Ontario Construction News staff writer
Developers in Ottawa may soon find it easier to build affordable rental housing, following a key approval from the city’s Planning and Housing Committee. The committee voted last Wednesday (May 7), to delegate authority to city staff to negotiate and enter into affordable rental unit agreements.
This move aims to incentivize the creation of more new residential rental units at affordable rates by offering developers exemptions from development charges and reductions in community benefit charges or parkland dedication requirements in exchange for committing to affordable rents for at least 25 years.
According to a city news release, the Development Charges Act defines a residential unit as affordable when rent is no greater than the lesser of the average market rate or an income-based affordable rate. This income-based rate, determined annually by the Province, is calculated as 30 per cent of household income for a household within the 60th percentile of gross annual incomes for rental households in each municipality.
The “Affordable Residential Units for the Purposes of the Development Charges Act, 1997 Bulletin,” which sets these rates, is currently in effect from June 1, 2024, to May 31, 2025, and is expected to be updated annually by the Province.
A report to the committee from city staff, outlines the framework for these agreements. It recommends that the Director of Housing Solutions and Investment Services be given the authority to negotiate and enter into these agreements on behalf of the city. The general form of the agreement is detailed in the report.
Key terms of the agreements iinclude:
- A requirement for the applicant to ensure units are rented at the provincially-determined affordable rate for 25 years.
- The applicant must provide proof of actual rents charged throughout the 25-year term to allow for compliance monitoring.
- Landlords must also comply with any applicable Residential Tenancies Act, 2006 restrictions on rent increases.
- The city’s prior written consent will be required before landlords can substitute which units in a building are offered at affordable rates, to prevent smaller or lesser quality units from being swapped in.
- Staff also propose a requirement that “due consideration be given to prioritizing renting to such tenants” who demonstrate financial need based on income, though the legislation does not permit restricting rentals solely to this group.
Should a landlord default on the agreement by charging rents above the prescribed affordable rates, the city’s first course of action would be to seek repayment of the excess rent to the tenant(s) and bring the landlord back into compliance. If this isn’t possible, “then a payment to the city of the pro-rata amount of development charges, community benefit charges or parkland cash-in-lieu would be owing, plus accumulated interest from the date the applicable charge would be owing.”
Even in such a default scenario, the landlord would remain obligated to rent to new tenants at affordable rates for the remainder of the 25-year term, if applicable.
The agreements will be registered on title to the subject property at the applicant’s cost.
The legislative amendments requiring these agreements were part of the More Homes Built Faster Act, 2022, and came into force on June 1, 2024. “Subsection 4.1 (9) of the Development Charges Act makes entering into an agreement with the municipality a mandatory requirement for qualifying for the exemption,” the city report states.
As part of this initiative, the committee also approved the creation of a new user fee to recover the city’s costs associated with preparing and negotiating these agreements. The proposed by-law documentation details a legal fee of $2,051.00 (plus HST where applicable) to be paid prior to the city executing the agreement. “As the volume of agreements is not known, no additional resources are being requested and the work to execute and monitor the agreements can be done from within existing resources at this time,” the report notes.
The recommendations pertain only to rental properties at this stage. The Development Charges Act also creates an exemption for units intended for sale at affordable rates, and recommendations for such agreements will be brought to a future committee meeting.
The city news release highlighted that these recommendations build on substantial investments in affordable housing, with over $200 million invested in supportive and affordable housing in Ottawa since 2022 with the support of federal and provincial governments. The report further notes that the delivery of new units at affordable rents “directly supports the 2023-2026 Term of Council Priority for: A city that has affordable housing and is more liveable for all.”
The recommendations from the Planning and Housing Committee will go to City Council for final approval on Wednesday (May 14).
