“What’s the Difference Between A Shed And A ‘Laneway House’?” [Drum-roll] “About $268,000!” [Cymbal]

“Alexis Lum is building a laneway house in his parents’ backyard for three reasons: It’s more affordable than a two-bedroom apartment; he can rent it out if he decides not to live there; and he can have privacy and independence from his parents, while being close enough for regular family dinners.”
“I do love mama’s cooking,” he said, adding that he’s sharing the investment with his brother, Antoine, 31. Lum, 28, is a French secondary school teacher at Southpointe Academy in Tsawwassen.
Lum’s situation is pretty typical: laneway houses have been allowed in Vancouver since 2009, and usually they are built as a way for parents to help their adult children get into the pricey Vancouver housing market.
Lum grew up in the Dunbar house behind which he’s now building the laneway house for about $270,000, and he’s really excited to get the keys.
“I love it. It’s absolutely fantastic — it’s a beautiful, small house,” Lum said of the two-bedroom home in his parents’ backyard.
Michael Lyons, vice-president of marketing for Smallworks, a builder of laneway homes in Vancouver, said that at least half of his customers are building these small houses at the back of their lots for the next generation.
“They can’t afford to buy in the neighbourhood where they grew up. People want to stay close to their family,” he said.
The cost to build a laneway home averages between $250,000 and $270,000; that price includes preconstruction costs of $11,500, excavation and site work of about $30,000 to $35,000 and another $175,000 to $200,000 for the construction, Lyons said. “By the time the dust has settled, you’re in the $250,000 to $270,000 range.”

“With the benchmark price for all residential properties in Greater Vancouver sitting at $679,000 and housing affordability a significant problem in the Lower Mainland, a laneway house could be considered a bargain.”

“We made a decision to support laneway homes as a way to make home ownership more affordable and also to build up the city’s rental stock,” said Colin Lawrence, mortgage development manager at Vancity.

The next generation can get the financing themselves and pay the mortgage, Lyons said, adding that right now a laneway house adds about $300,000 to the value of a property.
For homeowners looking for rental income, a laneway home would also be a good investment.
The mortgage on $250,000 would cost about $1,200 a month, Lyons said, but laneway homes can rent out for as much as $2,000 a month on the west side, or $1,700 a month on the east side.
“Basement suites are renting out for $1,600 or $1,700 a month for a two bedroom on the west side of Vancouver,” he said. “It’s not surprising that a detached house — where you don’t have to live below someone with their kids running around or playing piano above your head — would rent for more.
“You’ve got lots of light, you’ve got two floors and you’ve got two bathrooms. Of course it’s going to be valuable.”

– from ‘Laneway eases path to ownership’, Vancouver Sun, 7 May 2012 [hat-tip Yalie at vci]

All part of the ‘This Is Vancouver; Accept Less For More’ ethos.
We dare anybody to attempt to justify the $270K cost for that structure, sans land costs.
Entire actual houses cost that or less all over the continent.
We’ve collectively gone completely insane.
Group hysteria. Emperor. Clothes.
And it goes without saying that the vast majority of these 500sqft structures will be built with ‘equity’ ‘extracted’ from the fantasy value of the main house, via HELOC.
“Adds about $300,000 to the value of a property”?
Let’s talk once “the dust has settled”.
– vreaa

133 responses to ““What’s the Difference Between A Shed And A ‘Laneway House’?” [Drum-roll] “About $268,000!” [Cymbal]

  1. Aldus Huxtable

    “He will share the home with his older brother Antoine.”

    Sir, we’d like to offer you the chance to live with your brother for $1,200 a month in a glorified tree fort. I know it’s a deal, I know, yes, ahh yes, there is a catch, a twenty year lease known as a mortgage, but you’ve known your brother for 28 years so what’s the big deal?

    • Today, a tree fort. Tomorrow, garbage cans like Oscar the Grouch!

      • Aldus Huxtable

        I’ll have you know those are recycled plastic modular multi-purposes homes made from over 80 plastic bottles. If they are under 4sqft you don’t pay property tax.

  2. Renters Revenge

    I look at that photo and it reminds me of something that used to be very common on the prairies before electricity – the Summer Kitchen.
    http://www.grit.com/Property/Summer-Kitchen.aspx

  3. Renters Revenge

    I can’t remember, are these lane way houses subdivided from the larger property? Or are they strata title?

    • From the article:
      “You cannot stratify or subdivide to sell the house separately; it rides with the property like a basement suite, Lyons said. However, co-owners can have a contract between them that splits the ownership, based on whatever terms they agree to.”

      • Oddly enough, there is a sub-set type of zoning that does allow laneway housing to be sold – there are a couple of them for sale on the eastside at the moment. Not all areas qualify for such zoning but I predict that, in the future, anyone will be able to sell their little 500 square foot shack to whatever fool would buy it. By the way, the two people I know that did build a laneway house ended up with a bill of about $325,000 even though the initial quote was about $275,000 – both of them said they would never do it again. The laneways houses themselves are very energy inefficient since they depend on electricity for everything – very expensive.

    • Renters Revenge

      Sorry, didn’t read very carefully.

      “co-owners can have a contract between them that splits the ownership, based on whatever terms they agree to.”

      So did Alexis and Antoine agree on which one of them is allowed to get married and have kids, and which one of them will move into the big house when mom and dad knock off?

  4. A prediction….

    http://tinyurl.com/d4vlwb6

    TeeHee!

  5. The thing cashflows if there is no land value.

    That’s like saying the Greeks are solvent if it wasn’t for their debt.

  6. pricedoutfornow

    Why are they so expensive? From what I understand, they are quite small. So why the high cost to build? Why can’t someone just find a small modular and put it on the lot for say, $50k? That would be more practical.
    And I doubt these things really rent for what they predict…in my craigslist browsing I’ve seen the same laneway houses advertised over and over again with lower and lower rents. They don’t come with a separate parking garage (often the suite is over the parking garage which the owner wants to keep for themselves) and the rents seem to be comparable to a self-contained condo (which has parking and various other amenities, and you’re not a second-class citizen who lives in the back.) I honestly don’t think they’re a hit in the rental market.

