Canada: The City Of Montreal Introduces Social Affordable And Family Housing Requirements

On June 12, 2019, the City of Montréal unveiled the draft Règlement visant à améliorer l’offre en matière de logement social, abordable et familial (the “By-law”). The By-law will replace the Strategy for the inclusion of affordable housing in new residential projects, adopted by the City in 2005 (the “Strategy”). While the Strategy’s approach was incentive-based, the By-law imposes mandatory requirements for residential projects subject to the By-law.

This note will provide an overview of the main features of the By-law, which is complex and comprises many variables. It should be noted that the By-law will be the subject of a public consultation in the fall of 2019. The By-law is expected to be adopted in its final form in early 2020 and should come into force on January 1, 2021. Until then the Strategy, to which certain modifications are being considered, will continue to apply to projects of 100 units or more that require a major by-law amendment.

Agreement with the City

The By-law imposes an obligation on the owner of any residential project that meets the minimum criteria for the application of the By-law to enter into an agreement with the City of Montréal prior to obtaining a construction permit. A residential project is defined as a project:

  • for the construction of housing units, or
  • for the transformation of a building resulting in the addition of housing units on the same site.

When a residential project is carried out in several stages requiring a construction permit, an agreement must be reached on the project as a whole before the first construction permit can be issued for the residential project.

The key element for the application of the By-law is to determine whether the project adds residential units. As such, renovation permits are not covered by the By-law. Further, the By-law provides for a number of exceptions.

The agreement with the City will have as its purpose the improvement of the supply of social, affordable and family housing and will contain certain commitments on the part of the owner. The issuance of the permit will be subject to the City obtaining the guarantees provided for in the agreement. To this end, the By-law imposes obligations on projects that meet the minimum application criteria for each category of housing units provided for in the By-law. The three categories of housing units covered by the By-law are social housing, affordable housing and family housing. The nature of each category, and the obligations they give rise to, are discussed in greater detail below.

The By-law requirements for each category of housing units vary depending on the location of the residential project. Schedule A to the By-law identifies four territories of application on the Island of Montréal, namely downtown, inner neighbourhoods, periphery and outskirts, and different obligations are imposed depending on the territory in which the residential project is located.

Click here to access the Schedule A p.1 to the By-law.

Requirements for Social Housing

Any residential project with a residential surface area of 450 square metres or more (5 units) must include a commitment regarding social housing in the agreement with the City.

The By-law defines social housing as housing that is eligible for or receives a subsidy under a municipal social, cooperative and community housing subsidy program.

Social housing requirements are set at 20% for all territories of application. The By-law provides for three methods of contribution to meet this requirement. The agreement must include a commitment from the owner to:

(i) transfer an immovable to the City,

(ii) make a financial contribution in an amount calculated in accordance with the By-law, or

(iii) a combination of a transfer of an immovable and a financial contribution in accordance with the By-law.

Transfer

The By-law provides for numerous criteria concerning the immovable to be transferred. In particular, the immovable may be vacant or an immovable on which social housing is located. In addition, the immovable to be transferred must, as the case may be:

(i) allow for the construction of a residential surface area estimated to correspond to at least 20% of the residential surface area of the private component of the project, or

(ii) include social housing with a minimum residential surface area of 20% of the residential surface area of the private component of the project.

This 20% is increased to 22% in certain cases. The private component corresponds to the part of the project that consists of housing units other than social housing. The residential surface area includes the sum of the floor area measured from the outside surface of the exterior walls of each of the floors of the residential project, including all common areas, mezzanines, stairs, elevators and lobby. The calculation excludes the surface area of commercial premises and the surface area of basement floors, with the exception of housing units or parts of housing units.

The agreement must also provide for payment of a financial consideration by the City to the owner established in accordance with the By-law based on the value sectors defined in Schedule B to the By-law.

Financial contribution

If the agreement provides for a financial contribution, the By-law stipulates the method and amounts to be used to calculate the amount of the contribution.

