Finance

Considering a 2nd unit on your property? How to weigh the pros and cons – National

With mortgage rates causing stress for many Canadians and rents across the country on the rise, many are looking for creative solutions for the housing crisis.

Depending on your needs, some experts say additional dwelling units (ADU) may be the answer.

“An ADU is … essentially a self-contained residential unit within the same property as a single-family home. They can also exist in ancillary buildings, which could be a secondary building on a property that can be a garden suite, laneway suite, or just an additional structure, somewhere on the property,” said Zachary Soccio-Marandola, a Toronto-based real estate lawyer.

In 2022, Ontario passed Bill 23, also known as the More Homes Built Faster Act.

“They’ve allowed up to three residential units on any parcel of urban residential land in Ontario,” Soccio-Marandola said, adding that an ADU could be one of those units. Depending on the size of the property, homeowners could potentially build up to three additional units on their land.

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Robert Pierson is the development director of the Vancouver-based group Eco Homes, which creates a platform for manufacturers of pre-fabricated homes.

“I have examples here in Vancouver, of whole subdivisions now that are being built because the zoning allows an ADU. (In these cases) The developer is fitting or building an ADU in every home as a way of making the accommodation more affordable here in Vancouver.”

Soccio-Marandola said ADUs can be a great way for homeowners to make an extra buck.


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“You can generate additional rental income to help cover mortgage payments, property taxes, maintenance. It also works really well for multi-generational families,” he said.

Pierson said ADUs could be useful for younger members of the family, who are just graduating college and can’t afford their own homes. They can also be useful for elderly members.

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“If the ADU is built on ground level, there’s no stairs to negotiate. It can be a very useful way of having elderly member of the family close by, but still maintaining a certain level of independence,” he said.

Soccio-Marandola said ADUs are great for cities that are trying to create more diversity of housing, giving people a greater range of options.

“We’re getting to the point where you have people who just graduated school, young professionals who don’t need a threebedroom house, they need an apartment or a one bedroom apartment or studio apartment.”

But he added that anyone looking to rent or build an ADU needs to keep certain things in mind.

“(As a renter) you want to make sure that they’re properly licensed, that they are legal dwelling units. Make sure your lease clearly states what you’re renting and you understand what the parameters and privacy of that actually is.”

For homeowners, he said, “(the) biggest challenges are going to be the zoning bylaws and those parking regulations.” 

Soccio-Marandola recommends homeowners considering an ADU on their properties seek advice from a real estate lawyer to understand property tax implications, rental regulations, and potential liability issues.


Click to play video: 'Laneway houses becoming more common in Edmonton'


Laneway houses becoming more common in Edmonton


While the advent of the federal government’s Housing Accelerator Fund has led to sweeping zoning changes across the country, many municipalities in Canada are still slow to adopt up-zoning measures.

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Pierson also said there would be a marginal dent on affordability if the volume of ADUs being built was low.

“I saw an example of an ADU, which was a two bed, one bath unit over a garage in Ontario recently that was for sale and was over $1 million,” he said.

He added that the cost of building an ADU might be a deterrent for many.

“If you’re having to build the whole thing from scratch, the square foot cost of an ADU is probably relatively higher than a regular home.”

The solution, he said, was to have prefabricated designs for ADUs. In the U.S., he said some manufacturers have even adopted creative financing models.

“They rent it (prefabricated ADU) out and get the rental income from it for a period of time, and then they give it back to the homeowner,” Pierson said.

He added that builders should also keep the climate crisis in mind.

“An ADU should be built as sustainably as possible,” he said. “Let’s keep the energy use as low as possible, let’s make a good choice of materials, let’s keep the interior air quality as good as possible.”

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