    • I would like to know why they are so expensive too. Who the hell would agree to pay over $550 sf for a cabin in the alley anyway?Just building costs??? Normal houses don’t cost that anywhere else…..this is insanity.

      • Yes, this really is a wonderful example of how the Vancouver speculative mania has led people to lose all capacity for common-sense thinking.
        All bubbles are like that, aren’t they?

    • I imagine the city makes all the money on these things. All the same permitting costs that are involved in building an adult-sized house would apply here. Plus your mechanicals would largely be the same.

      Its largely about economy of scales. These things are all finish with no volume (drywall and 2x4s are cheap).

  7. Just for discussion sake.

    Parts of Chicago too have allowed this, only now you can resale the lane way house. They also allow much larger lane way houses, that essentially eliminates all green space. Future of Vancouver?

    • Source of kindling for the cities next great fire maybe. As I recall it was the fact that housing was built in such density and with roofs nearly touching that allowed the first great fire to take hold in the first place. Plenty of houses in Kits are like that now. Barely 4 feet between them. Throw in laneway houses and it will be a real disaster after the earthquake strikes. You know the drill. We saw it happen in LA. Water supply lines burst, roads became impassable after overhead cement structures, highways and rail trestles collapsed and fires just raged out of control. Maybe you folks will be lucky and it will be raining the day it comes.

  8. You could a tumble weed house for waaaayyy cheaper.

    BTW where have all the Bulls gone????
    And whatever happend to the guy who had the friend from China, whom he was gonna ask about the investments and what not coming from China.

    • We, too, have noted the striking ‘pause’ in bullish commentary.
      Perhaps they have all taken vacation at the same time, but it is more likely a result of rising inventory, dropping sales, and the very beginning of downward pressure on prices.

    • The bulls are in a panic. I am betting more than a few are listing their own homes. So much for ever rising prices……they just realized their thesis was a pile of steaming bunk and are throwing in the towel. Too late though. Those fools are going down with the ship.

  9. You can buy a really fancy 110 sq ft studio shed for about $20,000. This is heated, insulated, wired and finished with real windows, counters, fancy doors, proper drywall. If the zoning were to allow, it would be cheaper to put five of these in the parents’ yard. “modern shed”
    Even better you can take it with you if you decide to get married, have kids, or get a different job.

    • oh, even Smallworks has them for ~$10,000

    • We tore down our rotting garage and built a studio on the old foundation, wired for electric, with a loft bed at one end. Total cost, built from the ground up was $23,000 and it was finished with good quality fixtures and wood flooring. It has no plumbing, but I’m pretty sure for under $30,000 we could put a small kitchen and bathroom with shower in there (if we wanted to, which we don’t). I am baffled by the prices I see on these laneway houses… even if you factor in the parking they are required to have, I don’t understand what is jacking them up to $250,000 in costs.

  10. “In Vancouver, RBC estimates the combined cost of mortgage payments, utilities and property taxes rose 3.1 percentage points to 88.9 per cent.”

    88.9%. Just mind-blowing.

    http://www.theglobeandmail.com/report-on-business/economy/housing/home-affordability-in-top-markets-deteriorates-rbc/article2446180/

    • For those who don’t know what the mind-blowing 88.9% refers to, see this from the article:
      “The report tracks how much of a home owner’s income would be required to pay typical costs associated with owning a standard one-storey detached house.
      In Vancouver, RBC estimates the combined cost of mortgage payments, utilities and property taxes rose 3.1 percentage points to 88.9 per cent.”

    • Of course, as we know, the bulls would argue that a “standard one-storey detached house” is a luxury in Vancouver, and that families should be looking at 500sqft laneway homes or condos as the new norm for households.
      Laneway homes can be constructed for, what, 4 times the average household income? (that is, if you are gifted the land).

      C’mon, folks. Can’t everybody now see how crazy this all is?

      • “C’mon, folks. Can’t everybody now see how crazy this all is?”

        I am getting the feeling that it’s starting to sink in a bit more.

        (I still don’t understand how it can cost so much to build a house so small. This makes absolutely no sense to me.)

      • reality check

        move to the suburbs and buy a condo. Oh yeah that’s what ftbs are doing

    • 4SlicesofCheese

      So is 88.9% after tax dollars?

      From the article,’
      He said RBC expects Canada’s central bank will hike rates gradually, starting in the fourth quarter.

      “A gradual pace of increases will allow income growth to provide some offset,” he said.

      How much income growth would realistically trickle down from higher rates.

    • I believe that that is also assuming a 25% down payment amortized to 25 years.

      I’d be willing to bet that virtually no one in Vancouver does that anymore.

      So, what would the pre-tax income percentage be for 5% at 35 years… which I suspect is much closer to reality?

  11. http://smallworks.ca/
    ps. that s&m thing … a sort of carry with 3 big risks: house dumps, rates reverse, and/or what you’ve carried into dumps … bottom line: bank collects fees and interest, you take risks … seems to echo happenings from a bygone era …http://www.economist.com/node/9587542

  12. do you think they’re building $270K laneway houses in Edmonton or Winnipeg? They’re probably 100K in these cities. These laneway builders are having their way with these idiotic homeowners.

    • Aldus Huxtable

      Upon speaking to friends in Edmonton and Winnipeg, no one seem to know anyone who lives in, has, or would want, a laneway house. SFH owners in these cities have garages and workshops. Oh, none of them rent out their basements either.

      • It’s the same in Calgary. BTW, how can anyone raise money for one of these if the land is owned by someone else?

      • armourb -> People build them on their own land… the point is that the $270K-$300K is purely the cost of the structure, not of the land.
        As we said in our comments, we’ll bet a majority are built with HELOC financing, under the charade that they are an ‘investment’ that will ‘enhance the value of the property’.
        Note that the laneway home-builder conveniently estimates that they add ‘$300K’ to the value of the property, whereas the realtor selling one said they don’t.

