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Interest in backyard homes grows amid soaring real estate costs and a shortage of housing

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2 years ago

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Chauncey Birch by the laneway home he built in Toronto’s Cabbagetown neighbourhood, on March 8.Fred Lum/The Globe and Mail

In November, 2018, Chauncey Birch was scoping out a fixer-upper in Toronto’s Cabbagetown neighbourhood to buy, renovate and then rent out. He came across an outdated four-bed, three-bath duplex sitting on a lot that was 63 metres deep. But it wasn’t until he spoke with the architect who would oversee its renovation that Mr. Birch realized he could also build a laneway suite.

“After looking at the size of the property, its location with a laneway and the ability to fit a laneway suite in that space, the architect could tell we had met the preliminary parameters,” Mr. Birch explains.

He chose to build a three-bed, three-bath home with a basement and carport in the hopes of appealing to a family as future tenants. “I saw the ability to add that much space – in essence, a small home on an existing property,” says Mr. Birch, who expressed an interest in the smart densification of cities and reuse of existing land.

Mr. Birch is one of a growing number of property owners in Canada that are building secondary homes in their backyards. These structures go by many names, depending on the city where they’re located: granny flat, laneway home, backyard suite or accessory dwelling units.

The City of Toronto passed a bylaw in the summer of 2018 making it easier for laneway suites to be built. And in Edmonton, where they’re known as garden suites, similar bylaws were passed in 2017.

Mr. Birch chose to build a three-bed, three-bath home with a basement and carport in the hopes of appealing to a family as future tenants.Fred Lum/The Globe and Mail

Travis Fong is a co-founder of YEGarden Suites, a non-profit organization that helps inform Edmonton homeowners about building a backyard suite. Mr. Fong, who conducts workshops and webinars and does consultations, says that interest has risen steadily since the organization started in 2017. In 2019, 70 garden suite permits were issued in Edmonton. That number increased to 92 in 2020 and 124 in 2021.

“People who are looking to build for rental make up about half of the suites that are built,” Mr. Fong explains. “The other half are being built for an aging parent, or it could be a child who they want to keep close. We’ve had a lot of families with children with physical or mental disabilities. They can maintain their independence, but they do need extra support.”

Mr. Fong says that the construction process, and financing of the new builds, are common hurdles for those looking at adding garden suites. “They can be a pretty expensive development,” explains Mr. Fong, who estimates the cost of construction in Edmonton ranges from $200,000 to $400,000. In Calgary, that price can reach $600,000 or more.

And in Toronto, laneway projects start around $400,000 and can cost upward of $700,000, which is what Mr. Birch spent building his three-level suite. The laneway build added 20 per cent to the loan that Mr. Birch sought out from a private lender to complete both the main house renovations and laneway construction. He’s now renting out the laneway unit for $5,500 a month, but his motivations for the build aren’t strictly about the income.

“The rent from the laneway suite has been beneficial, but not a windfall,” he says. But Mr. Birch believes that he’ll see greater benefit once he’s ready to sell the property. “Perhaps at the time you sell, the return on investment could yield much larger returns that allow you to climb the property ladder more aggressively.”

Mr. Birch believes that he’ll see greater benefit once he’s ready to sell the property.Fred Lum/The Globe and Mail

Linda Hayes, a chartered accountant based in Edmonton and Belize, constructed her first garden suite on an investment property in 2017. She’s since built five of them in the city.

All of Ms. Hayes’s garden suites were built as part of brand-new home projects, so she was able to secure a regular mortgage to fund the construction of both structures. “You can also use the equity in your current home to pay for it through a HELOC,” she says, referring to a home equity line of credit. Another option for those buying homes to build a laneway suite is securing a “purchase plus improvement” mortgage to borrow the cost of renovations, in addition to the price of the existing home.

Backyard-suite builders should also keep in mind that adding a garden suite adds value to your property and therefore increases your taxes. However, property taxes and some other costs can be offset by tax deductions that landlords can claim against rental income.

“For rental properties, you get deductions for the expenses related specifically to the rental suite,” explains Ms. Hayes. “Items like the additional property taxes, utilities, interest on your HELOC, advertising and repairs are some examples of deductions.”

New federal tax credits for 2023 also provide relief for some garden-home builders housing family members. The Multigenerational Home Renovation Tax Credit provides a 15-per-cent refundable tax credit to assist with renovation costs up to $50,000 for a secondary unit with a private entrance, kitchen and bathroom. “But to be eligible, the resident of the unit must be a family member who is a senior or an adult with a disability,” Ms. Hayes explains.

She also points to the GST/HST New Residential Rental Property Rebate, which refunds part of the GST paid on a laneway housing project. “The rules on this are complex, so it’s best to work with an accountant,” Ms. Hayes says.

