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Many UrbanToronto articles mention “affordable housing,” but the term can mean very different things depending on whether you’re looking at a federal program, a provincial policy, or a municipal agency. Official definitions vary across levels of government and shape how projects are financed, approved, or managed.
At the national level, Canada uses a basic benchmark: housing is affordable when shelter costs (rent or mortgage, plus utilities, taxes, and fees) do not exceed 30% of gross household income. The rule of thumb is widely applied by the Canada Mortgage and Housing Corporation (CMHC) and Statistics Canada, though it does not capture the realities of Toronto’s high market costs.
A second measure ties affordability to market prices. CMHC publishes Average Market Rent (AMR) by unit type, and many programs cap affordable housing at or below those levels, such as 80% of AMR. Because AMR shifts with the market, this approach reflects current rents but may quickly move out of reach when prices rise faster than incomes.
Ontario blends these two lenses. The Provincial Planning Statement defines affordability as the lower of a 30%-of-income test for low- to moderate-income households or average regional rents and prices. The Development Charges Act, 1997, which governs exemptions from municipal fees, uses households at the 60th income percentile as the benchmark. Rental affordability is the lower of a 30%-of-income figure or local AMR; ownership is the lower of a 30%-of-income figure or 90% of the average purchase price.
In the municipal realm, Toronto applies its own, more detailed thresholds. For affordable rental, the City compares CMHC’s AMR with 30% of before-tax income at the 50th percentile for studios and the 60th percentile for one-, two-, and three-bedroom units, applying the lower number. It also defines “mid-range” categories up to 100% and 150% of AMR.
The City of Toronto’s Housing Now TO program adds another approach by redeveloping municipally owned land, requiring that a significant portion of new homes meet affordability rules alongside market units. While slower to advance than initially planned, it is designed to deliver thousands of rentals across multiple sites.
For affordable ownership, the City caps purchase prices so that monthly costs equal 30% of before-tax income at unit-specific percentiles. In 2025, this produces price limits of about $186,000 for a studio, $226,000 for a one-bedroom, $282,000 for a two-bedroom, and $327,000 for a three-bedroom, well below typical Toronto sale prices.
Inclusionary zoning requires that a share of units in new developments meet the City’s affordability thresholds, often secured for 99 years in PMTSAs (Protected Major Transit Station Areas). Non-profit providers and co-operatives frequently use rent-geared-to-income (RGI) models, pegged at 30% of actual household income, which achieve further affordability. For example, a mid-2025 proposal at 9 Shortt Street just a block from the soon-to-open Fairbank station on Line 5 Eglinton, and therefore within that station’s PMTSA, is part of the Toronto Builds program. Of its 458 rental units, about 140 would be designated as affordable, directly applying the City’s threshold framework.
Debate continues around feasibility. Income-based thresholds reflect what households can realistically pay but often fall short of covering construction costs. Market-based thresholds move with rents but can escalate faster than wages. Governments try to bridge the gap through subsidies and funding agreements, yet demand continues to exceed supply, as shown by housing lotteries that draw thousands of applicants for a handful of affordable homes.
For readers parsing development proposals, context matters. One application might reference “affordable rental” tied to AMR, another may rely on Development Charges Act formulas, while an ownership program could publish fixed City price caps. Understanding which definition applies is the key to knowing how many units qualify, at what rent or price, and for how long the affordability is guaranteed.
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From 2015 to 2017, UrbanToronto and its sister site, SkyriseCities, ran an occasional series of articles under the heading Explainer. The series was revisited, expanded, and articles were updated where necessary in 2023. Now, additions to the series will occur on occasion, like this article. Each Explainer takes a concept from Urban Planning, Architecture, Construction, or related topics covered on our sites, and presents a detailed look at it. While you may already know what some of the concepts covered by the Explainer articles mean, others may be new to you. To read other Explainer features, click on the magenta Explainer box at the top of the page. If you have other planning terms that you would like to see detailed in an Explainer article, or thoughts about this one, please share them via the comment field below!
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UrbanToronto’s research and data service, UTPro, provides comprehensive data on construction projects in the Greater Golden Horseshoe—from proposal through to completion. Other services include Instant Reports, downloadable snapshots based on location, and a daily subscription newsletter, New Development Insider, that tracks projects from initial application.