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A recently completed laneway project in Toronto's Wychwood Park neighbourhood by Lanescape Inc. and builder Integrity Design and Build Inc.GetDave Photography

Though hardly commonplace, it’s a phrase that has started to appear with increasing regularity in real estate listings for city of Toronto residential properties in downtown neighbourhoods: laneway suite potential.

The reference is to a two-year-old city program designed to allow homeowners with rear lane access to build two-storey rental suites where a garage once stood. According to the policy, the city will defer normal development charges on such projects, provided they meet safety, design and fire code requirements.

While such dwellings are estimated to cost at least $250,000, the potential upside is significant: rental income and a potential boost to property values, plus soft benefits, such as the prospect of living space for aging parents or adult children.

One upstart consulting firm, Laneway Housing Advisors, tells visitors to its website that “Laneway Houses are the newest, most exciting housing option for as many as 48,000 current Toronto property owners.”

Yet, buyers should exercise caution with listings claiming that a home has laneway suite “potential.”

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For any laneway project, rules require a clear one-metre-wide side alleyway extending from the front of the house to the backyard.GetDave Photography

“A lot of people are trying to sell properties under the guise that it is developable as a laneway suite,” says architect Craig Race, co-founder of Lanescape, a boutique firm that is specializing in these projects. “There’s not a lot of support to help buyers figure out when it’s possible.”

While planners identified 295 kilometres of laneways in the city, there’s no database identifying which properties actually pass muster with the technical requirements of the bylaw. These include highly prescriptive rules regarding access for emergency services that disqualify a substantial number of homes that back onto lanes – as many as 30 per cent, according to Mr. Race’s estimates of the applications he’s seen.

The rules require a clear one-metre-wide side alleyway extending from the front of the house to the backyard. This regulation has proven to be the most confounding, with the city rejecting applications that miss the width by even a few centimetres.

For some properties, the City will only approve if the applicant agrees to remove obstacles, such as a protruding bay window or a gate. And in cases where the alleyway is shared between neighbours, the laneway suite approval depends on the applicants obtaining a formal easement guaranteeing access between the houses in perpetuity. (City council will be considering a staff report looking at expanding the ways for applicants to meet fire access eligibility requirements next week, including potentially allowing applications for houses whose side alleyways are only 90 centimetres wide.)

Design/build firms that have entered the laneway suites market are offering inexpensive or free assessments about a property’s suitability, and some realtors have begun urging clients to purchase these evaluations to show potential buyers.

Laneway Advisors founder Marty Steele, who supplied materials to Vancouver laneway developers before launching his firm earlier this year, says he can do an assessment for $99 or $250, often in a few days or less. Most agents, he adds, want the less expensive one. “That’s what most realtors are willing to pay.”

Yet, the mere fact that an assessment has been completed doesn’t provide any guarantee that a property will be deemed eligible by the planning department, cautions Mr. Race, whose firm provides these evaluations at no cost. “The [assessments] that are good, they show their math.” Mr. Steele adds that his firm provides waivers to customers, advising them that a positive assessment report doesn’t guarantee a green light from the city.

In some cases, listed properties that reference laneway suite potential have obtained some of the necessary planning approvals. Lina Kuliavas, an agent with Royal LePage, says a client in the Oakwood/Vaughan area has received zoning clearance from the City and submitted applications for a building application. “We don’t have an answer yet,” she says, adding that potential buyers aren’t obligated to continue seeking approvals. The listing says “Zoning Cert for Laneway House!!”

In other cases, such as a $1.15-million listing on Lansdowne Avenue, the property is described as having the “Potential to Build Laneway Suite for Extra Income.” The listing agent, based in Peterborough, Ont., didn’t return calls. Ms. Kuliavas says some of the buyers of such properties are investors.

The Toronto Region Real Estate Board (TRREB) has no specific policy on such claims in listings, although the organization did endorse the City’s policy when it was going through council’s approvals process.

“TRREB rules require brokerage responsibility for the accuracy of listings and the Real Estate Council of Ontario enforces Realtor advertising,” CEO John DiMichelé said in a statement. “Both are complaints based processes. Parties to the transaction, including real estate professionals, are expected to do their due diligence regarding information that is disclosed.”

While there’s no doubt the number of such listings is growing, it remains to be seen how the potential for laneway suite development factors into property assessment calculations and, ultimately, asking and selling prices.

Mr. Steele, who is assembling a database of properties with demonstrated laneway suite eligibility, says the market is waiting to see what the asking will be for a property that sports a completed laneway house. So far, he adds, “there’s no clear evidence of what happens to market value in houses with laneway potential.”

Laneway Suite Stats as of Aug. 31

  • Building permits issued: 88 (14 more since June 30)
  • Building permits under review: 24
  • Development Charges Deferral Program applications: 103 (2 more since June 30).
  • Affordable Laneway Suites Program applications: 4 (no change from end of June)

(Source: City of Toronto)

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