      • I’ve lived in Calgary and Edmonton. People there would laugh at this.

        In fact, the only other place that I’ve seen anything of this sort was when we were living in California during their bubble.

        There were people in our apartment complex who would sub-let out their detached garage parking spaces to others. And there were takers for the garages as well. Some would park their car below and live in the rafters above. I’m not sure how they cooked, etc. And it amazed me that the apartment management went for it. But, seemingly, they did.

        That was near to the tail end of the bubble. Interest only mortgages. Reverse amortization mortgages were taking off. All sorts of other insanity that we’re all familiar with.

        Then… POP!

        I sort of doubt that anyone is successful in sub-letting out garages as living space anymore.

      • You are right EG. It is because Laneway houses speak more to poverty than to wealth. This is a form refugee housing for those who once were wealthy. They create an environment of encampment and transience within established neighborhoods and are an acknowledgement of failure rather than success.

    • Live and have grown in Edmonton, have never ever heard of a laneway house here.

    • My bet, f1, is that there is no end to how much $ you can spend on finishing. They probably built that laneway with more bells and whistles than a vanilla dwelling.

  13. A couple I know just sold their Dunbar property which has a laneway house built by Smallworks. (A very well-built and energy efficient laneway house, I might add!) Realtors – who of course just wanted a quick sale – told the couple they wouldn’t recoup the money spent on the laneway house. They held their ground and within two weeks the property sold at the price they wanted. And this, at a time when sales are tanking.
    Laneway homes are a very good solution to the issue of adding density to established neighborhoods. You’d be hard pressed to find a condo in Burnaby for the price of a laneway house. Which one would you rather live in: a cheap-ass box in the sky or a leafy garden cottage? Hmmm.

  14. Aldus Huxtable

    So if these laneways are supposed to rent for more than $1,600 a month, how come they are available for… $600?

    http://vancouver.en.craigslist.ca/van/apa/3037813207.html

    • “So if these laneways are supposed to rent for more than $1,600 a month, how come they are available for… $600”?

      have you seen it? It’s probably a garage

  15. This is completely fucked up.
    Too bad that stupidity is infinite.

  16. As we noted in a comment ‘nested’ above, this means that a 500sqft laneway house would cost about 4 times the average local household income, without factoring in land costs.
    Remember that international standards judge an income:housing price multiple of >3 to be ‘unaffordable’.

    We will add this representative laneway house to our list of ‘Vancouver RE Jumps the Shark‘ candidates.

  17. HappyDTVanRenter

    Funny this article just came out as I saw some ridiculous rental postings on CL.

    http://vancouver.en.craigslist.ca/van/apa/3042033996.html
    http://vancouver.en.craigslist.ca/van/apa/3042074919.html

    The size is unbelievable and the rental price is just as crazy.

    • not showing pics of the exterior is a tip off that it’s a converted garage – that and the <400sqft size.

    • My guess is, judging from “utilities included” that the laneway house is an illegal build. The legitimately built laneway houses have their own meters. I wonder if finished garages will be the future – the fire department loathes this sort of thing because, in an emergency, noone knows who lives where when there is no official address.

    • You used to be allowed to build small structures with no permits at all. They could be wired and plumbed to boot. You justified this by saying you needed water lines for the garden and light for the workshop. Last I heard the max limit was for a 10X10 structure with minimal roof overhangs but it could be two stories tall. So in other words you could put a “tea-house” in your back yard with 200 square feet of living space that was legal and the neighbors could not make you tear it out. Renting one was a little tricky but still possible if everyone kept quiet and kept a low profile. Nothing wrong with micro-houses.

    • That second one is awesome… it only costs $250 less than our 4 year old condo with parking, in suite laundry, bike storage, and an external storage locker… plus double the square footage 😛

  18. anonymous guy

    Jeez,
    This is fucking depressing, I went to High School with those brothers. Kind of a sad commentary of what has become of the younger generation of Dunbar kids. Really the last generation of Dunbar kids, seeing as young people haven’t been able to buy into the neighbourhood in a long time, save the odd independently wealthy ones (Trust Fund $$).
    They’re gonna feel pretty shitty when they’re stuck with a fat mortgage and cheaper, better places start hitting the market after the crash. But at least they got Mom’s cooking nearby.

    • “They’re gonna feel pretty shitty when they’re stuck with a fat mortgage and cheaper, better places start hitting the market after the crash.”

      Yes. This is why the overextension of everybody into ownership during the bubble takes away the ‘move-up’ buyer when the market implodes.

  19. google laneway house … most are vcr … interesting … agree oscar had the original and best idea
    http://www.mybcrental.com/listings/w30th3608/
    http://tinyurl.com/7q9aj5a
    http://www.lanehousesvancouver.com/

    • Good links, thanks.
      Will headline aspects of an interesting post at the third of those links.

    • From the third link, I love these paragraphs:

      “As far as renting the laneway house, we have not, so far been successful. Our agent at Sunset Realty says this is a very slow year, and I have many other friends with empty basement suites and apartments, so I have no reason to doubt her word. April is usually a slow time of year for rentals in Vancouver – all the full time students head home for the summer, and the rental market usually picks up again in the fall. Still, our target rental market is not students, so I am a little concerned. I think that part of the problem is that we, unlike so many others have decided to use our garage as a garage and so our house is one bedroom, but what a spectacular one bedroom home it is!

      I know one happy university student, who is thankful for the lack of paying tenants – our son, home from third year is happily ensconced in the laneway house, and I don’t think he’s keen to move out anytime soon. According to him, “it’s a great place to live.” I’m sure. I know what his last year’s digs looked like at school – he’s gone from one star to five!”

      lol! I’m sure the son is happy…

      • Yeah; “our target rental market is not students, so I am a little concerned.”

