Due to some recent changes in policy at City Hall, small laneway suite homes now have the ability to impact Toronto’s housing market in a big way.  Prior to the policy shifts, it was not possible to build a 'house behind a house', but now over 300km of Toronto laneways are eligible for low-rise housing development.  In a city which finds itself in a chronic housing and rental unit shortage, this planning amendment could provide some valuable relief to residents and newcomers to this growing city.

So what exactly is a laneway suite?  They’re stand-alone secondary dwellings built at the back of a residential lot, facing a rear laneway.  Think of them as a small second house at the rear of a property where you might normally have a garage backing onto a lane.  That rear lane is critical for emergency response access, so if your property backs onto another lot without having that important rear access, then this would be considered a ‘garden suite’ rather than a ‘laneway suite’ and unfortunately does not qualify for development by right at this time.

From a city-planning and city-building perspective, this newfound acceptance of laneway homes provides a means to densify the existing fabric of the city in a relatively low-impact way.  We’re able to squeeze in more families per square kilometre without having the disruption that comes with the construction of large condo-towers that immediately strain the city’s existing infrastructure.  Rather than concentrating hundreds of new homes at a single location which can instantly cause traffic and service problems, the new living units can be spread more evenly among various neighbourhoods throughout the city.  This is a much gentler (though admittedly slower) means of creating more local housing stock without suddenly and drastically altering a neighbourhood.

Laneway suites alone won’t solve the problem of our housing shortage, but they will certainly help.  Other cities throughout Canada such as Vancouver and Ottawa have adopted similar policies long before Toronto and shown excellent results, so it’s encouraging to see the progressive changes here at home.

Beyond being beneficial at the city planning level, laneway suites can solve problems and create opportunities for the folks that decide to build them:

An apartment for family members.  Laneway suites are excellent alternatives to basement apartments.  They usually have more space and light, while keeping close proximity to the main house and other family members.  This can be a great solution when considering elderly parents or adult children – they’re able to have an autonomous space of their own but are only a few steps away.  The extra suite offers a lot of flexibility for multi-generational families that want to remain close.

Rental income.  Everyone can appreciate making a little extra money, and building a laneway suite can be an excellent opportunity for additional monthly cash-flow.  Building the unit will take an initial capital investment, but can yield monthly rental rates easily worth $3000 and beyond.  Alternatively, if you’re willing to live in the smaller laneway unit for a few years, you could rent the main household out for much more money and fast-track your financial return.  Also, don’t forget about short-term rentals like AirBnB.  Building a suite that’s trendy and tailored to short-term renters could bring in thousands of dollars each week.

A home office or studio space.  Laneway suites offer an opportunity to create a perfectly tailored space for a home based business, whether it be a small private office or an artistic studio space.  You can customize the design to your needs, with the ability to include washrooms, kitchens, and sleeping quarters.  Perhaps it’s the perfect live-work home for a young professional, while they rent out the main house which pays for everything.

Building real estate wealth.  Toronto real estate prices can fluctuate year to year, but as people flock to the politically stable and rapidly growing world class city, long term prices are only going up.  This makes Toronto a great place to invest.  A smart way to cash in on the rising real estate values is by upgrading a single family residential property with a laneway suite to multiply this long term growth in value.  Upgrading a residential property with a secondary suite can literally add millions of dollars to the property’s value long term.  You’re creating a property that can cash flow thousands of dollars each month to cover the monthly mortgage and maintenance costs while the property slowly appreciates in value year over year.

Free money.  Not only can laneway suites create huge amounts of rental income, the city of Toronto will literally give you money to build one.  If you agree to rent the new suite out at affordable market rates for 15 years, they’ll give you a forgivable $50,000 loan that you won’t ever have to pay back.  Alternatively, you can rent for exorbitant sums and simply defer the development fees for 20 years which is a nice option too.  Check out the city’s website for the latest details.

Given the local demand for housing, and the aforementioned benefits to both the city and property owner, it’s only a matter of time before laneway suites start popping up more frequently all across Toronto.  Currently there have been close to 100 building permit applications, but expect a few thousand more as the idea catches on and proves to be highly rewarding.

Laneway Suites: Toronto’s Untapped Housing Market
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