Laneway Houses: Changing Canada’s Big Cities (and Your Practice)

The Canadian Mortgage and Housing Corporation recently announced that we need a jaw-dropping 5.8 million new homes by 2030 to address the affordability crisis in Canada’s housing. While the worst crises continue to dog Vancouver and Toronto, no major Canadian city would claim an abundance of housing within their borders.

So, note the recent moves by cities like Vancouver, Calgary, Edmonton, Regina, Hamilton, Ottawa, Toronto, and Halifax against even the nimblest neighbourhoods. They are passing laws to not just allow but promote laneway houses and garden suites. Which are?

Secondary homes built on single-home lots, laneway houses and garden suites are similar, but the latter doesn’t have its own (laneway) access and address. They have different sets of rules that are likely to vary, sometimes wildly, between districts. So, each form of secondary housing presents unique opportunities for real estate lawyers.

Canada’s cities are incentivizing all this building, but NOT as a path to a short-term rental space like, say, AirBnB. The point is to create more traditional rental housing.

The benefits of building laneway housing or garden suites?

For the homeowner: there’s the allure of extra and passive income. A recent blog by Simplii Financial referenced a builder of Vancouver laneway homes who ball-parked their construction usually at under $400,000, then $3,000 a month in subsequent rent. (Which would mean this major investment pays itself off in just over eleven years!)

For renters: more rental housing should mean more choice and, it follows, lower prices for rentals. Some housing advocates, however, worry that opportunistic developers will scoop up any properties for sale that could accommodate secondary houses, thereby potentially driving up the price of real estate. Worse: later, when cities become more comfortable with subdividing properties into multiple smaller ones, would those newly separated houses retain their exclusively-for-rent status? For now, though, cities are betting that more rental housing would mean greater affordability.

From the urban planner’s perspective: more homes on single-home properties mean denser neighbourhoods with mixed housing and little cosmetic change. A win-win-win!

Most cities are doing - in their own way and time.

A recent MediaEdge article reported Vancouver, Calgary, Edmonton, Hamilton, Ottawa, Toronto and Halifax all making moves towards more laneway housing. Small wonder. The pandemic amplified the work-from-home trend, only intensifying the need for more and better rental properties.

As you know, city laws and bylaws can be arcane and complicated. So, the legislated specifics range significantly between cities, and even within them.

Vancouver first passed laws legalizing laneway homes in 2009 but then was initially slow to grant permits. Now, however, the city expects to have a total of 7,000 laneway homes built by 2028.

Recently, Regina not only unanimously passed legislation allowing their construction but extended a 5-year tax exemption of 25% for “backyard suites” in some test areas.

Things are changing fast. Toronto.ca reports a program that “provides funding in form of a forgivable loan of up to $50,000 for eligible property owners developing a laneway suite.” Local architect Erik Calhoun is well versed in the city’s ever-changing bylaws. Noticing how eager the city is to accommodate good-faith builders, the clients wait for a few months. Rather than going to the expense and time-consuming effort of applying for an exemption, see if the city proactively eases the same restrictions they were hoping to circumvent.

More housing means more need for your services.

The possibilities accrue. Those clients who can build right way will need financing guidance to subsidize it. (See above re $400,000!) They’ll also depend on your insider’s knowledge of beneficial programs like Toronto’s forgivable loans and Regina’s tax exemptions. Then, there are the contracts with builders, architects, etcetera, to be reviewed and advised upon.

Plus, you can still work with those who would like to but aren’t sure they can build. They need help interpreting city bylaws. For instance, is their neighbourhood an exception, disallowing secondary homes? If not, great! But is their laneway too narrow to accommodate a fire truck? Or does their property lie just outside a legally mandated distance from the nearest hydrant? Some clients may need help to negotiate limiting distance agreements with neighbours. It’s all complicated stuff.

Later, before they can begin renting, many will need help with lease and rental agreements. (They may have read horror stories about renters who know the laws better than their landlords and get around them, sometimes costing tens of thousands in lost revenue - and years in lost sleep. What rights do they have?)

Finally, as the laws ease, some of these lots will inevitably be subdivided and sold off as separate properties, demanding the services of a trustworthy law firm.