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Laneway Housing – Does It Work For You?

Kiley Bollenberghe — Wed, 05 Dec 2018 21:46:32 +0000

The City of Toronto is getting closer to approving a change to the Planning Act which would allow homeowners to convert garages accessed by lanes into living units. These units would be self-contained, and the government is hoping they will be used as rental stock thereby easing the shortage of rental housing in the city. Its impact can be significant considering there are 250 kilometres of rear laneways in Toronto.

In the last few weeks, we’ve received many inquiries from our clients who are curious or seriously considering building a laneway house. Most were questioning the impact of this on the value of their property. Could they recoup an investment like this which could run into hundreds of thousands of dollars?

There are two obvious and overriding concerns that should matter:

If the laneway structure takes away all the parking for the main house, or if it significantly shrinks the backyard of a single-family home, it would more than likely lower the value of your property. Given the cost of buying a single-family home in Toronto, most buyers want parking on their own property, as well as a backyard to enjoy. Another issue would be a likely increase in property taxes

On the opposite side of the argument, there are many purposes for, or reasons why home owners would consider building a laneway house. Here’s who could benefit the most:

1. Parents may consider building a laneway house for their grown children who are ready to move out but don’t have the funds required to buy the average priced house or condo in Toronto. This would be a much cheaper alternative per square foot than either a house or a condo.

2. Adult children can choose to build one for their elderly parents, to keep a close eye on them without travelling distances. This would save time and give everyone peace of mind while retaining privacy. In the past we have found that children are reluctant to place their elderly parents in basement apartments, usually because of lack of enough light, so this would be a great alternative.

3. As home owners age, they often find the maintenance of their property too much to handle. Yet they have difficulty parting with their house, their garden and their neighbourhood. A laneway house would allow them to move into it when life is simpler, and they need less space. Essentially, they could “age in place”. An added bonus would be the ability to supplement their income by renting the main house.

What about those who need to draw on the equity of their house to live on? A reasonable possibility could be to sell your house, get your equity out, while retaining an option to rent the laneway house from the new homeowner.

4. Another great use is that it allows you to expand your livable space. Moving is expensive so if you need more space, whether it be to use as a home office, a teenager’s space or for elderly parents, laneway houses can be the solution to your space problem.

5.Homeowners could consider building a laneway house for rental income. In this case you would have to weigh the cost to build versus the rental income generated to determine whether it makes economic sense. For example, a laneway house could cost $300,000 or more to build. Let’s assume you’re passing the utility costs to the tenants, you still have to pay for the mortgage, insurance and increased property tax. Therefore. if your mortgage cost is about $1,500 a month plus insurance and property taxes (estimated at around $250 per month), your rental income would have to exceed $1,750 a month for this to pay off as an investment.

In my opinion, considering that renovated basement apartments are renting for higher than $1,500 per month, a nicely done laneway house could rent for well over $3,000, a month making it an economically smart investment.

Furthermore, because of the many uses for laneway housing, it is entirely possible that buyers looking for more space outside of the main house will pay a higher price for your property.

I am very excited to see this policy come to fruition. I think that in the long term it will:

increase the rental supply in established neighbourhoods that have access to transit and key amenities;
increase the viability of home ownership making it more affordable just as basement apartments have already done;
increase tax revenue for the city; and
make our laneways safer by bringing lighting infrastructure and more pedestrians into the laneway

The post Laneway Housing – Does It Work For You? appeared first on Kiley Bollenberghe.

Apprehensive About Moving To A Condo And Asking “What Will It Be Like?”

Kiley Bollenberghe — Wed, 05 Dec 2018 21:44:07 +0000

Are you considering downsizing from a house to a condominium but feel anxious about the transition or overwhelmed about de-cluttering and getting rid of years of accumulated “stuff”?

We helped a few clients transition from a house to a condo this year and we wanted to share what they expressed to us about their downsizing experience. Hopefully this will be helpful and give you some food for thought.

