Some properties are readymade with multiple units, while others require work to convert them. A ready-made duplex typically commands a premium in the purchase price compared to a single residential home.
The most common example of a conversion in Canada is splitting a residential home into a duplex, with the second unit being a rented basement with a separate entrance. This is a common way for buyers to narrow the affordability gap, a strategy known as “house hacking.” By living in one unit and renting out another, a homeowner can use rental income to help cover the mortgage and other ongoing housing costs.
Mortgage and insurance rules
If you’re buying a property that is already established as a duplex, triplex, or fourplex you can leverage a minimum of 50% of the rental income to help you qualify for a mortgage, rising to 80% for some lenders.
If you’re living in the main home and have just one more suite, insurers like CMHC allow up to 100% of the gross rental income, making it a fantastic option in meeting affordability requirements. Plus, you’re only required to make a 5% down payment, compared to a minimum of 20% if you don’t live in a unit. This makes it much easier to afford a multiplex.
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For an owner-occupant, that combination of rental income and a lower minimum down payment can significantly change the affordability equation. That said, always run the numbers carefully and account for mortgage payments, property taxes, home insurance, maintenance, vacancy periods, and the cost of creating the additional unit.
If you go through with a conversion make sure to update your homeowner’s insurance, as your existing one is likely to be void.
As-of-right rules
In Ontario you are legally allowed to have a total of four residential units on most residential lots, though rules are more relaxed when there are two extra units (three in total). From May 2023 onwards, Toronto waived development charges for second, third, and fourth units to encourage more conversions.
While these “as-of-right” rules remove the need for any zoning changes, you still need to apply for a municipal building permit before you start any construction or renovations, encompassing safety, structural and building codes. It’s not an easy process to navigate for a first-time landlord.
Converting your home
The following is a general list of what’s required, though precise stipulations vary depending on which town or city the property is in. Rules also change over time, so you’re advised to always look at the latest stipulations from your municipality.
Primary requirements
Units need to have a separate unobstructed entrance and exit, either to the outside or to the common corridor or stairwell area. The exit can’t go through the main dwelling.
They need a kitchen sink, bathroom with a toilet and a shower or tub, as well as access to laundry. Bathrooms and kitchens must have an operable window or exhaust fan.
Main and second floor units must have a height of at least 2.3 metres (7 ft. 6 in.) for rooms, and 2.1 metres (6 ft. 11 in.) for hallways, bathrooms, and laundry rooms.
Ontario’s provincial rules generally dictate that each additional unit created needs a parking spot, though this has been relaxed in many urban areas, including much of the Greater Toronto Area.
Basement rules
Under the Ontario Building Code, habitable basement rooms like living rooms require windows with a glass area of at least 5% of the floor space. It’s generally also 5% in bedrooms, though some older bylaws enable 2.5%. Windows need to be large enough to act as a potential escape route if the room lacks a direct exterior door, with a minimum size of 0.35 square metres (3.77 sq. ft.).
Basement ceilings don’t have to be as tall as above ground. Basements require a minimum height of 2.1 metres (6 ft. 11 in.) covering at least 75% of the area. Underneath beams, ducts, and bulkheads, however, this can drop to 1.95 metres (6 ft. 5 in.).
Some municipalities have grace periods for existing basement units, so it’s worth checking your local rules.
