Daily insights for city builders, delivered every morning at 6 AM ET. I’m Brandon Donnelly — a Toronto-based real estate developer and founder of Globizen. I’ve been writing here since 2013.
A few weeks ago, Equitable Bank launched a new construction financing product for laneway homes and garden suites in Canada. Here is the announcement. This is generally good news. When we completed Mackay Laneway House back in 2021, the banks hadn’t yet gotten their head around this housing type. I remember RBC getting tripped up on the fact that there were two detached dwellings on the same residential lot.
That said, there are some important conditions around this new mortgage product:
“The Laneway House Mortgage is offered on properties that are free and clear, or in combination with new or existing mortgages where Equitable Bank holds, or will hold, the first position.”
In other words, they want no debt on the property or they want sufficient equity in the property — but Equitable Bank needs to hold the mortgage. I suspect that most of the people who have built laneway and garden suites have done so by leveraging the equity in their main house; so I’m not sure how “innovative” this product will end being in practice. You’ll also need to switch to Equitable Bank if you have your mortgage with another lender.
Still, if you’re looking to build one of these homes — and I continue to believe that they make a ton of sense both financially and from a city-building standpoint — it wouldn’t hurt to see what Equitable Bank can offer.
This is not a post about laneway housing. Okay, it sort of is. But there’s a broader point to discuss. Recently, a local Toronto newspaper ran this article talking about how a bunch of people are upset that their neighbor is building an as-of-right garden suite. Here’s an excerpt:
“The members of the community know that they can’t stop the building of this ‘garden suite’. However, they want to change the bylaw to ensure that future ‘garden suites’ can’t be built without community consultation and an environmental assessment,” said a news release from a number of residents in the area that was sent to Toronto media outlets including Beach Metro Community News last week.
This raises some interesting questions.
For one, what would be the purpose of this community consultation? Is it just a “Hey, I’m going to be building a garden suite” and then homeowners go do it exactly how they want anyway? Or, would it be an extensive community engagement process where homeowners would be expected to gather feedback, submit a report to the city, and consider design changes?
And, would this apply to all low-rise housing? In other words, would all homeowners need to consultant their neighbors and do an environmental assessment before pulling a building permit? What if someone just wants to build a small extension or a shed? Or, are we only talking about laneway and garden suites?
I’m not really sure what the exact intentions are here — besides delaying new housing — but I can tell you that it’s a terrible idea.
Laneway and garden suites should never require community consultation and/or an environmental assessment. I mean, this is the whole point of allowing them as-of-right. It’s so you don’t have to do these things and you can go straight to a building permit. This is way too small of a housing type to burden with obstacles.
In fact, the same is true of larger housing types. In my opinion, conventional mid-rise buildings should not have to go through a full rezoning and they should not have to consult with the community. We already know what these buildings look like. We know that they make for great homes. And yet they’re our most expensive housing type to build.
Removing barriers (and reducing project durations) is a sure-fire way to make them cheaper. Especially in a higher interest rate environment.
It was for a class on laneway housing and, as it turns out, some of the students had been using MLH as a case study. That’s pretty cool, although the primary lesson is probably “don’t build next to large trees.”
Following the presentation, we had a good discussion about laneways, and it reminded me of some of the things that I believe to be true. More specifically, it reminded me of what I think will happen in the future:
Bona Fide Streets: Laneways will become bona fide streets. Meaning, they’ll get real names (most don’t have one today) and they’ll get serviced. Today, laneway suites are typically serviced via the main/existing house.
Severable Lots: Laneway lots will become severable. Right now this is strongly discouraged, because the intent is to create new rental housing and not new for-sale housing.
Market Inversion: Once these lots become severable, the market will then be able to decide which frontage is most valuable — the current street side or the laneway side. Maybe some get split right down the middle (50/50) or maybe some get biased toward one frontage. Either way, I think it will become common for the laneway frontage to be more desirable given its intimate scale and pedestrian orientation.
Mixed-Use: Non-residential uses will become allowed.
I have no idea when all of this might happen, but I believe it will happen. So I wanted to write it down publicly.
