Secondary units in Ontario: municipal estimates and what contributes to disparities

Our latest Housing Market Insights explores secondary units in Ontario.

Our goal is to provide you with a more accurate estimate of the number of secondary units in Ontario’s most populated municipalities. We also examined the factors that contribute to the regional disparities across the province.

Secondary units are self-contained residential units within dwellings, predominantly single-family homes. They can also be within structures ancillary to a dwelling, an apartment above a detached garage.

They are commonly referred to as:

• basement apartments
• accessory apartments
• in-law suites
• laneway homes

Past attempts to estimate the number of these units, including by CMHC, were unsuccessful owing to a lack of reliable data.

We devised a method that identified which properties in the Municipal Property Assessment Corporation’s (MPAC) database had a secondary unit. Once these homes were identified, we were able to analyze whether certain location and property-specific attributes affected the likelihood of a home having a secondary unit.

City of Toronto had largest number and greatest prevalence of secondary units

Contrary to our expectations, municipalities with more ground-oriented homes did not always have more secondary units.

The main exception was the city of Toronto, which had the greatest number of ground-oriented homes and the most secondary units at nearly 75,000².

Ottawa, on the other hand, easily had the second-largest number of ground-oriented homes. However, it had fewer secondary units compared to Mississauga and Brampton.

Greater Sudbury had more secondary units than municipalities with a far greater number of ground-oriented homes, such as Hamilton and London.

For a better comparison across municipalities, we calculated each region’s percentage of 1-to-4 unit properties with a secondary unit.³ This measures the prevalence of secondary units in every municipality.

We excluded properties having more than 4 residential units, inclusive of their secondary units. This is because they would not be eligible for CMHC homeowner mortgage loan insurance.

Our calculations reveal there is significant regional variation across the province. As shown in Figure 1, Toronto had the greatest prevalence. Secondary units were found in nearly 1 in 6 ground-oriented homes in Toronto.

In contrast, just 1 in 60 ground-oriented homes in Burlington had a secondary unit. The 3 municipalities we examined in Halton region made up the bottom 3 in this category:

• Burlington
• Oakville
• Milton

Higher than average ratios were registered in the Peel Region municipalities included in this study:

• Mississauga
• Brampton

Other municipalities with higher than average ratios were:

• Greater Sudbury
• Thunder Bay
• Guelph
• Oshawa

Most secondary units were basement apartments

Our method of identifying secondary units allowed us to break them down into 2 categories:

1. basement apartments
2. units added either in the primary dwelling, above ground or in secondary structures, such as laneway home

Generally, municipalities whose secondary units mostly consisted of basement apartments had a greater prevalence of total secondary units. This suggests that policies favouring the creation of more basement apartments may have the greatest success in maximizing the overall supply of secondary units.

Guelph and Brampton were among the municipalities with the greatest prevalence of secondary units. Nearly 75% of their secondary units were basement apartments.

In contrast, basement apartments made up far less than half of secondary units in many municipalities where secondary units were less prevalent⁴. For example:

• Windsor
• Brantford
• Cambridge

Basement apartments may help to address the need for more spacious rental housing

The overall average floor area of all basement apartments was 825 square feet. Average basement sizes ranged from just over 700 square feet in Greater Sudbury to slightly under 1,200 square feet in Vaughan.⁵

In many municipalities, these floor areas are the equivalent of either a large 1-bedroom or small 2-bedroom rental apartment unit. A significant percentage of basement apartments can accommodate more than a one-person household.

The creation of new basement apartments could help to address the need for more spacious affordable rental housing.

Secondary units more prevalent in municipalities with low supply of traditional rental housing

Secondary units were more prevalent in municipalities where a small percentage of their renters lived in either⁶:

• purpose-built rental units
• condominium rentals
• subsidized housing

Supply of these traditional forms of rental housing was low relative to the number of renters living there.

Figure 2 shows prime examples of municipalities that fell into this category:

• Ajax
• Barrie
• Brampton

Nearly 50% of renters in these municipalities had to find rental accommodation in ground-oriented homes, such as:

• single-family homes
• secondary units

Conversely, secondary units were far less prevalent in municipalities, such as:

• Ottawa
• Burlington
• London

In these municipalities, a large share of their renters lived in traditional forms of rental housing.

Secondary units were also more common in these municipalities with consistently low rental vacancy rates:

• Toronto
• Mississauga
• Guelph
• Kingston

A lack of options in the primary rental market has resulted in greater demand for other forms of rental housing, like secondary units. Low vacancy rates have also produced strong rent growth, encouraging a larger percentage of homeowners from these municipalities to add a secondary unit.

