It’s no surprise housing affordability is a major concern for young Canadians. Due to rising house prices, high interest rates and stagnant wage growth, many young adults perceive home ownership as an unattainable goal.
Many are resigned to being perpetual renters and have accepted a future that traps them in a state of financial insecurity. As a result, the younger generations are putting off major life events such as getting married or starting a family.
Additionally, urban centres are buckling under the pressures of skyrocketing rents and home prices, posing an ever-growing challenge to governments, city planners and real estate developers.
From every angle, young people are feeling pressured to tighten their belts, abandon their dreams and accept a reality that excludes them from the housing market altogether.
The solution, however, might lie closer to home than we think — in accessory dwelling units (ADUs). An ADU is a smaller, independent residential dwelling unit located on the same lot as a standalone, single-family home.
They're known by many names and come in a variety of form factors — secondary suites, granny flats, in-law units and so forth — but their potential to resolve the housing crisis, or at least relieve the pressure, is consistently substantial.
We’ll explore how constructing new homes, inclusive of ADUs, can contribute significantly to easing the housing crisis by increasing the rental supply, and perhaps more importantly, do it quickly!
Perhaps there’s a solution that tackles both home ownership and rental supply . . .
Understanding accessory dwelling units
Typically, ADUs are constructed as detached structures like a backyard cottage or a converted garage, but they can also be attached to a primary residence, such as a basement apartment with a separate entrance.
These units are much more elaborate than a simple basement renovation. In order to preserve privacy and safety they require proper fireproofing, soundproofing and their own temperature controls.
Constructing new homes that include roughed-in ADUs can offer a unique, under-utilized approach to urban densification without dramatically altering the neighbourhood's character or escalating the need for new infrastructure — think of it as light intensification.
Creating housing solutions through accessory dwelling units
The demand for affordable housing is outpacing supply, leading to inflated prices that many residents cannot afford. This is where ADUs can play a transformative role.
The opportunity is here, where home ownership affordability and rental supply can be addressed in one, fast-paced solution. I call it The Self Funding House approach, treating your house as a business by becoming a landlord:
- Increased supply: Incorporating ADUs into new home construction expands the rental supply without the need for land acquisition, a significant cost in urban development. This strategy increases housing availability and diversifies the types of housing on offer. Consequently, the surplus in housing units can ease rental prices by reducing the competition for homes.
- Cheaper houses & rent: Because ADUs are smaller than traditional homes, they require less material to build and less energy to heat and cool, resulting in lower overall living costs. By providing an affordable housing option, ADUs can cater to lower-income groups such as students, young professionals and seniors who might not have the need or resources for larger, pricier homes.
- A green solution: As they are built on existing residential lots, ADUs don’t contribute to urban sprawl or require new infrastructure. Since they are smaller than new homes, they require fewer materials to construct, leading to lower carbon emissions associated with building.
- Density without disruption: ADUs provide a way to increase urban density — an important factor in tackling the housing crisis — without disrupting the existing character of neighbourhoods. Unlike large apartment buildings, ADUs fit into residential areas seamlessly, minimizing concerns about overdevelopment. Since the landlord and renter will be occupying the same property, the landlord will be motivated to choose a tenant that will be a positive addition to the existing community.
- Rekindling the dream: ADUs can also ease financial pressure on homeowners. The income stream provided by an ADU can make home ownership more affordable while providing economic resilience. This rental income can also contribute to mortgage payments, insulating the homeowner from rising interest rates and reducing the risk of foreclosure.
We have taken the next step and are currently collaborating with builders to implement The Self Funding House strategy into new home developments.
Despite the benefits of ADUs, bureaucratic red tape and outdated zoning laws have often restricted their construction.
Thankfully, many municipalities are now easing restrictions and offering new incentives for ADU development.
For example, in Ontario, recent legislation has simplified the permit process, reduced parking requirements and allowed ADUs to be built in single-family zoned properties, covering both new construction and renovations.
This represents a significant policy shift toward housing diversification and affordability.
Incorporating completed or roughed-in ADUs into new home construction presents a compelling solution to the current housing crisis.
By increasing the rental supply, ADUs simultaneously ease housing demand while reducing rental prices — all without disrupting neighbourhood character.
But for this to truly succeed on a large scale, concerted efforts must be made in policy reform and public education about the benefits of ADUs.
With the right approach, ADUs could prove to be an invaluable tool in our efforts to create more equitable, affordable and sustainable housing — bigger, faster, cheaper and easier!
Your children can afford a house in today’s market by becoming a landlord.