They expressed that, in some instances, it’s radically different yet there are common themes. We’ve summarized their “lessons learned” below. We hope that you find their perspectives helpful.

All our clients talked of the freedom they gained when they moved into their condos. Whether it was freedom from outdoor maintenance, worry-free travel or moving about easier without stairs, everyone found that they had added convenience and accessibility … plus time … to their daily lifestyle. And when looking to the future, the convenience of condo living fit their idea of hassle free retirement living. One of our clients stated, “The biggest benefit is ease of living and peace of mind.”

Although, some who have dogs found it inconvenient to have to take an elevator on a regular daily basis and missed the ease of a backyard. Of course this inconvenience multiplies as the weather gets colder. Possibly sharing dog walking with other dog owners in the building or hiring an occasional dog walker (if finances permit) would lessen this inconvenience.

Know Your Neighbourhood

Many of our clients purchased condos in the same area where their house is located. This allowed them to continue to enjoy the amenities (shops, restaurants) that were already familiar. It also made it easier to maintain existing relationships with local friends and family. For those who moved out of their neighbourhood, they found it exciting to explore their new community. Many moved to new locations downtown and began to discover the city in ways they never had before. What they may have lost in physical space, they feel they gained with easy access to work, dining, activities, public transportation and other amenities.

Amenity Shopping

Do you wish to move into a building with a gym, pool, billiard room, meeting room or party room? If you are not likely to use these types of amenities, our clients recommend that you shop around for a building where “less is more”. Be aware of what types of amenities you will use on a daily basis because these services are part of the common elements fees that you pay for. You don’t want to end up feeling resentful because you are paying for amenities and services that you do not use. Do your homework.

Personal Space?

Be prepared to change your expectations around privacy. Your personal space in a condo is simply not the same as in a single-family home. Walls may be thinner than you are used to, noises may echo and you could end up hearing your neighbours. Also, it is not unusual to run into your neighbours more frequently in the shared areas – such as the lobby, parking and elevator. Some of our clients commented that “getting along with neighbours becomes more important because we see them more than we did when we lived in a house.”

Start to Downsize and De-clutter as Early as Possible

The greatest challenge in the transition from single family home to condo may be downsizing and parting with things you have accumulated over the years. All our clients recommend that you start the process early – and be brutal. Use the two-year rule when going through your clothing – if you haven’t worn it in two years, place it on the discard / donation pile. Use online classified services such as Craigslist and Kijiji. If you have a lot of heirloom / valuable pieces that you wish to part with, consider working with an estate service – you may be able to sell some of the pieces.

Consider hiring a downsizing specialist or organizer which will make the move much easier if you can afford it. Our clients have expressed that they couldn’t have executed the move efficiently or as timely without this invaluable service. Many specialists do it all from packing, sorting and cleaning to managing the move on moving day, unpacking and setting up in your new space. This gives you the time and energy to really plan your new space and then sit back and enjoy it from day one!!

All our clients warned against renting a storage locker for extra pieces of furniture and excess belongings. They recognized that if they needed to put the item in storage, they could live without it and they could end up paying for a storage locker for years. Start the process of de-cluttering early and be ruthless. And consider using moving services for both the packing and unpacking!!

One of our clients suggested that if you have some treasures that are particularly hard to part with, take a picture and create a photo album that brings back all the memories. It worked for them!

Overall, the move to a condo was very positive for our clients. They all found the transition easier than they thought it would be, and the benefits far outweighed any perceived drawbacks. Exploring new neighbourhoods, meeting new people, hassle free travel and more manageable expenses and maintenance all led one of our clients to say, “I LOVE MY CONDO. “

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The T.O. Real Estate Market: Something Needs To Happen, But What?

Kiley Bollenberghe — Wed, 05 Dec 2018 21:39:30 +0000

This post by Melanie Piche, real estate agent at Sage Real Estate in Toronto, was originally published on www.getwhatyouwant.ca.

