On January 12th, the Ministry of Municipal Affairs and Housing (the “Ministry”) proposed to amend Ontario Regulation 232/18 (the “Regulation”), to pause the implementation of Inclusionary Zoning (“IZ”) in Toronto, Mississauga, and Kitchener, until July 1, 2027. These three municipalities are the only ones in Ontario where IZ requirements are currently in effect.
In a sign of shifting market conditions, this move comes less than one year after the Regulation was amended in May 2025 to introduce a 5% cap on the proportion of affordable units allowed (whether measured by unit count or gross floor area) and to set limits on the duration of affordability to a 25-year period.
What is Inclusionary Zoning?
Inclusionary Zoning is a planning tool granted under subsection 16(4) and section 35.2 of the Planning Act, which authorizes municipalities to include IZ policies within their Official Plans, and to pass implementing by-laws.
IZ allows municipalities to require that a portion of new residential development or redevelopment be dedicated to affordable housing, and that those units remain affordable over a period of time. Pursuant to subsection 16(5.1) of the Planning Act, IZ can only be applied within delineated Protected Major Transit Station Areas (“PMTSAs”), as approved by the Minister, or within areas where a “development permit system” applies.
Toronto’s PMTSAs were approved by the Province, with modifications, in August, 2025 (which we detailed in a separate blog post). Kitchener’s PMTSAs were approved as part of its new Official Plan, subject to minor modifications, in October of 2025. We understand that Mississauga’s PMTSAs have been partially approved, pursuant to an order of the Ontario Land Tribunal.
How will the “Pause” Work?
The proposed amendments would exempt developments in Toronto, Mississauga, and Kitchener from IZ requirements if they have a complete application for any of the following:
1. a zoning by-law amendment,
2. site plan approval, or
3. a building permit,
filed on or before July 1, 2027, provided that a building permit has not been issued before the amendments take effect. Where a building permit has already been granted, IZ requirements would continue to apply.
It remains unclear whether an applicant with an issued building permit in place could negate the imposition of IZ by submitting a revised zoning bylaw amendment or site plan application with minor changes, prior to July 1, 2027.
Municipal transition provisions in IZ policies or by-laws would be overridden by the Ministry’s proposed changes. Notably, because IZ units are exempt from development charges, parkland levies, and community benefit charges under the Development Charges Act, 1997 and the Planning Act, removing IZ requirements would reinstate these fees for affected developments.
Details on the Ministery’s Proposal can be found here: Proposed amendment to Ontario Regulation 232/18 – Inclusionary Zoning to pause implementation in three municipalities until July 1, 2027 | regulatoryregistry.gov.on.ca