Here is a mapping, from the University of Toronto’s School of Cities, showing the number of “closed” building permits issued in Toronto between 2013 and 2023 for both rear-yard suites (laneway houses and garden suites) and secondary suites (like basement apartments).
A “closed” building permit probably means that construction is complete. However, it is not uncommon for a permit to inadvertently remain open. This happened to me with Mackay Laneway House. The permit was supposed to be closed, but it wasn’t.
So here’s the same mapping with open (i.e. active) permits also turned on:
Three things immediately stand out:
Secondary suites seem to be somewhat evenly distributed across the city.
Rear-yard suites are heavily concentrated in the older areas of the city, flanking the downtown core.
North Toronto is wealthy and isn’t having either of these housing typologies.
Looking at these mappings, it probably seems like a decent amount of new housing. But that’s not really the case:
From 2013 to 2023, Toronto issued 2,209 building permits for secondary suites (1,525 have been closed and 684 remain open as of December 31, 2023).
And from 2020 to 2023, Toronto issued 898 building permits for rear-yard suites (192 have been closed and 706 remain open, which does suggest some increased adoption). Rear-yard suites only became permissible in 2018, which is why the date range is shorter.
To be fair, I would imagine that many secondary suites get built without a building permit. So I think the above number is probably underestimating actual supply. But even still, it doesn’t change the conclusion: A lot more needs to be done to increase the supply of new housing in Toronto.
I opened Twitter today and one of the first tweets that I saw was about Austin passing a new resolution that allows 3 homes on every lot by-right; lowers the minimum lot size to 2,500 sf; and expedites planning approvals for triplexes and fourplexes. I then scrolled a bit further and found a tweet on how Vancouver is about to vote on a new motion that will allow 4-6 homes on every residential lot as-of-right. (The US typically uses the term “by-right”, whereas in Canada we use “as-of-right”.)
None of this is surprising. As many of you know, Toronto just did something similar by allowing fourplexes + a laneway or garden suite on every residential lot. But all of this is still noteworthy because it reinforces one simple fact: cities across North America are all starting to rethink their low-rise single-family neighborhoods. I know that many of you will say that fourplexes are not enough. We should be doing more. But I think this is an important step.
The single-family home hegemony is ending. We are now asking our cities to do more with the same amount of land.
Yesterday evening I visited the future of Toronto’s neighborhoods. It is located at 367 Howland Avenue. And it takes the form of 10 homes on a lot that previously used to house only 1. Developed by Green Street Flats and designed by Craig Race Architecture, it is a near perfect example of what Toronto hopes to achieve with its new multiplex policies. As Craig put it last night, “we found the missing middle!”
Now to be fair, this is a double lot, measuring about 10m wide in total. And so this is twice the size of what the new policies now allow on a single lot — a fourplex plus a laneway suite or garden suite (4+1). But it is still generally consistent with what you could do today if you had two contiguous lots.
That said, this project predates the new multiplex policies, meaning it required a long list of zoning variances and it led to an inevitable fight with the neighbors. This small project required an 8-day contested hearing before it was granted approval! Start to finish, Howland took over 3 years.
That is ridiculous and so I think all of us should view the new multiplex policies as meaningful progress in our city. What was once contentious and a huge pain is now permissible as-of-right. Isn’t it funny how rules and perspectives change? “No, you can’t do this! Okay, now you can. Please do a lot of it.” So for the purposes of this post, let’s talk about Howland as if it were built on an as-of-right basis and you could do the same on your own lot if you were so inclined.
From a design perspective, the homes are organized as follows:
There’s a full-floor basement suite, a full-floor suite on the main level, two back-to-back two-storey upper suites, and then a laneway suite at the back. One reason for this configuration is that it means you never have to walk up more than one flight of stairs to get to your main living space. This was one of the design criteria and I think it works very well. Here’s an example of what this looks like (this is a suite #3):
For this particular site, the entrance to suite #4 is at the back of the fourplex and accessed via an adjacent laneway. But for the “inboard” fourplex, each suite is accessed via the main street. Once again, I think this all works very well. I just wonder if there could be an opportunity to shave additional costs by moving some of the circulation outside (kind of like this). I guess it would depend on the width of the lot.
