‘Increasing demand’ for secondary units as homebuyers grapple with rate hikes – National
Real estate experts say demand for homes with secondary units, such as basement apartments and alley homes, is growing as Canadians struggle to pay higher interest rates and expensive mortgages.
Recent zoning ordinance changes in cities in Ontario and Alberta have greatly increased flexibility when building new secondary suites with private entrances in existing homes.
This has happened at a time when the country is in the middle of a housing crisis, with not enough real estate being built for its growing population.
Secondary housing is a “low-hanging fruit” that not only can help solve the housing supply problem facing Canadians, but can also provide much-needed rental income for homeowners facing high mortgage rates, says CEO and founder Ken Bekendam. Regal Second Suite.com.
His company helps Ontario homeowners and real estate investors create additional units in existing properties.
“We can see that the demand (for such services) is growing,” Bekendam told Global News.
“Many first-time homebuyers are interested in homes that already have revenue-generating suites or are easy to add.”
Why is the demand for secondary units growing in Canada?
Last week, the Bank of Canada decided to raise key interest rates for the second time in a row, but there are fears that potential future rate hikes could further jeopardize many Canadians’ home-buying plans.
Rising mortgage rates are making it harder for homebuyers to qualify for a loan, said Anthony Passarelli, senior analyst at the Canadian Mortgage Corporation (CMHC).
That’s why a second suite is an attractive option that can make a big difference in making your homeownership dream a reality, he said.
“If you have additional income and are eligible to buy a home, you would think it would be more attractive, so whether there is an income potential can influence a buyer’s decision,” Passarelli said in an interview with Global News.
a Royal Lepage Survey A study published in May found that 11 percent of Canadians (4.4 million) now own investment property, with single-family homes being the most popular among investors.
However, the survey found that one-third of investors are considering selling one or more properties as mortgage payments for variable-rate holders have increased.
“Certainly, with borrowing costs and homeownership costs rising, homeownership remains a Canadian dream, and many buyers and homeowners will seek ways to make that Canadian dream a reality,” said Mike Heddle, a broker at Royal Lepage State Realty.
According to one source, construction of secondary suites increased in Calgary, Edmonton and Vancouver last year. Canada-wide CMHC report published in April 2023.
Toronto had approximately 75,000 secondary units throughout the city in 2019. CMHC data show. Passarelli said the number has continued to grow, based on the number of building permits issued in the city.
“There certainly seems to be a growing demand for it, partly because … the City of Toronto has loosened some of its guidelines on this, particularly its policy of allowing backstreet housing.”
A CMHC report, issued in June 2021, examined secondary housing in Ontario and specifically argued that the lack of choice in the province’s primary rental market is driving demand for other forms of rental housing, such as basement apartments, in-law suites and back alley homes.
“These are practical solutions to address the rental supply gap, especially in areas dominated by low-density housing.” CMHC said.
In addition to monthly rental income, statutory attached housing can increase property value, provide additional living space for families to live together, and make it more attractive to a wider demographic, Heddle said.
Bekendam argued that having tenants stay in basement apartments is also a good thing from a security standpoint.
“The fact that people actually live in the property makes it even more secure,” he says.
What problems may homeowners encounter?
But landlord homeowners can run into problems like noise complaints and temperature differences, Bekendam said.
That’s why I advise installing soundproofing products and separate heating and cooling systems so that residents can control them individually.
“The more segregated the unit, the better for everyone.”
Additional living space is also subject to additional charges.
Bekendam said a shortage of skilled trade and contract workers has made construction costs higher for secondary units.
And every time interest rates rise, construction activity slows down, reducing demand for these units in terms of construction costs, he said.
“It’s a complicated matter, isn’t it? We need more of these units… but they are very expensive to manufacture.”
He said the government should offer more subsidies and incentives to encourage homeowners to build secondary units in their homes.
© 2023 Global News, a division of Corus Entertainment Inc.