      • from the earlier entry, says a lot (imo) …
        “I grew up in Vancouver and back in the day, lane houses did exist, although we called them coach houses and they were in the back gardens of Shaughnessy mansions and gardeners lived in them…They were about five times bigger than the house we live in now – and lovely and stately too.

        Forward 25 years and ‘coach houses’ although we call them lane-way houses, or lane houses, are back in fashion. I suppose we call them laneway houses because, unlike their elegant cousins, they are actually built in lanes and not around the back behind the tennis courts.

        I think they can be still be elegant. I love small spaces, and when done right they always feel really big.”

      • maybe what i’m getting at … try not to be too hard on this one … looks like pure and honest commentary

      • I’d be willing to bet that one reason for a lack of renters is that fed up young people are leaving town in droves.

        Two reasons that I think this:

        1. A few weeks ago I was renting a small U-Haul in the lower mainland. It was as hard as anything to get one, and the guy told me that general inventory of units in town was low because they were all being taken on one-way trips out of town. “People want to get out of here,” he said.

        2. The number of new GVRD refugees that I’m meeting here in the interior is definitely increasing. We’ve lately bumped into several young couples who have fled to good jobs and lower expenses here.

    • Owner/blogger seems like a nice enough person but… somebody should have ‘splained the economics to here before going ahead with this project.

      First, she is looking for $3K/mos for her 600sf 1 bdrm with no parking:

      http://apps.facebook.com/marketplace/local/vancouver-bc/?f=2960230182&etype=share&uid=&cm_mmc=Share_Listing-_-Send-_-NA-_-NA&rfb_domain=facebook-canada.oodle.com

      I will leave it to the market to straighten her out on that one.

      However, there is also this quote:

      “The lanehouse is much nicer than our tiny, rather old, in need of paint, 1 million dollar plus bungalow, but it cost less than 300 K to build.”

      If she had followed Viorelly’s example below she would have a brand new big house with a rentable suite for not much more than $300K plus she would have increased the value of her land and still have a backyard.

      Lane houses make no sense.

      • Yes, I am puzzled by what owner/blogger’s long-term plan might be. As for renting out the laneway house: note that this one is fully furnished. One plausible target market would be single/couple coming from far away to UBC for a term/year who want to live without a car, don’t want to spend time getting together a set of furniture and household necessities, and think this would be an interesting alternative to subletting a furnished condo/apartment. Not that most people in this situation will pay $3000, even for those conveniences. But I have seen generally comparable living quarters — furnished carriage houses and converted garages — advertised for healthy rents in the neighborhoods of other universities, research institutes, and so on. Finding well-located, short-term, furnished rentals in decent shape and with a reasonable landlord can take some luck and sometimes you have to pay a premium per month to get them.

  20. First, this laneway looks like the one in the craiglist ad posted on http://www.vancouvercondo.info yesterday that was trying to rent for $2200/month.

    With regard to cost, I think I heard that half of it might be due to various permits/inspections/etc from the city, and payments to BC Hydro and various utilities to upgrade their infrastructure capacity. I remember seeing news stories back when this laneway house thing just got started that owners were hit with $50K+ bill from BC Hydro to add new capacity, and smilar amount from city to upgrade water and sewer pipes.

    The one question I have is how do this help the kids build equity and get in on the property market?? It’s costing $275K to build and you can’t sell it. So how does the two brothers who borrowed the money for the laneway house and then living in it going to build equity and move up??? This just doesn’t compute for me.

      • It made sense when you could rent lane houses in the old days though. I had one for nearly nothing when I was 18. It was called a garage in those days. The digs were decent enough, lots of light, a wood burner and soft mattress but I had troops of mice that ate pretty much everything I couldn’t finish before bedtime!

      • It works if some wealthy young lady comes along and says: Let me save you from that laneway house!

      • Funny, that’s kind of what happened AG. I should have stayed where I was. The mice were better company and I have peace of mind.

    • Relaxed & Happy Islander

      I’m wondering if the notion of the brothers ‘moving up’ the real estate ladder is a moot point – how impressed will potential dates be with “Why don’t you come over Saturday night and I’ll get Mama to whip us up something special” Or does that sound too cynical?

  21. these stories are great. With this guy’s new laneway house it offers a bank a possible new HELOC product, something they can’t do with a Motorhome.

  22. “Laneway house for rent. 300 square feet of luxury! Amazing views of…lane! Spacious open floorplan combines living room, kitchen, bedroom, and bathroom into a single fetishist’s dreamspace! Bonus: Neighbour children play ball hockey against your wall ONLY IN THE DAYTIME!” Call 604-URF-UCKT today!”

    Mmm…lanes.

  23. Ball hockey practice…? What about the fornicating felines yowling all night or the crackheads taking a leak against your coach house wall in the wee small hours? Now *that’s* downtown living at its finest!!

    🙂

  24. I like this idea if 1, I could live alone and 2, I’d build it myself because, sheesh, 250k??

  25. The whole thing sounds so futile when listening to most of you who have about enough information on the subject to make every error possible. I work for a builder doing some of these homes so I know several happy laneway homeowners laughing to the bank.
    You’ll say “he’s biased”, well sure… because I know what you don’t and I could easily work elsewhere so this isn’t just supporting my paycheque.
    The renters who rent them love those neighbourhoods but not basements… and the rent is always going to cover the mortgage (barring double digit rates)
    They cost so much because they have all the infrastructure of a full size house, but packaged into a small space (all the services, a full insulated foundation, a full function mechanical room, a complete kitchen, all the bathroom fixtures and vanities, fire suppression system, etc….). Certainly they’ll be a lot more per sq/ft than a 4000 sq/ft house.
    And Vancouver tradespeople charge a helluva lot more than a Moose jaw tradesperson because they have a lot more expenses to pay… like pricey housing… so it trickles through.
    Why is no one belly-aching about the price of downtown condos as these laneway houses are certainly cheaper (even factoring in the land), have no property tax burden (BC assessment treats them like a garage), have no exorbitant condo fees and allow families to stay together rather than dispersed over the city, and provides a residence for grandma for a few more years before going into a $7K p/month full care facility.
    Not to mention bringing new life into neighbourhoods where households used to be something like 4.5 people and are now more like 2.5 people per household. How do you justify schools and transit when it’s empty nests as far as the eye can see.
    These aren’t for everybody, but many are super nice inside (better than the main house most often) and I’d love to rent one (just haven’t found one over where I want to live over on C Drive).

