As interest rates rise and mortgage payments become a challenge, Canadians are increasingly seeking houses with secondary units, such as basement apartments and laneway homes, according to real estate experts.
Recent changes in zoning bylaws in Ontario and Alberta offer greater flexibility for building new secondary suites with private entrances in pre-existing homes. This comes amid a housing crisis, with insufficient properties being built to meet the growing population’s needs.
Secondary dwellings not only help address the housing supply issue but also provide crucial rental income for homeowners facing high mortgages, says Ken Bekendam, CEO and founder of legalsecondsuites.com. His company assists homeowners and real estate investors in Ontario to create additional units in their properties.
The demand for secondary units is growing in Canada due to rising interest rates, making it harder for homebuyers to qualify for loans. A secondary suite can provide an attractive option to bolster income and qualify for a home purchase, according to Anthony Passarelli, senior analyst at the Canada Mortgage Housing Corporation (CMHC).
A Royal LePage survey revealed that 11% of Canadians (4.4 million people) own investment properties, with single-family detached homes being the most popular choice among investors. However, increased mortgage payments have led one-third of investors to consider selling one or more of their properties.
Cities like Calgary, Edmonton, and Vancouver have witnessed a rise in the construction of secondary suites. Toronto, with approximately 75,000 secondary units in 2019, has seen an increase in their numbers due to relaxed guidelines, particularly for laneway homes.
Secondary units, such as basement apartments, in-law suites, or laneway homes, address rental supply gaps in neighborhoods with predominantly low-density housing, as per a CMHC report published in June 2021.
Apart from providing monthly rental income, a legal accessory dwelling can increase property value and offer additional living space for family members, appealing to a larger demographic. It also contributes to a sense of security when a tenant resides in a basement apartment.
Homeowners might encounter challenges, such as noise complaints and temperature differences, with secondary units being used as rentals. To mitigate such issues, installing sound-proofing products and maintaining separate heating and cooling systems are recommended.
Building secondary units is becoming costlier due to a shortage of skilled trades and contract labor. As interest rates rise, construction activity slows down, affecting demand and construction costs. Government grants and incentives are needed to encourage homeowners to build secondary units in their properties.