Vancouver policy to create rental housing brings life to the laneways

Editors note: This article first appeared in Citiscope.org and is reprinted with permission.

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VANCOUVER, Canada — Brent Wager lined up with a few dozen other people in a Vancouver alleyway on a smudgy October afternoon, waiting to get into the small, peaked-roof house with a tiny balcony facing the lane. Queued up with him were young couples, some with toddlers, older couples without, and a mix of all kinds of people in between.

The crowd had gathered to inspect what has become a Vancouver phenomenon: little houses built in the backyards of single-family homes. They’re the product of an innovative policy passed by a city council desperately searching for ways to create rental housing in a place where the base price for a single-family home now tops a million dollars.

For Wager, who has one of these “laneway houses” under construction in the backyard of his east Vancouver property, the one-day tour of other such homes was a chance to get more ideas for a concept he’s already committed to.

“I think it’s a lovely, cool idea,” says Wager, a 48-year-old dental hygienist. He has family reasons to build: His 72-year old mother lives in a faraway suburb and may consider moving in as she gets older.

Until then, he may move in himself. Like many in Vancouver, Wager is constantly triangulating how to stay ahead in a crushingly expensive housing market. He already rents out a basement suite in his main house. He might move into the 850-square foot (80-square meter) laneway house himself and rent out the space he lives in now.

Wager is far from alone. His neighbors across the alley are building a laneway house where an older couple will live while their adult children occupy the main house. Other neighbors are pondering developments of their own.

Laneway houses are Vancouver’s answer to a growing trend in North America’s priciest metro areas. The idea is to squeeze more housing into residential areas without changing the character of the neighborhood too much. The small homes, known in other cities as “coach houses,” “granny flats,” or “accessory dwelling units,” are meant to offer a way for middle-income people to live in locations they otherwise could not afford.

​Vancouver created the most permissive policy in North America, allowing laneway homes to be built on almost all single-family lots. The city of about 640,000 people has seen almost 2,000 applications for laneway houses in the six years they’ve been allowed. About 85 per cent of those have been built, according to homebuilder Jake Fry, whose company called Smallworks is the best known in what has become a niche building sector.

Living in the laneways has proven so popular in Vancouver that the city recently initiated a new variation — the laneway apartment building. In a dense urban neighborhood known as the West End, property owners can build mini-apartment buildings up to six stories tall facing the alleys. Four such projects have been approved (none are built yet) and more are in the pipeline. The units must be rentals, and at least half must have two or more bedrooms, as part of the city’s effort to make room for families.

“I really believe in this product,” says Nevin Sangha, who owns the properties where three projects are going to be built. One is behind a 110-year-old apartment building, and two are behind historic homes. “People moving here from out of town … want to live in this kind of place.”

Focus on rental housing

For city planners, laneway houses are one relatively simple way to tackle the region’s housing shortage. Suburban municipalities surrounding Vancouver have joined in, allowing secondary houses everywhere from upscale neighborhoods like West Vancouver to working-class suburbs like Surrey.

“This allows us to add rental with an incentive and without a subsidy,” says Kevin McNaney, Vancouver’s assistant director of planning. For homeowners, the rental income helps build equity, McNaney says. “It’s supposed to be a mortgage helper.”

According to recent real estate advertising, laneway house owners in the region are charging rents of anywhere from C$1,300 to C$3,500 (US$990 to US$2,570). The exact amount depends on the size and location. That’s often more expensive than units in older apartment buildings nearby. But it’s more affordable than larger single-family houses and comes with amenities like access to a yard that condo buildings don’t have.

“This allows us to add rental with an incentive and without a subsidy.”

Kevin McNaney
Vancouver assistant director of planning

Laneway houses have been particularly popular with the “baby boomer” generation now reaching retirement age. Fry says most of the 150 laneways Smallworks has built or started are for that group.

