Building Laneway Suites in Toronto: What Homeowners Need to Know

Are laneway suites in Toronto a solution to the housing supply crisis? From the length of time it takes to save a down payment, to the housing supply shortage driving up prices, many prospective homebuyers are being priced out of North America’s fourth-largest city.

In recent years, many public policymakers, industry professionals and community activists have proposed a series of measures to address housing affordability in this major urban centre. Real estate experts contend that the best answer to Toronto’s housing woes is to create more supply, by removing exclusionary zoning bylaws and supporting the construction of the right type of homes in the right neighbourhoods. One concept that has garnered support from city hall is the development of laneway suites.

So, what are these residential units anyway, and can they help alleviate the sky-high housing market? Let’s explore!

Building Laneway Suites in Toronto: What Homeowners Need to Know

A laneway suite is a type of property that is a detached secondary unit, typically located in the backyard or back alley of densely populated cities.

While some will describe it as a newly designed mid-block property big enough for a couple of bedrooms and space for a family, others view it as a small, detached apartment above a garage that belongs to the primary house.

The laneway suite shares the main home’s water, sewer, gas, electric and waste collection services. Also known as “infill houses” or “garden suites,” these units can never be standalone, commonly likened to a basement apartment. The difference, of course, is that you enjoy more light, windows, fresh air, and the myriad of benefits that a typical above-grade apartment offers.

Proponents of this housing type argue that laneway suites tackle under-utilized spaces, make communities more sustainable, and create equity for the population. Moreover, there are other perceived advantages, such as respect for the character of a neighbourhood, addressing multi-generational living needs, and slowing the pace of development. Others also see it as a rental income opportunity, allowing the homeowner to generate revenue or support retirement plans.

Toronto officials got on board with the idea, launching the Laneway and Garden Suite Development Charges Deferral Program in 2018 to incentivize homeowners to add a secondary laneway suite to an existing property. And as of May 2021, the city received more than 200 building permit applications for new laneway suites. To be eligible for the program:

• the property needs to be located within an area permitted by By-laws 810-2018 and 1210-2019
• the property has to conform with applicable zoning and other by-laws as determined by Toronto Building
• the homeowner must have applied for building permit
• the homeowner must enter into a DC Deferral for Ancillary Secondary Dwelling Units Agreement with the City

Under this program, development charges related to the building of this secondary property will be deferred for 20 years from the date the building permit is issued. However, the amount owing will need to be repaid with that 20-year window if:

• a new lot is created through a Plan of Subdivision, Plan of Condominium and Consent to Sever
• the seller and owner do not enter into an Assumption Agreement before transfer of the property

According to the City of Toronto, the amount of development charges payable in an event of default is based on the single-detached unit rate that is set out in the Development Charges By-Law plus annual indexing. You can repay the Development charges at any time during the 20 year period. The amount payable will be the rate for a single detached unit as set out in the Development Charges By-Law plus annual indexing.

Furthermore, the Department of Finance announced in its 2024 Fall Economic Statement that it will double the loan limit for the Canada Secondary Suite Loan Program to $80,000, launching in early 2025, making it easier for homeowners to add secondary homes such as a laneway home, to increase density in our communities. In addition, homeowners can now refinance with insured mortgages to help cover the cost of adding a secondary suite, as of January 15, 2025.

Check with your area’s governments and housing authorities for the latest incentive programs.

Are Laneway Suites the Answer to Housing Affordability?

Toronto has been home to laneway suites for a century, and it appears that Canada’s most populous city is leading the push in North America. However, other jurisdictions, such as Vancouver and the state of California, are incorporating laneway suites into their public policymaking efforts.

“In the world of planning and urbanism, these homes are generally known as granny flats or accessory dwelling units (ADU). American municipalities have been embracing them for a decade now. California effectively legalized ADUs at the state level in 2017. In Los Angeles, many are being built, and the city government pre-approved a set of standard plans for such dwellings by talented young architects,” The Globe and Mail reported in January 2022.

The average price of a detached home in Toronto is well north of $1 million, while condominium suites are approaching seven figures. The metropolis is begging for more supply to come online. Construction cranes dot the skyline and residential neighbourhoods, but many agree that more needs to be done. Whether laneway suites will enhance housing affordability in Toronto or not remains to be seen. Still, real estate is at the top of mind for public officials, the housing industry, and consumers – buyers and sellers.

Sources:

• Toronto
• The Globe and Mail