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Marcel Greaux outside his multiplex rental unit in Toronto, on March 9.Tijana Martin/The Globe and Mail

A few years ago, before the fight to eliminate exclusionary zoning became a talking point for politicians across the political spectrum, architect and planner Naama Blonder had a pair of clients thinking of building missing-middle type rental projects in Toronto.

One was to be an eight-plex and the other a multiplex built on three assembled lots. Both were to be situated on the fringe of primarily residential neighbourhoods and close to subway stations.

While there are hundreds of such small apartments in older parts of the city, Ms. Blonder’s clients’ projects stalled as the owners confronted the double-whammy of zoning obstacles and cost. “We didn’t go to committee of adjustment,” she says. “We ran the pro forma and the math didn’t work.”

What’s more, despite the fact that Toronto council voted late last year to allow construction of triplexes and fourplexes in house neighbourhoods, Ms. Blonder, co-founder of Smart Density, says neither would pass muster, even now. “Three years later, and these projects are still not something that the city is willing to accommodate.”

She points, by way of example, to the city’s hard threshold for development charges: they’ll be waived on projects with four units or less, but are applied in full for five units and over (the rates approved last November run from $22,000 to $44,000 per rental apartment, depending on unit size). “Five-plexes,” she says, “will never make sense to anyone, ever.”

Her experience reveals some inconvenient truths about the city’s stated goal of “expanding housing options in neighbourhoods,” as its missing middle planning reform agenda is known. While moves to end zoning that permits only detached single family homes is a necessary first step, planning regulation reform by itself is unlikely to be sufficient to kickstart development of multiplexes in Toronto house neighbourhoods – the vast majority of which have been losing population in an era of out-of-control real estate prices.

Even with some up-zoning, the promise of streamlined approvals and provincial planning amendments enabling such projects, the cost of building small scale apartments remains daunting. Financing such projects is difficult at best, while modern building and fire codes erode predicted returns while increasing design complexity.

The irony, of course, is that there’s enormous demand for all forms of rental housing, as well as growing interest from small-scale builders, contractors and investors trying to back what some describe as “citizen developers.”

Marcel Greaux, a mortgage broker and founder of Garrison Capital, is among those who are scouting for missing middle rental projects or existing multiplexes to address that demand. He points to pending City of Vancouver zoning reforms, which will allow up to six units per residential lot, as well as multiplexes that can go as high as six storeys. “I think we need to push it to that level,” he says. “I think it starts to get interesting at around five units.”

Land economist Chris White, a principal at Parcel Economics, has been working with Ms. Blonder’s firm and the City of Kitchener to assess the missing middle opportunities in low-rise residential neighbourhoods. He describes multiplexes in such parts of the city as a “sweet spot” – more geared to investors and small developers than garden suites or other accessory dwelling units, but less complicated than mid-rise projects, which tend to be subject to the same kind of regulatory scrutiny as high-rise buildings but provide much less return.

Mr. White says that the “plex” market will be unlocked by some combination of looser height and density regulations, significantly relaxed parking rules and reduced development charges and other fees, as has been done with Toronto’s laneway suites program. But, he adds, the emergence of small-scale investors depends also on educating them about the opportunity. “People are creatures of habit, including investors,” he says. “When there’s a successful blueprint, they’re going to keep banging on that drum.”

Others, however, point out that the emergence of citizen developers and a new generation of small-scale landlords is contingent on changes in the way banks and other lenders, including the Canada Mortgage and Housing Corp., look at such projects.

At the moment, it’s almost impossible to get financing for small multi-unit residential buildings. “That’s a huge barrier,” Mr. Greaux says. “It’s really difficult to get construction loans with any kind of a bank, especially as a small-scale developer trying to do these triplexes and duplexes. You may have a little bit more luck with the credit unions, but if you want more free-flowing capital, you’re going to probably have to lean on private capital.”

Other entrepreneurs eyeing the plex market have their own ideas about accessing capital for small-scale projects. For example, Parimal Gosai and Lesli Gaynor co-founded Husmates, an app-based platform that aims to match people looking to co-own small multiunit properties using a fractional ownership model that allows multiplex residents to renovate and build equity, yet also sell their portion back to Husmates if they decide to move.

The platform, they say, would allow the company to build a portfolio of multiplex dwellings. They say the target market are younger people who know they are permanently locked out of the ownership market, but want to see some kind of return on their shelter costs.

But Mr. Gosai, who is a lawyer and a realtor, points out that this kind of innovation in small scale housing finance won’t take off without significant shifts in lending practices, zoning bylaws and the kinds of demanding safety codes designed specifically for condo or strata title.

“As of right [zoning] allows people to develop their properties and would be beneficial for the co-ownership model,” adds Ms. Gaynor. “Until we change the system, it limits what we can do.”

Whatever happened to the Golden Girls Act?

It was hailed as a breakthrough – a private member’s bill that sought to amend Ontario’s Planning Act to allow a form of housing that would allow unrelated seniors to live together in a single home, each with separate units, but also sharing common elements, like a kitchen or a living room.

The legislation, introduced by former Durham Liberal MPP Lindsey Park, was named after the long-running sitcom. In pushing for the change, however, Ms. Park was trying to help four senior women who were living together in a house in Port Perry, Ont., and had been turned down for a building permit because the local bylaws didn’t permit that kind of occupancy.

As Husmates co-founder Lesli Gaynor explains, “The city wanted to have them register as a rooming house because they shared the kitchen and they said ‘We are not a rooming house. We don’t want to be inspected. We don’t want to have to pay the fees that go along with rooming houses.’”

Those policies were a hold-over from a more puritanical era when unrelated adults living together were viewed with suspicion – unless they were boarders in a boarding house.

“Local municipalities should not deter seniors from choosing affordable housing options and should recognize that unrelated seniors living together can reap significant health, economic and social benefits,” the bill’s preamble read. “It is desirable to provide clarity to municipalities that the Planning Act should be interpreted in a way that encourages and permits home sharing by unrelated seniors as a housing solution.”

Co-housing has been growing in Canada, and especially British Columbia, for many years, but such projects tend to be larger and rely on a condo or strata ownership model. In the case of the four women in Port Perry, they were told they’d have to register their dwelling as a rooming house, pay fees to the municipality, and submit to regular inspections.

While Ms. Park’s bill never made it past second reading, later amendments to the Planning Act now include a provision preventing municipalities from passing bylaws that distinguish between related and unrelated adults.