Financial considerations of a laneway house
There are, however, other financial considerations that laneway housing investors need to consider, says Vancouver’s Sam Wyatt, a realtor with Re/Max Real Estate Services. He likes the concept of infill densification and how it benefits the city, but points out that the typical $250-per-square-foot cost for a new standard house on Vancouver’s west side often nearly doubles for a little lane house. This is because expensive-to-install services like electricity, sewage, sprinklers and heating are required, regardless of the structure’s size. “The building’s footprint is smaller,” says Wyatt, “but the costs are larger.”
Then there’s a second troublesome consideration, Wyatt believes, for those seeking a good rental cash flow. With a lane house often costing more than expected, that new mortgage, combined with the main house’s continuing mortgage, can erase most monthly rental income. Yes, a rental lane house will, in time, add significant resale value to the property and will, in the long term, bring in revenue. But it may not be an immediate cash cow. “For homeowners,” Wyatt warns, “you need to do the math. Is the lane house for family, or for rental? If it’s for rental, investors need to see if the new mortgage payment, the tax increases and the cash flow all work.” These revenue issues, Wyatt adds, don’t apply to families who invest in a lane house for an elderly parent, a non-rental caretaker or university-age children.
The potential for a laneway home’s usage to evolve over time is one of the things that appealed to 63-year-old Elizabeth Ball. She sat on Vancouver City Council in 2006 when she first heard a presentation from Smallworks Studios and Laneway Housing Inc. about the feasibility of laneway housing as part of Vancouver’s proposed EcoDensity program. She liked the idea then, she says, and sitting today with her husband, Douglas Welch, 60, in their one-year-old, $300,000 South Cambie lane house, she likes the idea a lot more now. The initial plan was for the little house to provide Ball’s ailing father with proximity to his family. That didn’t happen, but in the intervening time the two-bedroom, craftsman bungalow has accommodated visiting Dutch friends and Ball’s sister. And someday soon, probably, it will accommodate the couple’s two children. “One of the nice things about this,” says Ball, gesturing around the cozy living room, “is it allows flexibility. It’s for family now. But later, we may move in here ourselves, using it as a base, and rent the main house out while we go travelling. For older couples, it provides choices.”
Smallworks owner Jake Fry, 48, has built 16 lane houses in Vancouver – mostly on Vancouver’s west side, including the Ball/Welch house. He has 24 more on order. He has lived in a 900-square-foot duplex for years, he reports, and believes in the ethics of small. It’s not simply because the average west side density today is 2.1 people per lot (while 50 years ago it was 4.5) or that the demographic is aging. Without increasing the number of people in the area, he says, and especially young people, neighbourhood businesses suffer, schools close, and inevitably, infrastructure and transit costs rise. This is the fundamental problem of suburbs: insufficient density to sustain quality public services. “In the future,” says Fry, “austerity and modesty will become a necessity. The conventional wisdom is more is better, bigger is better. But we’re impoverishing our affluence. If you live more modestly, you liberate yourself from the traditional big home. That’s good for the environment. It preserves neighbourhoods. It makes life more enjoyable.”
This is something Akua Schatz and Brendon Purdy know a lot about. Since they moved into their compact Dunbar lane house this past July, they’ve discovered the realities of small. They admit that downsizing from their 900-square-foot basement suite to their 500-square-foot lane house has been an adjustment. But it is theirs in a way most laneway houses, which are usually sold on a turnkey arrangement, aren’t. Despite being amateurs at carpentry, once Smallworks’ prefab building envelope was erected, Schatz and Purdy did a lot of the interior work, including floors, tiling and doorways, themselves. (Purdy has created a time-lapse video, which can be found online by Googling “akua and brendon build small.”) It was a labour of love. Moreover, in a legal arrangement with Purdy’s family, the young couple acquired ownership of the lane house (with a loan co-signed by the parents), while the parents retained possession of the land (as stipulated by Vancouver’s Laneway Housing regulations).
They have, out of necessity, had to simplify. Among many other things, gone are books from undergraduate days. Says Purdy, “This is a reality check. What do you really need? What space is unnecessary? What stuff’s unnecessary? The larger the house, the more you end up shrinking into it. In urban Japan or Europe, people live in small spaces and go out more.” In the building’s design, the couple have made sure certain things have been included to minimize feelings of being cramped, including a bathtub, lots of closets and windows, a large and efficient kitchen and a roof patio.
They’ve also learned the lane house connects them to the outside more. Back-alley dog-walkers have become friends. They eat out more. They bicycle more. In fact, the basement crawl space beneath their kitchen contains seven bicycles that take them all over the city. They do not own a car. “If we run out of milk,” says Schatz, with a wave toward her in-laws’ house across the backyard, “or if they run out of eggs, or if we need to borrow a car . . . ” She lets the gesture finish the sentence. And on Sunday evenings, one family cooks and the other brings the wine, as the two generations re-explore the old, and often forgotten, virtues of sharing and closeness.