Why Secondary Suites Are Becoming Popular
September 10, 2018
September 10, 2018
Secondary suites have become increasingly popular in the last decade. They are what others would know as granny flats, rental units, accessory flats, laneway houses, in-law suites or basement apartments. By the Canada Mortgage and Housing Corporation’s definition, it is an area that contains its own living and sleeping areas, bathroom, and kitchen but shares some facilities with the rest of the household.
And, as of 2016, an estimated 820,000 homeowners are currently renting out part of their homes, with 42% of homeowners saying its more of a choice than a necessity. Meanwhile, 400,000 are planning to in the future. In addition to this, 34% of first-time buyers also believe it is important to generate income from their properties. Mortgage Professionals Canada says this trend is slowly turning into the ‘new normal’ in the Canadian housing market. But with housing and rental costs on the rise in markets such as the Greater Toronto and Vancouver area, it comes as no surprise.
For the average Canadian, a basement apartment is much cheaper than most apartments on the market. The only major difference is that tenants will have to share a few facilities like yards, parking areas, laundry and storage spaces, and, in some cases, hallways with household members. This might pose a problem if the homeowner and tenant do not get along but, other than that, a basement apartment offers similar levels of convenience and comfort.
Moreover, secondary suites are covered by the Residential Tenancy Act (RTA). Regardless of a rental unit’s status, the Tenant Resource and Advisory Centre maintain that tenants enjoy the same rights as those renting large apartment buildings. Landlords are not allowed to enter a suite without any proper written notice, dictate how the unit should be cleaned, restrict a tenant’s right to have guests under reasonable circumstances, and decide what and when a tenant is allowed to cook. One thing to note is that the RTA does require renters to follow reasonable standards when it comes to health, cleanliness, and sanitation.
For homeowners, granny flats are a great way to generate a few extra hundred or thousand dollars every month for extra income or make ends meet – especially when it comes to day to day necessities. In fact, a 2016 report prepared by Mortgage Professionals Canada chief economist, Will Dunning, discovered that 58% lease parts of their dwelling out of economic necessity, with 15% of homeowners renting out their unit admit that they “would have to make major lifestyle changes if [they] did not have rental income” easing their living expenses.
On the other hand, a larger percentage of Canadian homeowners (24%) say they need to rent out their units to meet their mortgage payments and effectively lower the costs of homeownership. An annual study on the state of the country’s Residential Mortgage Market found consistently that, each year, more than a third of mortgage holders take actions, like building and leasing a secondary suite, to shorten their amortization period. On average, the contracted amortization period for homes purchased from 2014 to 2016 is 22.4 years but recent purchasers expect they will shorten their amortization period by 3.6 years (18.8 years) by increasing their regular payment, making lump payments, or increasing the frequency of payment.
Aside from the skyrocketing housing and rental costs, Canadians are also the subject of new mortgage rules that make it harder for them to become prospective homebuyers. So, for householders that have no problems with mortgages or affording homeownership, they may offer their laneway houses as a first ‘home’ for their adult child. They could also use it as long-term accommodation for elderly relatives, in-laws, or other family members so they may stay together longer.
Overall, secondary suites are a great option for renters and homeowners to effectively cut down costs, make ends meet, or stay with family. The process of having them approved – applying for permits, following standard regulations, meeting requirements, or checking their legality – are quite tedious but the benefits outweigh the costs. It’s undeniable that rental units, accessory flats, laneway houses or whatever you’d like to call them are an important source of support for homeownership and an affordable or moderate cost rental accommodation.