Life in the fast lane: How laneways could impact Toronto real estate

Allowing laneway homes could create a huge supply and increase prices for homes on lanes

A proposed set of rules to allow the development of laneway housing in Toronto was set to go to a vote before Toronto City Council in February in what could be the biggest thing in local real estate since the invention of the basement apartment.

Although the vote has been postponed for a few months, the proposed rules would see a single set of regulations governing how homeowners can convert alley-facing garages into rental units.

The rules would define how electrical and sewage services are delivered, how addresses work and what needs to be provided in terms of emergency access.

Assuming council adopts the regulations, Toronto homeowners may soon have a potential new revenue stream, and the city’s rental crisis will be addressed while at the same time dingy alleys would be renewed, according to supporters.

“The prospect of laneway housing would open up tremendous possibilities for homeowners and renters across the city,” said Toronto realtor Jamie Dempster.

“Although laneway housing would not completely solve the rental crisis in the city, it would help to alleviate the situation and allow more people to live in homes that are not condominiums in Toronto.”

Another benefit of these so-called “granny suites” is that small downtown homes can expand their habitable space.

“I have a lot of clients that are downsizing. If they can move into a laneway suite behind their kids instead of going into an old-age home, that’s great,” said Dempster. “This allows people to age in place. This provides options.”

A vote had been expected to go to city council as soon as February but now seems to have been pushed off to May or June. “It was originally slated for earlier in the year, but it was moved to accommodate more public meetings” said Craig Race, co-founder and architect with local design firm Lanescape.

“The planning department wants to give everyone their chance to speak up.”

There will be some property owners opposed to the new rules as the plan would densify neighbourhoods.

According to Race, early indications are that the regulations are finding broad support.

“The Toronto and East York Council unanimously voted to commission the staff report, so we are hoping that enthusiasm carries through to city council,” he explained. “The city held its first public meeting in November, and the atmosphere was overwhelmingly positive.”

According to Race, property owners will find that the benefits outweigh the drawbacks.

“Average, everyday homeowners are the ones who will benefit most from this new type of development,” said Race. “It is important to remember that laneway suites are not severable. They must be purchased and sold as part of the main house, just like a basement apartment would be. The economic impact of a laneway suite will be similar to a secondary suite within a home — something that is currently allowed as-of-right across all parts of Toronto.”

There is also potential here for a sort of mini building boom in the city, especially older central and downtown Toronto neighbourhoods such as Summerhill, Rathnelly, and parts of the Annex and Wychwood where there are approximately 250km of rear laneways.

Designers, architects, contractors, electricians, home furnishing retailers and landscapers will benefit from the creation of a new real estate class.

The City of Vancouver went forward with laneway housing in 2009. Bryn Davidson, co-owner of Vancouver-based Lanefab Design, said the change in law came just in time to help the city weather the recession, providing an immediate and lasting economic impact.

“Vancouver’s 2009 lane house policy kick-started a whole new industry right in the middle of the global financial crisis,” said Davidson. “The key was making the permitting process easy enough and universal enough that a business like ours could launch and grow.”

According to Robert Slade of Smallworks, a laneway home builder in Vancouver, laneway homes have changed the nature of the Vancouver real estate market. “[These units] have become the de facto rental situation for young professionals, like myself, with a higher than average disposable income. Our projects usually rent for over $2,500 per month,” Slade said.

“The attraction is not having any shared walls. In Vancouver, we tear down the garage and the entire unit is devoted to living space. This relieves some of the pressure on the rental market, but these aren’t low-income suites. They rent for higher than any other square footage in Vancouver.”

New financing models quickly emerged to facilitate construction.

“Homeowners are usually financing through a home equity line of credit or a construction loan from the bank,” said Davidson.“It took the banks a year or two to get used to these, but it’s no problem now in Vancouver. There are [about] 2,500 that have been built across the city since we finished the first one in 2010.”

Other benefits include new taxes to the city. According to Dempster a laneway suites policy would also clean up Toronto’s endless rows of dingy alleyways. “In Toronto so many of the laneways are shoddy and covered in graffiti,” he explained.

“This will see those laneways cleaned up. This will put eyes on the alley, making them safer,” he said. “There will be those who don’t like the densification and might not want to live with someone in the backyard. But over the long-term this is going to be positive for the city. Montreal and Vancouver do this. I think Toronto needs this. I’m excited.”

Jane Jacobs would surely agree.