On December 15, the City of Kitchener adopted a new Inclusionary Zoning (IZ) bylaw that will require developers to include a percentage of affordable units in new housing built within Protected Major Transit Station Areas (PMTSA).
Inclusionary Zoning is intended to increase the supply of affordable housing by mandating that a portion of units in new developments be priced below market. These requirements, known as set-aside rates, determine how many units must be designated as affordable.
Under the approved bylaw, subject developments will be required to set aside between zero and two per cent of their gross leasable residential floor area as affordable units starting in 2025, with all PMTSAs moving to a five percent set-aside rate by 2031.
Given that the condominium market is experiencing one of the most significant downturns in recent history, with no clear end in sight, Build Urban is disappointed in, and does not support the City’s decision to move forward with inclusionary zoning at this time.
The market cannot support IZ today
The housing market in Kitchener and the broader region remains fragile. High interest rates, escalating construction costs, and slower sales have created a challenging environment for developers and builders. Since 2017, construction costs have risen nearly 96 per cent, making even basic projects significantly more expensive to deliver. At the same time, pre-condo sales have plummeted (down 97 per cent from long-term norms) while unsold inventory has nearly doubled compared to 2023–2024 levels.
This combination of higher costs and slower sales has stalled many projects. According to the city’s consultant report, there were no condo launches in Waterloo Region in 2025, highlighting just how fragile the market has become. Introducing IZ requirements in this context would only add financial pressure and risk slowing or halting new housing development when it is most urgently needed.
Regional coordination remains a concern
Another challenge with IZ is ensuring consistency and alignment across neighbouring municipalities. While Kitchener has moved forward with its adjusted rates, the City of Waterloo has yet to finalize its IZ approach, and the City of Cambridge has paused its work on the policy entirely.
This lack of regional coordination creates uncertainty for developers who operate across multiple jurisdictions. Inconsistent requirements, timelines, or set-aside rates can lead to delays, reduce project feasibility, and complicate planning for larger regional developments. A coordinated regional approach at the appropriate time would better support the goal of increasing affordable housing without undermining overall housing supply.
Administration of affordable units
Even if developers meet the set-aside requirements, managing and maintaining affordable units presents additional administrative challenges. Inclusionary Zoning typically requires developers to register these units with the city, ensure they remain affordable for a set period, and follow specific pricing rules. This often involves ongoing reporting, monitoring, and sometimes coordination with third-party housing organizations.
For condominium developments in particular, these requirements can be especially complicated. Unlike rental projects, condo developers typically sell individual units and move on, leaving little ongoing control over the property. Ensuring that these units remain affordable over time through resale restrictions or occupancy rules requires additional oversight and enforcement, which can create uncertainty for developers, builders and buyers.
Build Urban’s position
Build Urban continues to believe that now is not the right time for IZ. The policy adds additional costs and regulatory hurdles at a moment when developers need flexibility to deliver housing efficiently. Housing policy should focus on removing barriers, encouraging development, and creating incentives for affordable units, rather than imposing mandatory requirements that may slow the very projects needed to increase housing supply while at the same time increasing market unit rents.
Looking Ahead
The City of Waterloo has not yet finalized its approach to Inclusionary Zoning and has been closely observing Kitchener’s implementation. This will be an important development to watch, particularly as IZ policies roll out and questions around administration, compliance, and effectiveness come to the forefront.
Build Urban will continue to monitor the implementation closely, tracking whether the policy achieves its intended goals and how the administrative requirements affect projects. We remain committed to advocating for practical, market-aligned approaches that support housing supply, protect project viability, and ultimately make homes more accessible for those who need them most.