Prices for March are up 33.2% since March 2016. Talking about real estate has long been Toronto’s favourite pasttime…but as the spring 2017 market gets into full swing, the conversations have taken on a new tone. The 2017 real estate stats are mind-boggling:

The average detached house in Toronto now costs almost $1.6 million.
The condo market – which has seen price appreciation of 4-5% for the last few years – saw price gains of 33%. Wowza!!!

It’s true madness out there, and almost everybody agrees that something needs to be done to calm the market. Between panic buying, greedy Sellers and FOMO (Fear of Missing Out), there’s a serious imbalance of supply and demand.

So what can be done? Below, my thoughts about some of the strategies being considered:

Foreign Buyers Tax

There’s so much talk about implementing a foreign buyer’s tax in Toronto!

The Vancouver experience: Last year, Vancouver implemented a foreign buyer tax equal to 15% of the property’s value. Suddenly, non-residents of Canada were required to pay an extra $150,000 in taxes on a million dollar home – not an insignificant amount of $$. Almost overnight, the market slowed – in fact since it began, sales volume in Vancouver is down a whopping 45%.

Does that mean that 45% of the Buyers in the Vancouver real estate market were foreign? Of course not. But it shows that markets are driven by the psychology of the people, and the foreign buyer tax made Vancouver Buyers pause (“Are lower prices on the horizon?”) and made Sellers nervous (“Better list my home now before prices go down!”). Result? A rebalancing of supply and demand.

Nobody has any idea what percentage of the Toronto real estate market is fueled by foreign money. Ridiculous as this may seem, nobody tracks that number. Making a big decision without any real facts or information is undoubtedly dangerous and can easily result in intended consequences.

In a city like Toronto – where 46% of the population was born outside of Canada (2011) – foreigners are the fabric of the city. Did you know that 30% of Toronto residents speak a language other than English at home? Amazing. Toronto’s population is growing at one of the fastest rates in the country, and that’s a great thing for our economy – it also means all those people need a place to live.

Fact: There aren’t a lot of ‘good’ investments out there, and foreigners have long considered Toronto’s real estate market a safe place to park their money. While a new tax will slow the foreign money coming in, it certainly won’t eliminate it.

Would a foreign buyer’s tax work here in Toronto?

My guess, based on our team’s experience and the anecdotal experiences of other top agents, is that non-residents account for 3-5% of the market in Toronto. A tax would certainly give pause to some of those Buyers – but not all of them.

A non-resident tax would, however, shock the system and psychology of ALL of the Buyers, resulting in a lower volume of sales…at least in the short term. Would that translate to lower prices? It would hopefully slow down the pace of growth (33% per year is clearly not sustainable) – but it’s hard to imagine prices decreasing much. Toronto has proven itself to be resilient to a lot of government intervention over the years. People want to live in Toronto, just like they want to live in New York, London, Tokyo, and Paris.

Vacancy Tax

Vancouver has recently implemented an annual $10,000 vacancy tax to discourage homeowners from leaving their homes empty, and there’s talk of a vacancy tax coming to Toronto too. The hope is to financially penalize those owners in the hopes that they might sell their empty properties.

Problem #1: Nobody has any idea how many condos and homes are vacant here and if this is an actual problem or not.

Problem #2: If an owner is already paying tens of thousands of dollars per year in taxes and maintenance on a vacant property, would an extra tax really change anything? It seems like an easy way to make a little extra tax money for the City, from people who don’t get a vote in the next election.

Changes to Financing Rules

In the past, government intervention has focused on making it harder for people to buy (with the hope of reducing demand). They’ve changed downpayment rules, CMHC rates, qualifying requirements and in October 2016, they announced a new stress test that reduced the amount of mortgage many people could qualify for.

The problem? None of these changes have ever had much of a long-standing impact in Toronto, beyond the first few weeks of implementation. In fact, I’d argue that the 2016 changes moved many buyers from the house market and put them into the condo market (thus increasing demand for condos and bidding wars), and it forced a lot of would-be-condo-sellers to stay put because they couldn’t afford a house, thus further reducing supply.

