After the last of their three children moved out, Joe and Rosalee Mihevc wanted to downsize from their 3,000-square-foot house on the west side of Toronto. The couple considered leaving the city — too much of a lifestyle change, they decided — or buying a condo in another neighborhood, but they couldn’t possibly afford it amid the city’s housing crunch.
So they’re moving to their backyard.
Last year, the Mihevcs erected a two-bedroom, 1,300-square-foot cottage in the grassy patch behind their house. The cost, which the family covered using a home equity line of credit, was about 500,000 Canadian dollars (or $350,000), roughly half what they would have paid for a condo in the area.
“I did 70 percent of the work myself,” said Mr. Mihevc, 70, who served on Toronto’s City Council for nearly three decades before retiring in 2021 to become an adjunct professor of human geography and urban studies at York University.
The question now is which of their children will get to live in the main house. “My kids are having kids, and there’s no way they can afford a big enough place to live,” he said.
It’s a common conundrum in Canada’s largest city, where a drastic inventory shortage and a ballooning population have set home prices skyrocketing. In an effort to ease the congestion, Toronto began allowing residents to build “garden suites” — defined as “self-contained living accommodations in rear yards” — on their properties in 2022. Olivia Chow, Toronto’s mayor, called the city’s housing market “a dire situation, a disaster,” in an interview.
“For several decades, all three levels of government stopped building housing,” Ms. Chow said. “We have to fix that by building more and building faster.”
The benchmark price for a home in Greater Toronto peaked at 1.32 million Canadian dollars (about $920,000) in mid-2022, before settling back to about 1.1 million Canadian dollars ($765,000) last summer — a 100 percent increase over the past decade. The city is scrambling to add more inventory, including 65,000 new affordable-housing units, some of which will be built atop municipal parking lots. But it won’t be enough to house everyone. According to Statistics Canada, more than 1.3 million immigrants settled in the country between July 2023 and July 2024. Nearly 14 percent of them landed in Toronto, according to a municipal government report. While the city welcomed many newcomers (not all, however), it didn’t build adequate housing for them.
“Obviously, we horrifically underestimated population growth,” said Paul Calandra, the housing minister for the province of Ontario. “Nowhere was it projected that we’d have 800,000 people pour into the province, the vast majority of them into the Greater Toronto area.”
Hence the garden suites. Thus far, homeowners have been slow to embrace them as a solution. As of December, according to a report by Laneway Housing Advisors, a Toronto consulting firm, the city had received just 400 applications to build one. Mostly, these backyard annexes have become a way for families, like the Mihevcs, to house two generations: their elders and their cash-strapped children.
Mr. Mihevc also saw an opportunity to launch a garden suite business, Humewood Homes, which helps clients with design, permitting and construction. “We had an open house for Humewood in my garden suite in October, and 100 people came through,” said Mr. Mihevc, who runs the company with two partners. “We’re getting two or three calls a week from potential customers.”
For homeowners who cannot afford to move and may want some income from a rental unit, the math makes sense. The 2022 law limits the size of garden suites to 1,290 square feet, with another 645 square feet of basement space. Some Toronto contractors are now promoting suites for as little as 142,000 Canadian dollars ($99,000). Meanwhile, the average price for a condo in Toronto was $713,801 during the third quarter of 2024, according to the Toronto Regional Real Estate Board.
Toronto is the first North American city to actively encourage citizens to build these backyard bungalows, offering forgivable loans of up to 50,000 Canadian dollars ($35,000). It also offers rebates of up to 16,080 Canadian dollars ($11,100) on construction materials for garden suites or “laneway houses,” similar structures that are built in small alleyways behind houses.
In downtown Toronto, where many single-family houses take up space that might hold apartment buildings in other cities, homes often list for 2 million Canadian dollars ($1.4 million) or more. For people looking to buy an apartment, Toronto actually has plenty — just the wrong kind. An October report from Statistics Canada pointed out that the median living area of a condo built in the 1990s was 947 square feet. For those built after 2016, it’s 640 square feet.
“Families aren’t going to move to a 400-square-foot unit in the Entertainment District,” said Christopher Bibby, a broker specializing in downtown condominiums. “Developers push this narrative of a housing shortage, but in fact they didn’t build what was really needed.”
Given the choice, Ryan Rohin would have bought a condo or a house for his mother, Shoba Rohin, so she could be close to him; his wife, Risa; and their two toddler sons in Toronto’s Scarborough neighborhood. “Everything was at least a million,” said Mr. Rohin, 39, a senior manager with TD Bank. “When we heard that garden suites were legal, we engaged an architect the same week.”
Working with Lanescape, a Toronto firm specializing in laneway houses, and MBC Homes, a local contractor, he spent 450,000 Canadian dollars ($313,000) on a sleek, 645-square-foot garden suite inspired by Japanese and Scandinavian design. Now his mother is living in the yard.
“I love the small suite,” said Ms. Rohin, 67, a project manager at a technology firm. “This is all a person needs. And my grandsons knock on my door every night to invite me over. I feel so blessed.”
The entryway to the little house is paneled in fluted hardwood and has a small stone patio. Inside, there’s one bedroom, a den with a Murphy bed and a desk, two bathrooms, an open living area and an outdoor kitchen with overhead heating lamps. Smart lights, blinds, appliances and electronics are controlled by voice commands using Google Home. The suite has heated floors; an exterior pathway to the main house is heated as well.
The prospect of a garden suite may be enticing for grandparents. But if these tiny homes are going to move the economic needle in Toronto, residents will have to warm up to the idea of inviting strangers to live on their properties.
“It’s not a silver bullet, but it’s a very important way to create what I view as civilized rental opportunities in places where renters need them most,” said Craig Race, an architect and co-founder of Lanescape, which began as a housing advocacy organization in 2014. He estimated that Toronto is on track to build 100 backyard houses a year. “And I think we’ll hit 200 a year fairly quickly,” he said.
Of course, there is some resistance. In September, residents of Parkmount Road, in the Danforth district, petitioned their city councilor to remove permissions for garden suites by amending a zoning bylaw. A spokesman for Councilor Paula Fletcher, who represents the neighborhood, declined to comment.
Last spring, the residents of an East End home planted a sign on their front lawn decrying the “monstrosity” of a garden suite next door, a local news site reported. Another complaint, filed with the City of Toronto, fretted that construction of garden suites could accelerate “tree mortality and tree cover loss.”
But by and large, locals seem to be embracing the idea that their neighbors may have a second house behind the first house. “Our immediate neighbors love ours, and they’re now planning to build one in their backyard,” Mr. Rohin said. “There has been an occasional complaint, but the city inspector always calls to let us know the complaint was closed, because everything we’ve done is permitted.”
Mr. Rohin’s stylish garden suite has even made him a minor celebrity in Toronto, where he’s spoken at trade shows and made media appearances. While most of the suites designed by Lanescape “tend to look more traditional,” Mr. Race said, “a few, like Ryan, have gone for modern contemporary.”
Across town, Mr. Mihevc’s miniature dwelling has inspired a few family friends to build their own tiny homes. “We’re getting pushed into it, but it might be the best thing ever for mental health, family connections and all of the social capital built up in more communal forms of living,” he said. “We’ll tell in a few years if there’s a payoff.”
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