    You sour grapes are the ones who need to give your heads a shake. Just a bunch of whiners who, unfortunately, missed it when property prices tripled this past decade. You would keep quiet if you bought your $1.5M house for $400K in 2005 and now the laneway house pays your whole mortgage! All while doing your part to add more rental units to a city in need of them.

    • Tradespeople in Van have high expenses is the tradespeople problem, not mine. As a customer it is not my obligation to ensure you can cover all your expenses and makes a nice profit. My only concern is how much I can afford, and if I can’t afford your services at your asking prices then I can’t pay. Simple as that. You can bitch and scream and bereat all you want, at the end of the day, there is a limit to how much as a buyer I can pay and if that’s too low for you then it’s too bad. You can either take it at a loss or not take it, make no money, and have even bigger loss. Using this you have to pay more because I have higher expenses argument is just a load of crap.

      Also, sure we can uderstand that building a laneway house can have higher per sq ft cost than a house due to less economy of scale, but $270K for 500 sq ft construction cost with basic finishings?? That just seems outrageous, especially as people said , similar products can be had at a much lower cost.

      Yes I realize that government takes a big chunk of it in various fees and taxes and well, that’s a tax grab and it still makes the whole thing way overpriced. I would rather invest $270K in stocks, REITs, or even houses in Vegas rather than a laneway house here.

    • Wow 2 bulls in one post!!!!!

      Been a while seen we’ve seen a RE Bull around here!!!

    • Stuart S -> Thanks for your perspective.
      You say “I know several happy laneway homeowners laughing to the bank”, but there appear to be valid objections concerning the math.
      These calculations are very similar to those on basement suites.
      People buy houses in Vancouver based on monthly affordability, shored up by income from basement tenants. They actually don’t live in a SFH, they own a two or three unit apartment building and they live in one suite. They are gambling that the value of those suites will rise over time… if they purchased anytime in the last few years, the suites certainly don’t cover their portion of the mortgage payments.
      Laneway homes are similar. Instead of a garden or garage, these owners now have a tenanted mini-house taking up most of the back of their lot. The calculations completely leave out the usage/opportunity cost of the land.
      The ‘mortgage’ on a $270K structure may be covered by rental income, at these emergency low rates, but even that appears to be debatable.
      Witness the one new Dunbar laneway home owner linked to by chubster, who still can’t find tenants. In fact, rather than “laughing all the way to the bank”, those owners are waiting for some kind of damage deposit back from the city so they can “go out to dinner” (their words).

    • Most grandparents with one foot in a retirement home want their bedroom on the same floor as their kitchen, bathroom and front door.

      As a homeowner I think lane houses are a bad investment. If you need revenue you can kit out your basement for a fraction of the cost AND make your house more affordable to the next buyer (it is what it is).

      If I’m going to build a small townhouse in my backyard I want to be able to sub-divide, sell it off and make a capital return. I’m not going to invest $300K into a depreciating asset that doesn’t improve land value. It makes zero sense.

      My kids are free to rent someone else’s lane house or they can live in my basement for free. Same for grandma.

    • Well I can appreciate some of the argument you offer, Stuart. There are redeeming features to the Lane House especially where density is concerned. Too many empty nesters and retirees in a mature community can make the place feel too much like a morgue. So lane homes allow younger people to stay in the communities they grew up in.

      The problem I have is the extremely high costs I am reading about. This is just one more distortion in a city that has completely lost perspective on what housing costs everywhere else. Contractors are too dear and think they are “worth’ what they get just because demand for services is high and qualified people are in short supply.

      So overcharging is epidemic.

      The only way 300k can be justified is by comparison to 500k condos or million dollar homes. At that stage it makes some sense but it sure as hell does not reflect real value. Nobody pays that much for so little anywhere else in the country. I don’t care if it has all the same services of a house. So do lake front cabins and they are a fraction of that cost even with land included.

      It is clear that labour is the problem here.

      You should be very concerned that as the bubble unwinds that rates will fall to better reflect reality. That means that as building slows that a surplus of workers will come available and prices for hourly rates will tumble (just like they always do…supply and demand). And don’t kid yourself, the correction is already here and demand is waning.

      So how will you manage to pay for your own home when unemployed?

    • You Canadians grow the trees we use for framing, the trees we use for flooring, the shingles we use for siding, and mine the copper for our pipes and our wiring, and despite all that, my 2400 sq ft house in the U.S. is insured to be rebuilt for $180k. The median new home price here is 220k. Something just seems really expensive about that little place. And I understand what you are saying about the mechanicals having a fixed capital cost no matter the square footage, but that doesn’t explain it all.

  26. I’ve enjoyed the comments here because I think a lot of them have good questions to ask (and are funny). I don’t agree with you, Stuart S, when you refer to commenters here as a “bunch of whiners who, unfortunately, missed it when property prices tripled this past decade” (beyond the insult, in many cases inaccurate as far as I know). Also, Stuart, I’ve seen some new builds with lane way houses that have been stuck on the market for months. Wait till we start hearing what the griping of the newly bankrupt sounds like.

    However, I’d also like to say that when I was on a neighbourhood committee considering the issue of lane way houses, there were residents who very much did want them to house family members, and I don’t see anything wrong with that. If they help ease Vancouver’s rental crisis, that’s a good thing too.