Double whammy….higher demand, lower supply.

Changes to Capital Gains Exemptions

Before the federal budget was announced, there was a lot of talk about whether or not they would change the capital gains exemption amount.

Currently, only 50% of the gain on the sale of an investment property is taxable, meaning that if you bought a condo for $500,000 and sold it for $600,000, you’d only pay tax on 50% of the $100,000 increase in value (less expenses of course). If capital gain exemptions were to change – for example, an investor would be taxed on 65% or 75% of the gain instead of 50% – that would certainly impact Toronto’s real estate market (while hurting other communities across the country too).

There’s a real risk that the result of an increased gain exemption would be investors holding onto their properties to avoid the tax…thus further reducing supply. Savvy investors do think about tax implications when they buy – but most people who own 1 or 2 investment properties, don’t think about it until they sell – so we might not see much of a change in demand anyway.

Nonetheless, the budget did not contain a change to capital gains, so this isn’t likely something we’ll see anytime soon.

Rent Control

In Ontario, properties built after 1991 aren’t subject to the usual caps on rent increases, meaning that a landlord can theoretically increase a tenant’s rent by as much as they want at the end of someone’s lease. Truth: this doesn’t happen very often and is usually a tactic used to get rid of a problem tenant without going through the painful eviction process. But nonetheless, the rule exists as a way to encourage investors to add to the rental pool and sway builders to build purpose-built rental properties which are in significant short supply in Toronto.

One of the tactics being discussed to reduce speculative investor buying is to make all properties, irrespective of construction date, subject to the usual rent controls (which are equal to the Consumer Price Index).

Will more rent control work?

I don’t think most investors are buying properties to take advantage of the 1991 rule…in fact, most investors didn’t even know about it until the media started reporting it in the last 6 months. More importantly though, discouraging more rental units will only make Toronto’s rental situation worse – rents have increased by 11.7% in the last year and vacancy has been hovering around 1% for years. If the goal of slowing Toronto’s rental market is to make Toronto liveable and affordable, penalizing tenants seems ill-advised. We need MORE rental stock, not LESS.

Changes to Bidding War Rules

A lot of Buyers and REALTORS have been lamenting the current lack of rules dictating bidding wars and noting the impact on prices. Truth: the current bidding war wild-west is painful and unpleasant and blind bidding likely does increase prices. In the heat of a bidding war, it’s not uncommon for multiple bidders to be sent back to ‘improve their offers’, thus driving up prices.

While I have a lot of ethical issues with how bidding wars are often run in Toronto, I have to wonder: should the government really be able to tell Sellers that they can’t push Buyers in the hopes of getting the highest possible price for their home? In a free market, the value is set when a buyer is willing to pay X, and the Seller is willing to accept X. I know the current situation is terribly frustrating for Buyers – but if they are willing to pay X price for a property, why shouldn’t they be allowed to do it? Do Buyers need protection from themselves? And let’s face it: the market isn’t always going to be like this. There will be a day when it’s a buyer’s market. Would the government then change the bidding rules back?

Note: I think the bidding war process needs an overhaul and more oversight…but not because the practice is the reason for Toronto’s overheated market. I wrote about that here.

Increase Supply?

Most of the tactics being discussed are aimed at decreasing demand, which yes, is part of the problem. But there are strategies that could help increase supply too:

Simplifying the process for permits, severances, and approvals
Easing the rules on development of the greenbelt
Reducing land transfer taxes in the hopes of encouraging more move-up buyers (lol, who are we kidding, the Toronto and Ontario governments are addicted to these taxes)

What Next?

Is Toronto’s market spiraling out of control and in need of government intervention? Or are we witnessing the Manhattanization of Toronto where ‘normal’ people with ‘normal’ jobs are simply priced out of living downtown?

Will the government intervene to slow down Toronto’s real estate market or let the market work itself out? In the last week, we’ve already started to see the signs of the seasonal slowdown, with fewer showings and fewer Buyers bidding on houses.

What do you think is going to happen?

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