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Alexis Levenson knew she found the perfect house when she saw it: a 1950s-style, semi-detached bungalow with plenty of space and light — and an unfinished basement she could easily convert into a legal secondary unit to rent out to pay off her mortgage.
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In 2022, Levenson, 42, who works at a fintech startup, was looking to upgrade from her condo to a larger space while the market was down, in the hopes of starting a family soon. She made an ultimatum offer of $700,000 on a bungalow in the east end of Toronto and submitted permits to renovate the basement even before the deal officially closed in February 2023.
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“I knew that I wouldn’t be able to afford the house on my own if I was to ever go on maternity leave or need to take time off work, or get fired,” said Levenson. “So, the intention was that the mortgage would be able to support me if anything happened to my full-time job.”
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The extra income covers nearly two-thirds of her monthly mortgage payment plus property taxes, she said.
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Levenson is part of a growing pool of homeowners using their extra space to pay off their mortgage. More than one-third of Canadians said they need to rent out part of their home to afford ownership, up from 25 per cent in 2021, according to a June report from Mortgage Professionals Canada.
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“Affordability is increasingly stretched in this economy,” said Lauren van den Berg, chief executive of Mortgage Professionals Canada. “For some of these households … renting part of the home is no longer just a lifestyle choice.”
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Van den Berg said she has seen homeowners rent out secondary suites, basement units or garden suites and laneway homes, which are small additional dwelling units on a property.
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And it’s a strategy that buyers such as Levenson are taking into consideration even before they move in.
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Alex Blenkarn, a Peterborough-based realtor at Royal LePage Our Neighbourhood Realty, said over the past year first-time buyers have been asking him more questions about the potential for rental income as they tour properties. Even though interest rates on many mortgages have dropped to about four per cent, home prices are still out of reach, especially for Canadians buying solo, Blenkarn said.
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He recounted working with a recent buyer who, as a single person, could only qualify for a property listed at less than $300,000. However, with the goal of renting out the basement, this opened options to consider properties priced as high as $400,000.
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This trend also depends on region, according to the Mortgage Professionals report. The proportion of respondents who said they would need to depend on rental income made up just 19 per cent in the Prairies but climbed to 55 per cent in British Columbia.
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This doesn’t surprise Adil Dinani, a Vancouver-based realtor with Royal LePage West Real Estate Services, who said an additional unit is one of the top three requirements most of his clients make. In British Columbia, the average home price was $946,431 in June, the highest across the country, compared with the national average of $696,078, according to the Canadian Real Estate Association.