Rental Suites: Basement Apartments vs Laneway Housing
August 24, 2022
Although laneway housing was approved by city council in 2018, there was a new development in July: garden suites are also now legal. You may be asking, what’s the difference between a laneway suite and a garden suite? A garden suite is a secondary unit on properties that don’t have laneway access.
The reason I want to address this topic now is because many buyers I work with are looking for homes with basement apartments that can be rented out to offset mortgage payments. However, basement apartments are liability heavy.
Many of them are actually ‘nanny suites’ and aren’t legal to rent out. Some units may be grandfathered in, but they still need to be up to code when it comes to fire and other regulations.
A secondary unit on your property can be a very good alternative to a basement apartment. Tony Cunha, an architect from Lanescape, recently spoke to Sage Real Estate about the differences between laneway houses and garden suites and what’s involved. If you’re curious about whether your property qualifies, they offer a free evaluation.
Here are some of the basics:
A suite is intended as a rental unit and can’t be severed from the main house, from which it shares services such as gas and electricity. There’s no parking requirement.
You don’t have to apply for a zoning change. As well, there are some affordable housing incentives and tax rebates available.
Although you don’t have to contact your neighbours about building a laneway suite, letting them know what’s happening in advance can help smooth the process.
A laneway suite can be used for supplemental income, multi-generational living (perhaps you want to live near your parents but not with them), live-work flex space, like a home office, guest or nanny suite or hobby and storage. They have been legal since 2018.
This is different from a laneway house, which is a completely separate dwelling on the same property. The approval process is complex and construction can be much more expensive. They’re often higher than two storeys to make them profitable.
These became legal in Toronto in July, and they open the possibility to many more homeowners. The same rules apply to garden suites as to laneway suites in that they share services with the main house and though laneway access isn’t required, there still needs to be access for emergency services.
Why consider a new build?
Liability-wise, a new-build laneway or garden suite is a much safer bet, assuming you’re working with experts and are fully permitted.
Laneway and garden suites rent a little higher than a condo because they’re a little more unusual. They can have a bit of the wow factor to it. It’s kitchy, it’s cute and people buy into that bohemian lifestyle as opposed to living in somebody’s basement. It definitely adds to the value of a home and over time it makes sense to have someone pay down your mortgage.
According to mortgage broker Samantha Comito, If a buyer is going to assume tenants, the lender will take that into account. They’ll use whatever rent is currently being paid. But if they’re buying a property and their goal is to have tenants, most lenders will allow for what’s called a market rent analysis, done by an appraiser to evaluate the potential rental that can be earned. That income can be used to help qualify the client to add it to their income to help them qualify for more money.
There are some very specific rules about what you can build and where. The best advice I can give is to consult an expert who can take a look at your property and let you know their recommendations, but depending on space, a laneway suite can be up to 1700 square feet, plus a basement, more than enough room for your in-laws.