“We have seniors leaving the workforce en masse, looking for options,” says Fry. “The laneway allows them to bring family onto the property. Or they can rent out the main house. It’s a retirement strategy.”

The boomers’ adult children are also a market. Among Fry’s first customers were Akua Schatz and her husband, Brendon Purdy, who built a small laneway house on Purdy’s parents’ lot in the otherwise completely out-of-reach Dunbar neighborhood of Vancouver.

“It gave us the opportunity to stay in the city and to have this multi-generational family arrangement,” says Schatz. The 500-square foot (46-square meter) house had its limits, however: When Schatz and Purdy had a second child, the whole extended family moved to another home where there was more space for each generation.

‘Leading the way’

U. S. cities such as San Francisco, Austin and Seattle also have adopted policies to promote accessory dwellings. But Vancouver’s strategy stands out from most of them in a number of ways.

For one thing, Vancouver created a fairly simple process for homeowners to follow. Getting a permit is not dependent on factors that can add uncertainty, such as seeking approval from neighbors. Vancouver also does not require that the owner occupy one of the units on the property.

“Vancouver is leading the way,” says Kol Peterson, a laneway-house advocate in Portland, Oregon, which has had the most success among U. S. cities in promoting accessory dwellings but not as much as Vancouver. “It largely has to do with the codes and avoiding poison-pill regulations.”

One rule Vancouver does apply has to with car parking — each laneway house has to have its own off-street parking space. In fact, the city amended its rules at one point to ensure that enclosed parking isn’t instantly converted to an additional room as soon as the city inspectors leave.

Importantly, Vancouver’s rules apply all across the city, not just in certain “hot” neighborhoods. That means practically every homeowner in a single-family zone has the right to build a laneway house if he or she wants to. That’s what’s turned laneway living into a kind of local phenomenon.

“They just made it city-wide,” says Fry. “Because it was facilitated so uniformly, that’s what made it so successful.”

While the surge of new laneway homes has made a dent in Vancouver’s housing crisis, however, the overall impact remains small. The new rentals are helping but it’s only one piece of an affordable-housing strategy.

“You put them in neighborhoods that didn’t have rental stock, so that’s good,” says Tsur Somerville, a professor with the University of British Columbia’s Centre for Urban Economics and Real Estate. “It probably accounts for a 20- to 25-percent increase in the amount of new construction of rental in Vancouver. But my sense is this is not solving Vancouver’s rental-housing problem.”

Tweaking the model

The program has had its growing pains. In the beginning, there was wild fluctuations in the permitting process, in what homebuilders charged, and even in how utility companies treated the laneways.

For example, the local electric company said at first it would charge an outrageous C$22,000 (US$16,000) for a hook-up. The city’s permits department struggled to process applications quickly. There were neighborhood grumbles that more residents would make traffic worse and parking harder to find. Some complained that  “mini-monster houses” were being built, in spite of limits on the square footage allowed.

The city made some tweaks — two-storey laneways are now strongly discouraged. Over time, permit processing was smoothed out, and prices got established. The cost of designing, permitting and building a laneway house has now settled out at around C$350,000 (US$258,000). Brent Wager thought he could lower that by doing some of the work himself with a contractor, but says he’s ended up at the same cost anyway. After applying for permits in June, he was able to start building by the end of September.

There are still the occasional complaints about parking problems or construction noise or discomfort with neighborhood change. But generally, the laneway homes have been popular. That’s not surprising, says Vinit Mukhija, an editor of the 2014 book The Informal American City: Beyond Taco Trucks and Day Labor.

Mukhija, an urban planning professor at the University of California in Los Angeles, says skyrocketing housing costs often lead to innovations like Vancouver’s. As the middle class struggles with the rising cost of real estate, the idea of adding density to existing neighborhoods becomes less and less objectionable. And as city politicians struggle to deliver on promises for more affordable housing, they’re more willing to look at alternatives.

“What we’re seeing,” Mukhija says, “is a social acceptance of a more informal form of housing.”

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