More Multiplexes Coming Soon? Details On Toronto's Expanding Housing Options in Neighbourhoods (EHON) Project
Introduction
In my last video about garden suites, I talked about an appeal that was holding them back. So my first update is that this appeal has been dismissed and now you can start building garden suites now. But there’s something more exciting than that for today’s video.
Garden Suites is actually just one of the priority housing projects in the pipeline for the city right now, and the next one might even be better. Enter the Multiplex Project, where the city is looking into allowing houses in Toronto to have up to four separate units.
Toronto's Housing Crisis
The City of Toronto projects that there will be at least 700,000 people moving to our city by 2051, and so we’ll need to make sure we have enough homes to meet this huge demand. We’ve been growing, but most of the growth has been in condos.
The result of that is that the density in our city is getting more and more uneven. Areas with condos are getting a lot more crowded, whereas the people in neighbourhoods with low-rise houses are on the decline. On top of that, a lot of these houses are sitting half empty.
For example, empty nesters might still be living in their house after the kids moved out, and so there are a lot of empty rooms. There are also people who have a cottage somewhere else, which means they end up living in their house in the city for just a few months out of the year.
So, based on how growth trends are going right now, the teams working on the Multiplex project see an issue where there might not be enough supply for houses, bigger units with 3 or more bedrooms, and purpose-built rentals.
Why Multiplexes In Toronto?
Specifically for those who are looking to live in low-rise options, right now there’s a gap of 43,000 units that’s needed so that this demand gets met. In Toronto at the moment, we have approximately 405,000 houses. So, using simple math, it’s possible to meet this demand if we add just one unit to 11% of the existing houses out there.
Now, on top of meeting the demand, the Multiplex team also sees other benefits to increasing density in our existing low-rise neighbourhoods. A lot of schools, parks, and libraries aren’t being fully utilized because the population is dropping in their neighbourhoods. So, filling up the gaps can make public infrastructure a lot more cost-effective.
The second part is environmental benefits. If there’s lower density, residents become more of a driving neighbourhood, where they’ll have to drive a car to get to the bank or shop. But if people lived closer to each other, it would make sense to have more public and private infrastructure in those areas. The end result will be that we’ll become less reliant on cars, which helps to cut down on greenhouse gas emissions.
All of this resulted basically in the creation of the EHON initiative, which stands for Expanding Housing Options in Neighbourhoods.
Why Does This Matter For Real Estate Investors
From the point of view of a real estate investor, this is great news. A growing need for purpose-built rentals means there will continue to be a strong rental market, and that is good for rental properties. Allowing more rental units in a home means better rental income and you can see it today already if you compare what a single family rental looks like, which typically cash flows negative, compared to a single family home with a secondary suite, which can cash flow positive.
So, instead of just being able to divide a house into two parts, if we can divide it into four parts, cash flows and even property value have the potential for improved performance.
The Multiplex Project Timeline
So this all sounds great, but how is the Multiplex project going right now? Things are going pretty smoothly right now, so I’d say this project is likely a go. In fact, 77% of respondents support this, and it is spread evenly across different parts of Toronto, age groups, income levels, and renters and home owners.
Here’s what’s been happening so far:
Key Issues Being Looked At
There are a few things the team is currently working on at the moment. The big one is obviously zoning. At the moment, almost half of Toronto’s land is in low-rise neighbourhoods, but only a quarter of those houses can be made into multiplexes because of zoning. That is a key issue that needs to be changed for people to start building multiplexes.
Financing is the other big one. Right now, even if you can build a multiplex, it’s extremely expensive just from development fees from the city. Adding a two-bedroom unit in a multiplex will cost you $78,000, and these fees are going to go up to $115,000 next year-a 49% increase!
Then there might be extra fees if you have to get a variance. Minor variances will cost you around $1,700 if you have a house with 3 units or less, and it gets a lot worse if you have a fourplex at $5000. This is something that the city can control, and getting rid of these barriers will be needed if their goal is to encourage people to build multiplexes.
The final thing is the actual building cost, which is probably the trickiest bit. Obviously, this is the part that will cost the most money and will be the hardest to meet, especially for those who need extra rental income from renting out part of their house to help carry their own living expenses. Laneway houses currently have a forgivable loan program of $50,000. So this might be a case study that the multiplex team might use for a possible affordable multiplex program.
There are also other things the team is looking at: maintaining green spaces, soft landscaping, tree protection, and keeping the existing character of neighbourhoods. In other words, there is still a lot more work that needs to be done. But it does look like we’re off to a good start with the multiplex project.
How We Can Help
It’s not just the rental income that makes the multiplex project stand out. With the city investing so much time and money into these low-rise neighborhood initiatives, we expect that future growth will be much better in houses in Toronto, which is the other very important part of the real estate investing equation.
In the meantime, if you want to talk more about how this relates to real estate investing or if you are looking to get started with real estate investing in Toronto, our team is ready to help. We’re a real estate sales brokerage that focuses on investing in Toronto, and we’d be happy to take a look at your situation and give you our best recommendations to get on the right track. Once you’re ready to buy, our sales team will help you buy it, offer renovation guidance, and help with leasing or property management if you need it. So just connect with us if you want to learn more!
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