    Finally, if we think back to a thread from last week, titled I believe “Urgent Return to China” and focusing on a new build at 33rd and Balaclava, which replaced a recently renovated, character “castle” house in good shape — would the city’s insisting that these character homes be preserved and a lane way house added — instead of the character house being torn down for some vulgarian’s vision of easy profit — be one better solution for Vancouver?

    I’d like to add, as an admirer of character houses, that their being torn down all over the city in the past few years has been I think an ugly act of cultural insensitivity, not to mention waste.

    • For a “green” city I chuckle every time I see loaded 99 B-liners smoking out to UBC. The entrepreneur in me sees a small bungalow on a large lot as a missed opportunity for much-needed student/postdoc housing close to campus.

      An interesting homework assignment for the interested reader: show what FSR ratio adjustments to all non-multiunit zoned lots in Vancouver are required to supply Vancouver with enough housing for the next 100 years given previous population growth and housing stock turnover.

      • Good point about the need for more housing close to UBC, Jesse.

        If the new builds actually housed more people than the old bungalows, maybe I’d feel better about them, but a lot of them, despite being quite large, don’t seem to be exactly teeming with inhabitants.

      • Here are some data from statscan. Surprising?
        Population ages 65+ in Vancouver CMA (PDF) http://bit.ly/KYF1nD http://bit.ly/KYF033
        Population ages 0-14 Vancouver CMA (PDF) http://bit.ly/JM0XY7 http://bit.ly/KEU2w3

      • Sorry, what do these data suggest?

        There are a lot of empty new builds in my neighbourhood, or large new builds with small families in them, so that’s what I was going by….

        Recently I heard from a very reliable source that it’s estimated there are approximately 60,000-70,000 “empty beds” on the West Side.

      • The data don’t show me any significant dearth of children in Vancouver neighbourhoods save a few areas. Maybe it’s starting but nothing that jumps out at me, and can (though not necessarily) be mostly explained by demographic shifts.

        Empty bedrooms is definitely something to watch.

      • epte: “there are approximately 60,000-70,000 “empty beds” on the West Side.”

        Wow, that’s more than I’d have guessed.
        Are there any stat sources we can reference?

      • @Vreaa Host: “Are there any stat sources we can reference?”

        Nothing official yet, but there may be soon. If I hear anything official, I’ll certainly let you know.

    • Relaxed & Happy Islander

      Epte, perhaps you can confirm, when laneway houses were first proposed/allowed I recall reading an article quoting a city staffer who said that a minimum of $175k must be spent on their build for the city to approve.

      • R & I — I don’t remember any of the prices that were quoted, unfortunately.

        I certainly agree with other commenters here that the prices for these places seem awfully high. I enjoyed Aldus Huxtable’s description of them as “glorified tree forts.”

  27. the classic remedy for the boomer bulge, which brought you portables in high schools during the 1970’s and 1980’s, is to apply the same method to housing today. Thus, further to my comment on Motorhomes, it makes way more sense to put a moveable house in the laneway, than to pour concrete and waste the talents of the Stuarts of the world. Check back to your old high school: Where did those dozen portables go, that you spent most of grade 7 and 8? the Oilfield? maybe they become prospector shed’s in the mountains east of Stewart?

  28. almost as much fun as yeti sightings … also some fun traditional ppties to peruse … http://japanpropertycentral.com/2011/12/the-china-money-myth/

  29. This is total BS, the laneway house does not cost $ 250.000 to build, my parents just built one with the new house in Kerrisdale, the total cost of construction was about $ 120.000. Mind you, we contracted all the trades ourselves, and hired an architect on our own, this price included the building / inspection permits, lanscaping, granit everything, carburator and dishwasher connections, skylights, and cement stucco, not the cheap plastic stucco shown above. The main house was about $ 390.000 (3200 sq.ft), and lane way house was $ 119.000 (580 sq.ft). We did a legal suite in the basement as well. The house was done top notch with granit everywhere, good fauceets, lots of pot lights, expensive floor and wall tiles, HRV, air conditioning, two loundry connections, good landscaping with plants and trees included. Some bouilders just have no shame, how can you charge that much………. $ 270.000 for a small laneway house. Its a complete joke and this guy got ripped off. I feel real sorry for him.

    • yltnboomerang

      Heh heh, the infamous obsession with pot lights and granite; does your family hail from Ontario?

    • As I mentioned to f1, it’s easy to tack on some nice-to-haves and slap on another $50K, even on on a 550sqft place. You built the laneway at the same time as the main (I assume), also a difference because you lot the project stages and subcontractors.

      I’m pretty sure the builder they interviewed is stating list price, you can probably do better if you get a lull in the market and NFW will he cite something low in case his acquaintances tear a strip off him, so lots of reasons to think this isn’t necessarily too far off the mark, bizarre as it seems!

    • Yes, as a caveat to my above post, a laneway can make sense if you build it during the construction of the main house. Suddenly, the excavation costs go from $30K for the cottage to about $5K (as the main house now rightfully bears the brunt of the expense).

  30. To: yltnboomerang | 29 May 2012 at 7:19 pm | Reply

    Heh heh, the infamous obsession with pot lights and granite; does your family hail from Ontario?

    Actually I was born in Italy and grew up in Kerrisdale, but my parents lived there for more than 290 years, and now the old house having the need to upgrade and repair, so my dad, who was in construction for most of his life here just contracted everyone himself and bought his own materials and supplies. I moved out of thier own home in my early 20s and just a renter at this point, just like most of the 30s something in this city. trust me, pot lights and granit do not turn me on all that much. Once the market crashes, I’ll put 50% down on something decent in north burnaby

  31. Some people might like being in a laneway home and not having immediate neighbours beside, below, and above as in a condo. It could give some sense of space. So people may justify that paying 250K is good compared to a condo which could be 400K and have monthly condo fees. It also comes down to location, location, location – you could basically live in one of the most expensive and beautiful neighborhoods in Canada – unfortunately the feeling of neighborhood has been eroded with so many empty homes and people who don’t say hi anymore.

