Ontario Government Proposes Pause to Inclusionary Zoning in Toronto, Mississauga, and Kitchener until July 1, 2027
On January 12, 2026, the Province of Ontario published a proposal to amend the inclusionary zoning (“IZ”) regulation (O. Reg. 232/18) in response to market challenges affecting residential development. The proposed amendment would have the effect of pausing IZ requirements for new developments in Toronto, Mississauga, and Kitchener.
Background on Inclusionary Zoning
IZ allows municipalities to require affordable housing units in new residential developments in certain areas, including protected major transit station areas (“PMTSAs”). IZ is currently in effect only in parts of Toronto, Mississauga, and Kitchener.
In May 2025, the government capped IZ requirements at 5% of the residential floor area of a development, and a maximum 25-year affordability period, but stakeholders remained concerned that IZ could slow housing development under current market conditions.
Key Features of the Proposed Amendment
The Province has not yet released a draft of the amending regulation. Based on the summary of what the amending regulation is intended to provide, the amendments would pause IZ obligations for developments in Toronto, Mississauga, and Kitchener provided that:
1. a project is the subject of a complete application for a zoning by-law amendment, site plan approval, or building permit that was submitted on or before July 1, 2027; and,
2. a building permit has not yet been issued as of the date the amendment takes effect.
This approach is intended to provide developers greater financial certainty under current market conditions and reduce the risk that IZ requirements could stall or cancel projects.
Looking Forward
The proposed changes are open for public comment on the Ontario Regulatory Registry ("ERO") until January 19, 2026. The ERO posting can be accessed here.
Stakeholders, including developers and municipalities, are encouraged to submit feedback before this date. Once finalized, the amendment would provide a temporary reprieve from IZ requirements, in an effort to support ongoing residential development in the affected municipalities.
We will continue to monitor further developments on this matter.
Disclaimer: This document is for information purposes only and does not constitute legal advice to any party. The contents of this document reflect our firm’s general review and observations concerning legislative and regulatory instruments, which are subject to change. Please seek professional legal advice on matters of direct concern to you.