On May 12, 2025, the Government of Ontario amended the Inclusionary Zoning regulation under the Planning Act. These changes introduce clear upper limits on what municipalities can require under local Inclusionary Zoning frameworks – marking a significant shift for developers navigating recent affordability mandates across Ontario.
Clear Caps
Through O. Reg. 54/25, the Government of Ontario amended the Inclusionary Zoning regulation (O. Reg. 232/18) to establish the following limitations:
- Within Protected Major Transit Station Areas, the required affordable housing set-aside shall not exceed:
- 5% of total residential units that are part of the development; or
- 5% of the total floor area of all residential units that are part of the development (excluding common areas); and
- Within Protected Major Transit Station Areas, the affordability period shall not exceed 25 years.
These Province-wide caps apply immediately as of May 12, 2025 and may result in less stringent affordability requirements than those already adopted and passed by certain municipalities, including the City of Toronto, which we had covered in previous blog posts.
Implications for Development Projects
Since the introduction of Inclusionary Zoning frameworks, like in the City of Toronto, many in the development industry have raised concerns about the feasibility and financial implications of long-term affordability requirements – particularly in high-cost markets. The lack of predictability around local requirements has added another level of complexity to development dynamics.
While the framework under O. Reg. 232/18 enabled municipalities to tailor Inclusionary Zoning based on local market conditions and feasibility studies, these recent regulatory amendments signal a shift toward Provincial standardization.
While still requiring affordable housing contributions in key growth areas like Protected Major Transit Station Areas, the revised regulation offers a level of clarity and predictability, responsive to concerns raised by those within the development industry. Developers with projects previously subject to higher set-aside rates or longer affordability periods should consult legal counsel to assess how these new Provincial caps may impact their obligations.
The Broader Legislative Context
These changes follow the Province’s 2022 consultation under ERO No. 019-6173, which proposed the very amendments now in effect.
They also align with the broader legislative direction under the proposed Bill 17, Protect Ontario by Building Faster and Smarter Act, 2025. Bill 17 signals the Province’s ongoing efforts to accelerate housing delivery by reinforcing centralized planning tools and streamlining development approvals.
What’s Next?
Municipalities will need to revise their Inclusionary Zoning policies and by-laws to reflect the new regulatory caps.
For developers with landholdings or those preparing applications under previously adopted municipal frameworks, this marks a key moment to revisit assumptions and confirm how these changes may affect project scope.
Related Links
O.Reg. 54/25 , amending O. Reg. 232/18 (Inclusionary Zoning)
ERO No. 019-6173
Bill 17, Protect Ontario by Building Faster and Smarter Act, 2025
News Release: Ontario Getting Homes and Infrastructure Built Faster and Smarter
Technical Briefing: Protect Ontario by Building Faster and Smarter Act, 2025
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