  32. at first the casual observer might dismiss these as infrequent oddities … then you discover some are really quite serious … $30/person to tour a few laneways? … (?)
    http://www.vancouverheritagefoundation.org/projects/laneway.html

  33. I live in a laneway house, waiting for the market to turn. It’s fantastic. No shared walls so I can play my stereo without concern. However, the economics don’t seem to work unless you are in it for 20 years. Some families don’t want to have to sell and downsize to a condo to give their kids a pre-inheritance for a small slice of a condo. For some young families and elderly couples it is exactly the right financial move; not to take on too much debt and add some value to the land while weathering out the madness. I also think holding land is a better for the estate than splitting the equity up into different condos. I sure enjoy it better than my last condo. Not sure about two brothers going in on it together though…sounds complicated

  34. joe_blown_away_by_high_housing_costs

    I just find it shocking that we have reached the point where high school teachers are living in sheds in their parents’ back yard. And this laneway homeowner still relies on his mum’s cooking. He is a child in an adult’s body. I have to wonder, has he ever lived away from his parents and paid for his own way in life???

    In my books, you’re not a grown up until you live off your parents’ property and you pay all your bills on your own. Grown ups pay rent/mortgage, gas, hydro, phone, cable, groceries. I’m in my early 30s and I know a lot of people my age who have never really been on their own. They all live with their parents or their parents pay for some aspect of their lives.

    I’ve been living on my own since I was 19 and I’ve paid all my own bills since then too. I do my own grocery shopping, make my own meals, and do my own laundry. I am a grown up. But I am given less respect in society because I can only afford to rent.

    There are twenty something homeowners who are given more social respect than me, but the only reason why they are homeowners or university grads is because they have parents who pay their way through life or let them live at home for years rent free. That is not living in reality.

    I overheard a conversation the other day at McDonalds. A baby boomer old guy was complaining about the student protesters in Montreal. He said, it’s easy for young people to pay tuition in BC, as long as they live with their parents rent free. Well that’s a pretty big qualifier. Yeah, it’s easy to pay for university if you extend your adolescent years well into your twenties and live for free with your parents!!! That’s not being a grown up. Your university education is undermined by your lack of adult life experience. I would argue someone who doesn’t go to university but who lives on their own and doesn’t rely on parents is actually going to learn more valuable life skills than the 22yo university student who lives with parents for free.

    I am ranting because I can’t tell you how frustrating it is for me to be part of a generation that won’t grow up and get off mummy’s teet–and then these schmucks get more respect and better credit than you because they haven’t had to pay their way so they end up as homeowners with equity and university educations without student loans.

    I wish people would understand that it’s the rare young person who actually does not rely on parents and pays their own way in life, who may just be a renter, who may have a blemished credit report (it’s hard to pay the hydro bill on time every month when you are paying your own way in life and working for min. wage)–this person actually has more life skills and better financial acumen than the kid who sponges off mum and ends up a homeowner with good credit. I mean I know how to stretch a dollar and pay my entire way in life just on min. wage. That takes skills.

    How can a high school teacher command the respect of his students if he’s living in his parents’ backyard?

  35. Lot’s of dis-information here and convenient math fudging to make things look as bad as you can when you want to. For clarity I did some research:
    – The building company I swing a part-time hammer for just finished a laneway house (retaining existing main house) for $235K. Other ‘soft’ costs to the buyer are 5% tax (after rebate), permits & fees of $16K ($12.5K is the standard new water/sewage connection), and I’m told about $9K for architect/planning (totalling about $270K)
    – We made a contribution to our overhead (gross profit) of about $35K on that, from which management pays our fixed costs: truck leases, office rent, insurance, admin staff wages, etc…
    – That was a 900 s/ft unit including a 230 s/ft garage, with 2 bedrooms, 1.5 baths, radiant floor heating, HRV, 2×6 construction, all stainless appliances, W/D, custom kitchen and bathroom millwork, hardwood floors, low VOC paint, paperstone counters, gas-powered on-demand hot water boiler, etc, etc…. Top-end stuff! Not a shed at all!!
    – This is a detached house in a desirable neighbourhood and doesn’t steal the backyard because it fits approximately on the footprint of the garage we pulled down.
    – I know that $235K on 900 s/ft (about $260 sq/ft) is very much in line with Vancouver’s average building costs, even considering these very nice finishings and amenities and a great price per sq/ft considering the size!
    – This one was built for family use but the last one we built is being rented for almost $2K and the tenant pays for hydro, gas, cable and internet.
    – Before you scream about the rental rate, consider that: a) the market sets the price not the landlord, b) this is a great brand new detached house, c) it is a rare above-ground rental in a desirable SFH neighbourhood, d) well built condos and basement suites in good areas are inline with this price point anyway.

    Side note: Perhaps it’s not the rental rates or RE prices that’s out-of-whack but the incomes in Vancouver. This has become (or arguably becoming) a world-class city with the prices you would expect from such, but our incomes have not risen accordingly (such as in SF, London, NY).

    • Stuart -> Again, thanks for your comment and for the information:

      You say: “This is a detached house in a desirable neighbourhood and doesn’t steal the backyard because it fits approximately on the footprint of the garage we pulled down.”
      But, it still has a footprint on the property, right?
      It didn’t cost $270K; it cost $270K plus the value of the land it inhabits, which is, what, about a quarter of the lot?

      When you say “This has become (or arguably becoming) a world-class city with the prices you would expect from such, but our incomes have not risen accordingly (such as in SF, London, NY).”
      – We have addressed this backwards logic before, in other contexts:
      See:
      Unrealistic Expectations Everywhere – “Robson is like Rodeo Drive, it’s like Park Avenue” (But 20 Stores Sit Vacant)
      In summary, the point is this: Instead of saying “We’re world class, therefore store rents or incomes should be higher”, why doesn’t it occur to people to ask “If we don’t command high rents, if we don’t support high incomes, are we really world class”?