Some property features increase the likelihood of a home having a secondary unit

The MPAC database also contained an extensive number of property features for each home, such as the:

• dwelling type
• number of storeys
• year built
• floor area
• type of driveway

We tested whether some of these property features affected the likelihood of a home having a secondary unit. We did this using an econometric approach called logistic regression.⁷ For example, conventional wisdom suggests that homes with smaller above-ground floor areas are more likely to have a secondary unit. This is because additional space is needed to create separate living quarters for a family member.

MPAC data allowed us to test a number of these theories against actual results, with the findings presented below.

Secondary units over-represented in single-story homes

In nearly all 28 municipalities covered by this study, secondary units were over-represented in single-story homes.

Oshawa was a prime example. Two thirds of secondary units in Oshawa were in single-story homes, despite those homes comprising less than half of the region’s ground-oriented properties.

A primary reason for this province-wide trend is that many single-story homes were built with a separate entrance to the basement. This is a provincial requirement for adding this type of secondary unit.⁸ This translates into a significant cost advantage compared to owners of other styles of homes.

Owners of single-story homes were also more likely to add a secondary unit because the home lacked space. According to the Ministry of Municipal Affairs and Housing, a primary reason for adding a secondary unit is to create separate living quarters for a family member. These above-ground features in single-story homes were all significantly lower compared to other styles of homes:

• floor area
• number of bedrooms
• number of bathrooms

In Toronto, single-story homes averaged fewer than 3 bedrooms and 2 full bathrooms above ground. They also had a total above-ground floor area of just 1,200 square feet. Dwelling types with smaller above-ground floor areas, such as semi-detached homes, were also over-represented among homes with a secondary unit.

A number of municipalities with predominantly single-story homes had a high propensity to have a secondary unit. Most notably:

• Thunder Bay
• Greater Sudbury

Figure 4 shows that nearly 75% ground-oriented homes in these municipalities had a single story.

A notable exception to this trend was found in Windsor. While the vast majority of ground-oriented homes in Windsor have a single story, it has a below-average share of homes with a secondary unit. This was due to geographical restrictions of where basement apartments were permitted.

A sizeable region of Windsor is not permitted to have basement apartments since it is designated as a floodplain area.⁹ Most notably:

• Riverside
• Tecumseh

Unsurprisingly, secondary units were less prevalent in forward sortation areas in Windsor where these restrictions exist.

Older properties are more likely to have a secondary unit

As shown in figure 5, just over 60% of secondary units were in homes built prior to 1970, despite those homes making up 40% of all ground-oriented homes. This trend is consistent with census data on the percentage of overall renter households by period of home construction.

Among the homes built prior to 1970, properties constructed in the pre-1920 and 1950-1959 periods were most likely to have a secondary unit. MPAC data confirms that many of the established neighbourhoods in older municipalities are predominantly made up of homes built prior to 1920. For example:

• Toronto
• Hamilton

Renters covet these neighbourhoods because they are in close proximity to their municipality’s downtown cores and major amenities, such as public transit hubs. Our analysis of secondary units by forward sortation areas in Toronto found that the highest concentrations were in neighbourhoods, such as:

• Trinity-Bellwoods
• Roncesvalles
• Little Italy

In these neighbourhoods, homes were on average built prior to the 1920s.¹⁰

Most municipalities with a high percentage of ground-oriented homes built in 1970 or later had a lower prevalence of secondary units, such as:

• Vaughan
• Markham
• Richmond Hill
• Oakville
• Milton
• Burlington

A large share of properties in these municipalities are spacious 2-story homes. Also, these municipalities have traditionally been less appealing to renters. This is due to their widely dispersed essential amenities that require car travel.

Additional significance is placed on the high proportion of single-family homes in these regions built between 2010 and 2019. Prior to the More Homes More Choice Act of 2019, development charges applied to secondary units added in homes that were less than five years old.¹¹ Homes built in the 2010-2019 period had the lowest likelihood of having a secondary unit, partly owing to this added cost.

Homes with no private parking more likely to have a secondary unit

Secondary units were over-represented in properties having either on-street parking or no parking. This may seem like a counterintuitive finding, since most municipalities in Ontario still have secondary unit bylaws that require a private parking space for every unit created. Properties with on-street parking or no parking do not fulfill this parking space requirement. Municipalities that currently have no minimum parking requirements, such as Ottawa, only changed their bylaws in the past decade.¹²

Many homes with either on-street or no parking were located in older established neighbourhoods, which tend to be highly coveted by renters. Parking bylaws may not have discouraged homeowners in these neighbourhoods from adding a secondary unit. Also, this finding could also suggest that many secondary units in these homes were added prior to the existence of any secondary unit bylaws.

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