The latest twist came on January 12, 2026, when Ontario released a proposed regulation that would broaden exemptions from inclusionary zoning requirements in Toronto, Mississauga and Kitchener. Any developments for which a complete zoning, site plan or building permit application is filed on or before July 1, 2027, would be exempt from affordable housing obligations.
This brings us to the current status of IZ in Ontario. On January 29, 2026, following the close of the public comment period, the Ontario Regulatory Registry released Ontario Regulation 15/26, amending the Inclusionary Zoning Regulation under the Planning Act. The province confirmed that inclusionary zoning requirements would be temporarily suspended in the above municipalities and new go-forward transition provisions were established.
As set out in the regulation,
An inclusionary zoning by-law does not apply to a development or redevelopment in the City of Kitchener, the City of Mississauga or the City of Toronto if, before July 1, 2027," specified planning or permit applications are made.
(a) a request for an amendment to the official plan is made in respect of the development or redevelopment, if required, and an application to amend a zoning by-law is made in respect of the development or redevelopment; or
(b) an application for a building permit or approval of a site plan under subsection 41 (4) of the Act or subsection 114 (5) of the City of Toronto Act, 2006 is made in respect of the development or redevelopment.
Interestingly, the regulation is specific to those municipalities that currently have IZ in place. It does not, directly, prohibit the adoption of new IZ bylaws by other municipalities during the freeze period nor does it amend the pre-existing transition provisions.
Importantly, the regulation also provides that this exemption does not apply where "a building permit was issued in respect of the development or redevelopment before January 29, 2026" preserving the application of IZ to projects that had already advanced under the prior framework.
IZ moved from concept to implementation and then to pause in just a few short years. The next stage of the review of IZ, taking place after July 2027, will determine whether inclusionary zoning resumes as a central tool or if this experiment in using zoning to determine markets will be completely rethought. As Ontario continues to adapt IZ, the pause may materially affect development timing and feasibility in the affected municipalities. Strategic assessment of application pathways will be increasingly important during this time.
The Bennett Jones Commercial Real Estate team has extensive experience advising on provincial and municipal planning policy and is well positioned to assist stakeholders with this IZ pause, and down the road as this regulatory landscape continues to evolve. Please contact us for more information on how our team can assist with navigating these changes.
