Laneway Housing as an Affordable Housing Solution

Vancouver is touted as one of the best places to live in the world. According to the 2014 Mercer Quality of Living Survey, Vancouver enjoys the highest quality of living in North American and the fifth highest in the world.

However, with those accolades comes the problem of being able to afford to live here.

Housing in Vancouver is amongst the least affordable in the world. It seems that every week Vancouverites are inundated with articles and opinions regarding the high cost of living in Vancouver and how best to make housing more affordable while still retaining the characteristics that make the city so wonderful.

The debate between permitting high-density, high-rise towers and maintaining heritage properties and single-family neighbourhoods has created conflict between the various community interest groups on both sides of the debate. While most people would agree that there is a need to provide more affordable housing in Vancouver, you would be hard pressed to find anyone who wants to have high-density development in their community.

The City of Vancouver is trying to address these competing interests by gradually increasing the allowable density in what have traditionally been single-family neighbourhoods.

The City of Vancouver’s mandate of promoting affordable housing through densification can be seen through the zoning bylaw changes that have been implemented over the last few years. Most residential zones now allow for up to three dwelling units on a single-family lot. In most areas homeowners are now permitted to have on their lot a main house, a rental suite or an apartment within the main house, and a separate laneway home in the backyard. Since the City amended its zoning bylaw in July 2009 to allow for laneway houses, there have been over 1,000 permits issued for the construction of laneway housing.

While the City has attempted to balance the competing interests of providing housing opportunities while trying to maintain the character of the neighbourhoods, even this subtle or “gentle” densification has not been without its critics and there are some questions as to how this makes housing more affordable.

The City of Vancouver website states that laneway houses are an excellent way to increase the diversity of rental units in single-family neighbourhoods by providing, amongst other things, additional opportunities beyond owning a house or renting a basement suite and more opportunity to live in detached and ground-oriented rental housing. The City states that laneway housing plays an important role in achieving the City’s priority to increase the supply of rental housing options across the city. While the addition of laneway housing may serve to increase the supply of rental housing in the city, it does not necessarily mean that it is more affordable.

There are significant costs associated with building a laneway house in Vancouver. In addition to the actual building costs, there are additional permitting costs, landscaping costs, and costs for sewer and water hookup. These costs can bring the total expenditure to upwards of $300,000. As a result, many laneway homes are commanding rents as high as $2,000 a month for a one bedroom, 650 sq. ft. laneway house on Vancouver’s west side.

In addition, there remain some groups opposed to laneway housing due to concerns over increased street parking, over shadowing and loss of privacy. Further, there are concerns about increased infrastructure costs arising from the population increase in the neighbourhoods and the strain on the infrastructure presently in place.

As things presently stand, laneway homes are not sub-dividable from the main property and can only be rented out. While this may serve to increase rental stock, it does not provide an entry point for people to get into the housing market. At present, all that is provided is an expensive alternative to renting an apartment or basement suite. Given the size, laneway homes are also not generally a viable option for young families. In addition, those laneway homes that occupy more than one storey are not a viable option for the elderly or those with mobility issues.

Further, there is a question as to whether the building of a laneway house adds any value to the property, particularly where the main house has reached the end of its economic life or has unused density. In those instances, many prospective home buyers would simply tear down the house along with the laneway home in order to build a new house with a garage. This is particularly so on the City’s west side where many houses are listed in excess of $2,000,000, and many of the purchasers are not interested in the revenue potential of a laneway home.

In the latest step to balance the interests of those wishing to develop and increase density and those that are advocates of heritage preservation, the City of Vancouver recently passed a bylaw creating the city’s first ever Heritage Conservation Area in the First Shaughnessy neighbourhood on Vancouver’s west side despite opposition from some home owners in the neighbourhood.

The new bylaw now gives the city the power to prevent the demolition of First Shaughnessy homes built before 1940. While these homeowners may be allowed to add density through the addition of laneway houses and coach houses, the restrictions may have the unintended consequence of limiting development and suppressing housing prices in that area.

Finally, there may be unintended tax consequences associated with the building of a laneway house resulting in an impact on the principal resident’s tax exemption.

There are no easy answers as to how best address the City’s increasing housing needs but it is inevitable that all neighbourhoods will have to adapt to accommodate the need for increased density in order to create more affordable housing options. The laneway housing initiative is but one option available and while it may serve to increase density there is some question as to whether it truly provides an opportunity for affordable home ownership. It would seem that the next step in the process would be to allow for the subdivision of laneway houses so as to provide a more affordable opportunity to purchase a detached living space as opposed to a condo or apartment.

Author: John A. McLachlan
Originally printed in RIEBC’s Input magazine – Fall 2015, Vol. 43, No. 3