BCBusiness
Upzoning promised untold riches to homeowners willing to redevelop their properties into multiple units. Here’s why that never happened.
It sounds so enticing.
Sure, the maintenance payments seem high—$1,000 a month for some of them—but how bad could that be when you’d have a mortgage that’s smaller than the cost of some people’s kitchen renos?
Tear down that adorable but, really, out-of-date, modest and mortgage-free house that you bought in 1992—one that’s now a lot of work to keep up, with the yard, the aging roof, the plumbing issues and more. Build four homes on the same lot, sell three of them for something like $1,100 to $1,400 a square foot and walk away with a million-plus in pre-tax profits. Or you could house a couple of your kids and rent out the fourth unit for another stream of retirement income.
That’s the potential deal available to tens of thousands of people in this province who bought their homes decades ago and now find themselves sitting on property that has essentially been upzoned by the province.
That’s the picture that David Babakaiff paints for potential clients who are cautiously pondering this opportunity to become “citizen developers,” as he calls them, thanks to the province’s law enacted in December 2023 that says any single-family residential property in a city or town with 5,000 or more population could be redeveloped into duplexes, triplexes, fourplexes or up to sixplexes.
“Now, those houses are in a new asset class. Overnight, they went from single-family to a small multi-family asset,” says Babakaiff, one of the partners at the custom home-building company Alair Homes.
You’d think that would kick off a big building boom throughout the province among the 42 percent of B.C. homeowners who are mortgage free (50 percent in Vancouver proper).
But, it turns out, that’s not happening. At least not yet.
The idea of undertaking a building project that would require at least two million or more to finance is daunting to many hesitant homeowners—even though some builders are offering to do multiplex projects as a joint venture with owners. The subset of builders in B.C. who specialize in smaller projects all say that current land costs and construction costs are stalling what would have likely been a big new wave of housing if it had been an option in the 2010s.
“If cities had allowed this 10 years ago, it would have worked quite well,” says Bryn Davidson, co-owner of Lanefab Design/Build, which has specialized in laneway houses for the past couple of decades. That housing form boomed after the City of Vancouver allowed for it in 2009, and about 6,000 have been built in that city alone. Davidson has a few multiplex projects on the go, partly a result of his ability to get slightly more square footage than nominally allowed because he is using passive-house techniques to create net zero energy-efficient homes.
Jake Fry, owner of Smallworks, who has spent almost two decades building laneway homes, is even more blunt about current prospects.
This is only an option for people who bought their property years ago, are mortgage-free and are able and willing to finance the significant construction costs—or enter into some kind of joint venture with a builder, he says.
“If you go buy a piece of land now, it doesn’t work,” says Fry; other builders agree.
Daniel Clarke is another person who has been seeing flurries of interest from different types of potential fourplex owners, but the initial enthusiasm dies off as people grapple with the financial realities.
Plenty of families are thinking of developing their own property or going in jointly to buy land and build, says Clarke, an architect whose site explains all the complexities of the new form and who has fielded dozens of calls, including inquiries from small builders—those who’ve specialized in duplexes and the odd triplex in the past—looking at whether they can make it work. Full-time developers are trying to figure out how to capitalize on this new possibility. There are even realtors who call him seeking insight into potential.
“What everyone has found,” Clarke says, “the cost to build is too high [estimates are around $400 a square foot these days] and the cost of land is too high.”
Eventually, he typically hears back from all of those groups that they’re waiting and pondering.
Everyone is looking at how to tinker with the equation to make fourplexes work, but it’s tough. Land is slightly cheaper in the outer suburbs, but then the rents or sales prices are lower there, too, and that wrecks the formula. Some enthusiasts think it would help if slightly more square footage were allowed per site. But then, Clarke says, that just adds more $400-a-square-foot costs and the need for buyers who can afford even higher prices.
“A drop in land values might help but construction costs ballooning would outpace that,” he says. Despite all those negatives, there are some projects going ahead here and there. Not a flood, for sure. Vancouver leads the way with 517 applications, although only 122 have had building permits issued so far. Surrey has had 52 applications, 19 of which have gotten permits. In Richmond: 28 applications since the provincial law came into effect in June 2024. In Burnaby: 46 applications since then, with six actual permits issued. The City of North Vancouver, which is otherwise booming with new housing, has had none.
It’s nothing like the volume of laneway homes that Vancouver has seen, and it’s certainly nowhere near enough to make any kind of dent in the expected demand for housing in B.C. That need was recently pegged at 500,000 to 700,000 units by 2030, according to a recent analysis by Braden Batch, the lead economist for B.C. with Canada Mortgage and Housing Corporation.
Those that are going ahead are being propelled less by the legislation and more by enthusiastic builders who coach people through the process. Fourplex proponents like Fry, Clarke, Davidson and Babakaiff are willing to put in that extra effort. (The vast majority of eligible homeowners haven’t even heard of their new option.)
Babakaiff, who won an award for a fourplex he built on Vancouver’s west side before the new provincial rules came into place, has several projects on the go. But he has developed an elaborate set-up to try to make the process as appealing as possible to homeowners. He has built a website, vanplex.ca, that allows you to enter an address and calculate construction costs, likely selling price and likely profit.
For an East 17th Avenue address in Vancouver that he entered at random, the program calculated that it would cost $2.476 million to build 4,900 square feet of fourplex on the site of what is currently a single- family home, with about $163,000 in financing costs. Three of the units were estimated to bring in $4.5 million once sold, with the largest one, valued at $2.8 million, kept for the owner. The pre-tax profit on the whole venture: $2.06 million.
He has also developed a team to handle different aspects of what is inevitably going to be a stressful project for any owner: a construction mortgage lender (a lot of banks are not yet comfortable with financing multiplexes), a realtor to help figure out what’s the most saleable in terms of design, a tax specialist to minimize taxes on the profit, a general contractor, an architect and a rental agency for those thinking of renting rather than selling.
He ultimately tells many people that a multiplex just won’t work for them. And he knows people for whom it just seems too risky. They’d rather just sell as is, downsize, and pocket some of the great gains they made in the last 30 years of holding real estate. And that’s enough for them.
We ran a typical detached home in the 4200-block of Blenheim Street, in Vancouver’s Dunbar-Southlands, through vanplex.ca (a cost simulator by David Babakaiff) to estimate potential multiplex profits.
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