The City of Toronto passed a bylaw in the summer of 2018 making it easier for laneway suites to be built.Fred Lum/The Globe and Mail

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Greater Toronto home sales jump in October after Bank of Canada rate cuts: board

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November 6, 2024

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TORONTO – The Toronto Regional Real Estate Board says home sales in October surged as buyers continued moving off the sidelines amid lower interest rates.

The board said 6,658 homes changed hands last month in the Greater Toronto Area, up 44.4 per cent compared with 4,611 in the same month last year. Sales were up 14 per cent from September on a seasonally adjusted basis.

The average selling price was up 1.1 per cent compared with a year earlier at $1,135,215. The composite benchmark price, meant to represent the typical home, was down 3.3 per cent year-over-year.

“While we are still early in the Bank of Canada’s rate cutting cycle, it definitely does appear that an increasing number of buyers moved off the sidelines and back into the marketplace in October,” said TRREB president Jennifer Pearce in a news release.

“The positive affordability picture brought about by lower borrowing costs and relatively flat home prices prompted this improvement in market activity.”

The Bank of Canada has slashed its key interest rate four times since June, including a half-percentage point cut on Oct. 23. The rate now stands at 3.75 per cent, down from the high of five per cent that deterred many would-be buyers from the housing market.

New listings last month totalled 15,328, up 4.3 per cent from a year earlier.

In the City of Toronto, there were 2,509 sales last month, a 37.6 per cent jump from October 2023. Throughout the rest of the GTA, home sales rose 48.9 per cent to 4,149.

The sales uptick is encouraging, said Cameron Forbes, general manager and broker for Re/Max Realtron Realty Inc., who added the figures for October were stronger than he anticipated.

“I thought they’d be up for sure, but not necessarily that much,” said Forbes.

“Obviously, the 50 basis points was certainly a great move in the right direction. I just thought it would take more to get things going.”

He said it shows confidence in the market is returning faster than expected, especially among existing homeowners looking for a new property.

“The average consumer who’s employed and may have been able to get some increases in their wages over the last little bit to make up some ground with inflation, I think they’re confident, so they’re looking in the market.

“The conditions are nice because you’ve got a little more time, you’ve got more choice, you’ve got fewer other buyers to compete against.”

All property types saw more sales in October compared with a year ago throughout the GTA.

Townhouses led the surge with 56.8 per cent more sales, followed by detached homes at 46.6 per cent and semi-detached homes at 44 per cent. There were 33.4 per cent more condos that changed hands year-over-year.

“Market conditions did tighten in October, but there is still a lot of inventory and therefore choice for homebuyers,” said TRREB chief market analyst Jason Mercer.

“This choice will keep home price growth moderate over the next few months. However, as inventory is absorbed and home construction continues to lag population growth, selling price growth will accelerate, likely as we move through the spring of 2025.”

This report by The Canadian Press was first published Nov. 6, 2024.

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Homelessness: Tiny home village to open next week in Halifax suburb

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October 24, 2024

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HALIFAX – A village of tiny homes is set to open next month in a Halifax suburb, the latest project by the provincial government to address homelessness.

Located in Lower Sackville, N.S., the tiny home community will house up to 34 people when the first 26 units open Nov. 4.

Another 35 people are scheduled to move in when construction on another 29 units should be complete in December, under a partnership between the province, the Halifax Regional Municipality, United Way Halifax, The Shaw Group and Dexter Construction.

The province invested $9.4 million to build the village and will contribute $935,000 annually for operating costs.

Residents have been chosen from a list of people experiencing homelessness maintained by the Affordable Housing Association of Nova Scotia.

They will pay rent that is tied to their income for a unit that is fully furnished with a private bathroom, shower and a kitchen equipped with a cooktop, small fridge and microwave.

The Atlantic Community Shelters Society will also provide support to residents, ranging from counselling and mental health supports to employment and educational services.

This report by The Canadian Press was first published Oct. 24, 2024.

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Here are some facts about British Columbia’s housing market

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3 weeks ago

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October 17, 2024

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Housing affordability is a key issue in the provincial election campaign in British Columbia, particularly in major centres.

Here are some statistics about housing in B.C. from the Canada Mortgage and Housing Corporation’s 2024 Rental Market Report, issued in January, and the B.C. Real Estate Association’s August 2024 report.

Average residential home price in B.C.: $938,500

Average price in greater Vancouver (2024 year to date): $1,304,438

Average price in greater Victoria (2024 year to date): $979,103

Average price in the Okanagan (2024 year to date): $748,015

Average two-bedroom purpose-built rental in Vancouver: $2,181

Average two-bedroom purpose-built rental in Victoria: $1,839

Average two-bedroom purpose-built rental in Canada: $1,359

Rental vacancy rate in Vancouver: 0.9 per cent

How much more do new renters in Vancouver pay compared with renters who have occupied their home for at least a year: 27 per cent

This report by The Canadian Press was first published Oct. 17, 2024.

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