      • 1) I was speaking more to the undiminished livability of the property by building a lane house… but since you mention it: The land was unused as a garage and didn’t have an additional price tag over and above what the owner originally paid (i.e.: if you have a 1 level house and build a second level on top of it, that land was ostensibly ‘free’ to the owner). It won’t be free to the next owner, but to the current one, yes, ‘free’ because there was no opportunity cost to him. No one was going to pay him $2K/month rent for the garage. Therefore he just ‘built value’. How much value? $2K/mo revenue at the cost of only $1300 in new mortgage!… And $2K a month in new revenue is $400K worth of buying power for the next buyer. And that is value.
        2) I am not saying that there is not a problem with our ‘world class’ status – many world class cities have their own woes – but we are consistently voted by the Economist and Conde Naste, etc… as a leading place in the world to live, have hosted world fairs and an Olympic games, and have many of the pre-req’s for what most would agree upon as ‘world class’: education, recreation, safety, entertainment, with desirability as a place to live or vacation being key factors. What world class city isn’t without its own unique (or common) problems?? Moscow? London? Berlin? San Paolo? Tokyo? So despite you having ‘addressed’ it, I think you’re off the mark on this one.

      • Stuart ->
        1) I get your point about the owner increasing use of their land, but, IMHO, you are still fudging the issue of land value when you say “$2K/mo revenue at the cost of only $1300 in new mortgage!”… you should say “$2K/mo revenue at the cost of (a) $1300 in new mortgage and (b) the cost of about a quarter of a westside lot” (which is currently, what, $400K?). But we can leave it at that and agree to disagree.
        2) Regarding whether anybody (buyers or sellers or landlords) should be making price estimation decisions based on their belief that Vancouver is a ‘world class city’, well, let’s leave that for the markets to judge. (On this note, why are there so many vacant stores on Robson and West 4th and South Granville at present?)

  36. Check out http://www.realtylink.org/prop_search/Detail.cfm?MLS=V934815

    A kitsilano coach house, 1422 sqft, currently listed for $898K… As a side note, that is down from the original price of $1.15M… almost $650/sqft and a million dollars for a glorified garage but there is no problem here…

  37. I am constantly amazed by people on this page. A detached house of 1,422 s/ft with 3 bedrooms, 2 baths and private 200 s/ft roof top deck is not a glorified garage any more than we are glorified chimpanzees. A glorified garage has a beer fridge and a ping pong table, whereas this is quite clearly a complete family home… right by the beach. You are in need of some objectivity, my friend. I’m not saying I’m jumping on it at $898K, but if it hangs around til $800K I might smash my piggy bank!

    • Stuart -> Are you serious that you’d buy this at $800K?

      • It certainly puts it smack in the game for $/sq/ft value. I love the area and I love the roof top deck! Realistically, I’m expecting to wait for the 10-15% correction that I expect (or ‘hope’ for, hard to discern the difference sometimes). Certainly no 50-60% correction in this crystal ball. Some forget that we don’t live in a vacuum: as our prices fall, buyers come out of the woodwork from near and far. With the worst of the bleeding in the US and other markets stemmed, if we start to bleed many self-serving band-aids will abound. If a correction is coming at all, the sooner the better I say.

      • “…as our prices fall, buyers come out of the woodwork from near and far.”
        Are you confident that that is the only possible outcome?
        What of the possibility that (1) buyers sit on their hands (why buy an extremely overpriced asset that’s falling in price?) and that (2) speculative holders (people who were only holding because prices were rising) decide to sell?

  38. Very idealistic view of how markets work Stuart. Buyers can come out of the woodwork , but their entire ability to purchase is hinged on one simple principal – access to affordable credit.

    There is an enormous amount of demand to buy property in the US right, as there should be – it makes financial sense. Only the privileged few are able to buy right now, cash is king. Home loans are still hard to come by, a good job and credit score may not be enough. For a clue into who is finally stopping the bleeding in the US look at who is buying and more importantly, why.

    In fact, looking closer to home – Kelowna. Considered highly desirable, with great amenities and many services of a big city. Yet lenders are now walking away from the market due to rising foreclosures and falling prices. Lenders are not interested in borrowing money for a depreciating asset. This is putting further distress on existing sellers, buyers have the desire to pick up perceived “bargains” at 20% off but they are unable to secure loans. A negative feedback loop begins. And to think, this is with foreclosures rates at 5%.

    Combine this with OFSI recommendation to reduce the total value owners are able to borrow out of HELOCS and the possibility of having to re qualify for a mortgage every 5 years and it becomes much harder to pay the obscene prices that we are seeing today.

    • You have nailed it Burt. It is why most who claim they will “vulch” property when prices fall are in for an even bigger surprise than owners whose homes have suddenly fallen in value.

      They won’t be able to get credit in most cases. Unless the vultures have squirreled away a significant down payment and have a stellar work history and credit rating they will get nowhere fast and the good deals will just go begging.

      That is why Vendor financing became such a hot topic in the early eighties. Vendor financing is where the owner of a home acts as the bank and the transaction is an agreement between buyer and seller alone with no intermediaries, no agents and sometimes no lawyers.

      I expect we will see that again in Vancouver as prices continue to fall and credit tightens significantly in the years ahead. What is worth noting is that the signal for a real estate market bottom is also the point where sellers have capitulated and begin doing their own financing deals. If the future resembles the past this will be a short lived period (six months thereabouts) so it is best to be ready for when it happens.

      • Getting back to the topic, what do you think happens to laneway housing specifically when your doomsday predictions come true?
        BTW – I’m not a strong ‘bull’ for the short term RE market in Vancouver, I’m just not amassing weapons and water in the basement like some of the writers here. IMO, most other forums seem much more balanced currently.

      • On a lighter note… [NoteToEd: “TeeHee!”]

  39. Coquitlam is now allowing coach homes in some neighbourhoods including the one i live in. I got a quote from a contractor to build one in our backyard and it was less than half of what they state in this article.

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