The self-funding house: A one-stop solution to affordability for owners and renters
By Murtaza Haider and Stephen Moranis
Canada must build six million new dwellings by 2030 to achieve housing affordability, but reaching this target will require more than doubling the current rate of construction, which seems increasingly unlikely.
But a breakthrough is possible if new homes are designed to accommodate not one, but multiple households, where the new house is built with an accessory dwelling unit (ADU) that can accommodate an owner and a renter household. By extension, a triplex dwelling can accommodate one owner and two renters.
If ADUs are added to existing homes, the potential to accommodate more households in fewer structures increases, lowering the unreachable target of building millions of new homes.
“The opportunity to build new and renovate existing houses with legal (accessory dwelling units), or basement apartments, is a win-win-win-win. Win No. 1 is the homeowner’s affordability as rental income supports the mortgage payment,” Benjamin Tal, CIBC Capital Markets deputy chief economist, said in a recent note.
He added that the other three wins include cheaper rental alternatives, leveraging municipal infrastructure to generate more shelter services and having the secondary units built as per municipal code.
SVN Rock Advisors Inc., real estate veterans, are behind this idea of a self-funding house. In a book with the same title, they explain the concept and the math behind it. They said secondary rental income can lower the income threshold for mortgage qualification by 30 per cent to 60 per cent “depending on the living arrangements chosen by the owner.”
With ADUs, new homeowners, especially first-time homebuyers, become homeowners and landlords from day one. The guaranteed rental income is the
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