Of course, the big question remains: Do projects of this scale actually make any money? Because if they don’t, then people aren’t going to continue building them. Though, I would say there are two ways to think about underwriting a project like this.
The first is from a 100% investment standpoint: build 5 homes, rent 5 homes, and then collect a reasonable risk-adjusted return. The second is a hybrid approach. Maybe it’s build 5 homes, rent 4 homes, and live in the other one. In this case, the math is likely a bit different. It could just be about subsidizing your living expenses as opposed to generating a commensurate return.
But in both cases, we know that these are very skinny projects. You need to be extra careful with your costs. And from what I gleaned last night, 6 or more suites is a better underwriting starting point (compared to 5). We also know that these projects only pencil with CMHC financing. Period. Full stop. If CMHC financing were to go away or meaningfully change, so to do these missing middle projects.
So as we look toward the future of housing in Toronto’s neighborhoods, we need to keep in mind that these projects happen very much on the margin (as does all development, but it’s an even thinner line here). Meaning it remains to be seen whether these will happen at scale across the city, which is now the hope. It’ll also be interesting to see if developers like Green Street don’t scale up over time. I suspect they will.
Congratulations to Green Street Flats, Craig Race Architecture, and the rest of the team on helping to pioneer this new housing typology. It’s a glimpse of the future and, judging by the turnout at last night’s open house, Toronto is ready for it.
As some of you will know, MLH took over a decade to get built. I first did a design for the house back in 2009. Laneway housing seemed like such an obvious opportunity, and so I designed a compact house that could fit neatly within the confines of my 25-foot-wide backyard.
Technically, it was perfectly workable. But I could tell I was too early. After speaking with city staff, I immediately got the impression that this thing was not going to get approved. At least not now. So I shelved the project until 2017.
By this time, it was clear that laneway housing was on its way to becoming a reality in Toronto. It was simply a matter of time. And so Gabriel Fain and I decided to come up with a new design and try our luck at the Committee of Adjustment (we needed, I think, over a dozen zoning variances).
But it turns out that we were still too early. The project was immediately refused. After the decision, I had a few planning lawyers reach and offer to help me with a pro bono appeal. But I decided to wait until the new laneway policies came into force and the home could be built without any variances.
And that’s exactly what we did. In the fall of 2020 we submitted for a building permit, and about 6 weeks later it arrived. The home was then built that winter and it went up on the market for rent in March 2021. It rented right away, even in the midst of intermittent COVID lockdowns.
At this point, it’s hard to imagine that this form of housing was once illegal. Hundreds of permits have already been issued and this number is only going to increase. In fact, I believe that the humble laneway house is destined to become a defining characteristic of Toronto’s urban landscape.
The city of Los Angeles has taken an interesting approach to accessory dwelling units (what we generally call laneway or garden suites here in Toronto). In an effort to streamline the approvals process and bolster the supply of housing in the city, they’ve gone out and pre-approved a series of “standard plans” that you can quickly implement on your property. The idea here is that all of their approved plans have already been checked for compliance with the various building codes. So those reviews don’t need to happen before a permit can be issued (though the building department would still need to review any site-specific conditions).
What that means is that if you’re in the market for, say, a one-storey, one-bedroom ADU at around 450 sf, you can simply scroll through their list and find the one you like the most. Here is one that fits this criteria by Design, Bitches (I just wanted to mention this firm name). The potential downside of this approach is that it could encourage less architectural experimentation. On the flipside, many of their approved designs are really nice and so maybe it’s a boon for those who are lacking in good taste. Either way, if you want to encourage more of something, the way to do that is to reduce friction.
To start to give you a sense of how meaningful this could become, the city of Los Angeles received 1,980 applications for ADU construction back in 2017. This is the year in which the state changed its regulations so that ADUs were no longer prohibited in some municipalities (I don’t know all of the specifics truthfully). Last year, LA saw 5,374 applications and I suspect the number will be even higher this year. Should other cities look at pre-approving certain designs? And could this be an approach used for even larger building typologies? Speed is good.
