How to hack into Vancouver's real estate market with a laneway house
In order to afford to live here, you have to hack the Vancouver housing market. Touted by the City as affordable rentals, laneway houses can be so much more. Your affordable Vancouver property is just around back.
If you want to rent a laneway house, you find one the same way you'd find any other listing: through a rentals broker, or just through craigslist. The prices are indeed higher than those you'd find in an apartment of comparable square footage, but you'll usually get parking and some backyard. As with all rental pricing, location matters. For example, a 1br LWH in Point Grey is renting for $2200 per month, while a 2br on Victoria at East 64th is renting for $1500.
Still, for renters, LWHs offer an alternative to moving into one of Vancouver’s condo beehives. For homeowners, a laneway house offers a method of turning the seething bundle of expenditures that is a freestanding house into a true investment.
Doing the math
If you buy or build a house with a laneway house attached, you can rent out the laneway house to slow the financial bleed of home-ownership. However, you must take into account that small footprint does not equal small construction cost: running electricity, plumbing, and gas to a spot on your property ain’t cheap, even if it’s only a 550-square-foot LWH. You’ll be adding value to your house, but not quickly; at least, not vis-a-vis your mortgage, property-tax, and maintenance costs. According to a REMAX blog post on LWH construction, to the city’s electrical, gas, and sewer systems will cost around $33,000. That’s just for the hookups, and is not even counting the cost of the construction.
If you want to actually make money off of your purchase, the only to make the math work would be to occupy the laneway house yourself and rent out the main property.
And the affordability noose is still tightening.
The latest UDI/FORTISBC Housing Affordability Index report is not encouraging: if you want to buy a condo, you need to make at least $73,000 per year if you want your mortgage to suck up less than a third of your income. Want to buy into a new construction? Make that a hundred grand.
Virtue from necessity: It's a family affair
Laneway houses are, by definition, small. Since its host property must also have room for a 16-foot-long yard, your average laneway house will likely not exceed 600 square feet. As per the amended by-law, it also cannot exceed one and a half stories. (Older LWH have been grandfathered in.)
A friend, colleague, or real estate broker can point you to a LWH-ready property, but then you gotta actually build the house. That’s where companies like Smallworks come in, targeting the stratum of the construction market that doesn’t have the budget referenced in a track by Fergie, featuring Ludacris.
Jake Fry, founder and principal at Smallworks, says, “Laneway housing definitely adopts that indirect route to affordability. Without question, we’ve always pushed the idea of these being family solution.”
Fry adds that over 75% of Smallworks’ customers have a family relationship with the owner of the land on which the LWH will sit.
Fry says the people for whom Smallworks most frequently builds are couples in their thirties who are thinking of having a baby, and who want to live in a single-family neighbourhood. Impossible for most Vancouverites if they want a full-sized house, but not if they’re willing to think outside the box (but still inside the property line). That, says Fry, is “because for a very modest price, you can get an extremely nice laneway home for less than the price of an average condo.”