On the future of laneway homes and things to consider when building one


A colleague once said, not everyone gets a chance to build their own home. Building a laneway home allows homeowners to have that chance. Most people can’t afford to buy a piece of land and build their dream house. But if you already have a house, that means you have equity and you can build a laneway home. That’s where I can help.


Q: Why did you become interested in laneway homes?

A: I was working with a private, boutique development company in Vancouver who was building coach houses in the rear of single family lots and I thought, “What a great niche.” We're already starting to see a lot of them being built in RT-10 zoning. That was the opener for me.


When I started doing research on laneway houses, and then when the city of Vancouver introduced the laneway housing program in 2009, I saw the opportunity for buyers to create more equity in their homes. Homeowners can rent their laneway homes out for immediate income, all while building their equity for the long term.


Why not just buy a new unit to rent?

The amount of money you make in rent for a laneway home is far greater than if you put that into a rental suite. For example:

  • If you pay $300,000 for a property, let's say you can rent it for about $1,300, plus strata fees. If you build a $300,000 laneway house with a good company and a good design, you’re going to rent it for about $2000 -$2,200, with no maintenance fees. Your monthly payments on $300,000 will about $800 per month in interest. I don’t know of any other investment, besides stocks, that can give you that type of return.


What are other reasons to build a laneway home?

For families, this is a flexible option that takes care of ever-changing family needs. I have a client right now who is looking to buy a home, and then build a laneway home for his daughter on it. In this way, his daughter can stay close to home, but also, when she’s going to school, he’ll know she’s in a secure home. What can you get for that type of money in the city? Not much! She would probably have to move out to the suburbs and live with roommates.  


For older homeowners and snowbirds who like to travel, maybe they want to go down toPhoenixfor part of the year. If they’ve got a big house here, what do they do with it? They can build a laneway home and let their kids buy them out of their house. Or they can simply rent the laneway house to generate regular income.


Laneway homes are also built to the Green Homes Program standards, which has the goal that “all new homes will consume up to 33% less energy by 2020. By 2030, all new homes will be carbon neutral.” This means that homeowners are doing their part for the environment.


How can you help people?

I know builders. I’ve partnered with banks. I understand what the rental values are for properties with laneway homes, neighbourhood by neighbourhood, and how that affects their property value. I also understand the look of laneway homes, their configurations, and how to make the most out of their rental value. Most realtors don’t have this specialized knowledge. They see a laneway house and they can’t put a price on the property.


I also know the quality of different kinds of construction: When they say 500 square feet, is it really 500 square feet or is it 350 of actual living space? These are some of these things that I can identify immediately. I’ve probably seen 70 laneway homes inVancouveralready.


Let’s say you’re going to go build a laneway home. Who are you going to talk to first? You’re going to talk to the few specialist builders in the city. But what about an opinion from a third party? What about speaking with the realtor who actually knows about the market for laneway homes and what the options are for your distinct needs?


That’s where I come in. I know the different builders and what their work is like. When you are preparing to build, you can ask me: What do you think I should do here? What’s the best option for me in this area? I can give you an impartial opinion and tell you what type of rent you can get or what happens if you go this route instead of that route. I can help make this an informed process instead of a risk-taking venture.


What is the future of laneway homes?

I wouldn’t be surprised if laneway homes become stratified. They already have separate sewer systems, hydro and water. Their foundations are concrete slabs or foundations, just like houses; they have their own address, just like townhouses. This will increase their value and give them a status similar to coach houses.  


Alleys are also going to change. They are going to start looking nicer than the streets. What if everyone who builds a laneway home has to contribute a certain amount towards the alley? Maybe when there are 10 laneway houses built, the alley can be re-purposed within the next 2 years. That will make the laneways look nicer than the main street and turn them into liveable, secure and private places to live. Or maybe someone will create a business were they run buses up them, or trolleys. Who knows? I’m thinking outside the box.


I heard one of the laneway builders pitch a really cool idea: Anybody who lives in an alley next to a commercial street, if a commercial building backs onto their alley, they should be able to build another level. They’re already discussing alleys in all of those commercial areas anyways, so give them that right.


We’ve heard of the term “Eco Density.” How does that apply to laneway homes?

We need to densify the city. It’s going to happen. Builders have been buying up land to build high-rises and reaping the profit for years. But in 2009, the City of Vancouver introduced the laneway housing program, allowing home owners themselves to profit from densifying the city.


In the City of Vancouver’s information sessions, they’ve talked about doing one-level laneway homes and giving more square footage if you go the one level. Who wants a one level home? Older people! We have baby boomers right now who are going to need homes and want to downsize.


If you put $300,000 into a place and it rents for $2000 - $2,200 a month, I don’t see how you can lose on that.


  • For example: You have a 33’ by 122’ lot, so you build up to 70% with a rental suite that rents for $1,500, plus you have a $2,000 rental laneway home. That’s $3,500 per month in rent, or $700,000 off on your mortgage and a 25 year amortization at 3.5% on a 5 year fixed. This a excellent for the families that don’t want such a big mortgage.


I was speaking with an architect in the city about the reality of laneway homes, which is that in most cases when cities open up zoning, they end up asking for money from homeowners. But the City of Vancouver did this in 2009 and they asked for nothing. Why? Because in the bigger picture, they’re going to end up making money from taxes. There are 450 laneway homes in the ground right now. There will be another 50 in 2 months.


So for people who are going to spend $800,000 on a property right now, they’d better make sure they can build a laneway home on it. If they don’t want to build it now, that doesn’t mean that they won’t want to down the road.



“I can help you market your unique property with a laneway home.”

-          Matt Henry (www.MattHenry.ca

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