The agreement may also provide for the transfer of an immovable the residential surface area of which does not reach the minimum percentages required by the By-law, on condition that an additional financial contribution is paid.

Requirements for Affordable Housing

For any residential project with a private component of at least 50 units, the agreement with the City must include a commitment by the owner to meet one or the other of the following requirements:

  • the construction of affordable housing, including a minimum of affordable family housing as provided for in the By-law;
  • the construction of affordable housing that benefits from a program (a “Program”) of a government, the City, one of their agents or the Société d’habitation et de développement de Montréal (if the project is located downtown), reducing the buyer’s contribution to the down payment to less than 5% of the selling price, of which a minimum of 5% must be affordable family housing;
  • a financial contribution calculated in accordance with the formula and amounts provided for in the By-law.

The By-law defines affordable housing as housing the price or rent of which complies with the maximum sales price or rent, as applicable, established by the By-law. Affordable family housing is family housing (defined below) the price or rent of which complies with the maximum sales price or rent, as applicable, set out in the By-law.

The percentages and amounts applicable to the above requirements vary depending on whether the project is located within, or outside, the downtown territory defined in Schedule A to the By-law.

For example, in the case of a downtown project where the owner has chosen to build affordable housing that does not benefit from a Program, the By-law requires that the residential project include at least 15% affordable housing, of which a minimum of 5% (that is a third (1/3) of the 15%), must be affordable family housing. Percentages are calculated based on the total number of units in the private component of the residential project.

Requirements for Family Housing

For any residential project with a private component of at least 50 units, the agreement with the City must include a commitment by the owner to build at least 5% family housing if the project is located in the downtown territory, and at least 10% family housing if the project is located elsewhere. The number of units is calculated on the basis of the number of units in the private component.

Family housing is defined as a unit with at least three bedrooms, with a minimum surface area of 96 square metres for a housing unit located in the territories defined in Schedule A as periphery and outskirts, and 86 square metres in the territories defined in Schedule A as downtown and inner neighbourhoods, which measurements are taken from the outside surface of the exterior walls. This requirement is in addition to the requirement described under “Requirements for Affordable Housing”. It should be noted that such family housing is not subject to the maximum sales price or rent, as applicable, set out in the By-law.

Indexation

The amounts provided for in the By-law for the financial consideration in the case of the transfer of immovable property, the amount used to calculate the financial contribution related to social housing, the amounts used to calculate the financial contribution related to affordable housing, and the maximum sales price and rent will be indexed by 2% annually, on the first of January of each year following the year in which the By-law comes into force. However, once fixed in an agreement, these amounts will not be indexed, except for the maximum sales price and rent, which will be indexed until the sale or the signing of the lease of each affordable housing unit built.

Transitional Measures

The By-law is expected to come into force on January 1, 2021. The Strategy will continue to apply to residential projects until such time.

The By-law stipulates that any application for a construction permit for a residential project for which a commitment has been made in favour of the City prior to June 17, 2019, is not subject to the By-law if the commitment meets the three criteria set out in the By-law.

In addition, any application for a construction permit for a residential project for which a commitment has been made in favour of the City between June 17, 2019 and the effective date of the By-law is not subject to the By law if the commitment has been accepted by the Director of the City’s Housing Department and meets the criteria set out in the By-law.

Summary

Before undertaking a residential project, owners must determine whether, to obtain a construction permit, they must enter into an agreement with the City that sets out their obligations regarding social, affordable and family housing under the By-law.

Unless the project falls within the exceptions set out in the By-law, the owner of a residential project is subject to obligations under the By-law:

  • in relation to social housing, as soon as the project includes a residential surface area of 450 square metres,
  • in relation to affordable housing, as soon as the project includes 50 units,
  • in relation to family housing, as soon as the project includes 50 units.

The By-law requirements for each category of housing units vary depending on where the residential project is located, namely downtown, the inner neighbourhoods or periphery, or on the outskirts, as each is defined in the By-law.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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