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Is Multigenerational Housing on the Rise?

Housing is changing.

We see it all the time in one form or another. The urban sprawl has transformed into densification.

Houses have gotten smaller. Yards have shrunk. We’re building up instead of out.

There is a noticeable shift from detached homes to townhomes.

And there are a lot of reasons for that. Lack of space, affordability, and even how we live and the demands we have from a home has changed.

And with that change, another trend is now gaining momentum, multigenerational housing.

Multigenerational housing refers to when two or more adult generations live at one property.

There are two main reasons for this living arrangement:

  1. Adult children wanting parents to live with them to
    a) Help them get into the housing market
    b) Help them raise their young kids
  2. Seniors moving in with their children as they get older and need extra assistance.

The largest increase is currently coming from retired parents selling and moving into an in-law suite in their child’s house.

However, in the last few years, the number of younger adults choosing to buy and live with their parents is on the rise. Instead of moving into the parents' house, more are looking to move to a home with a secondary living space.

If housing costs stay high, don’t be shocked if the demand for multi-unit housing increases.

How many people are actually living in multigenerational housing?

Demand for multi-unit housing is up, but demand for housing is up in general, so are headlines that talk about multigenerational housing simply speculating?

Well, the 2021 census from Statistics Canada found that multigenerational households have grown relatively quickly over the last 20 years (+45%) and now represent 7% of all households.

And Toronto has the highest percentage of people living with multiple adult generations (almost 12%) in the country, followed by Vancouver.

Image Source: Financial Post

Almost 1 in 10 kids (9%) under the age of 14 in the census, were living in the same household as a grandparent in 2021, the vast majority of these children live in a multigenerational household (living with at least one parent and at least one grandparent).

The growing trend isn’t just coming from young adults priced out of the housing market…

As of 2016, 11% of immigrant families in Canada lived in multigenerational housing, compared to the 6% of non-immigrant families.

Our population growth is largely immigration-based. So, when we see that immigrant families are twice as likely to live in multigenerational housing, it doesn’t take a genius to see there will likely be a growing demand for this type of home.

And the government knows it.

The Liberal government rolled out a multigenerational housing tax credit in their 2022 budget.

In order to tax credit, the secondary unit and its residents must meet a few eligibility requirements:

  • “The residence must be for seniors over the age of 65, or adults over the age of 18 who are eligible for the disability tax credit within the taxation year that includes the end of the renovation period.
  • The primary property must be owned by the eligible person, the spouse or common-law partner of the eligible person, or a qualifying relation of the eligible person, which could be a parent, grandparent, child, grandchild, brother, sister, aunt, uncle, niece, or nephew.
  • The secondary unit itself must be a self-contained dwelling unit with a private entrance, kitchen, bathroom facilities, and sleeping area. This could be a brand new unit, or an existing unit that requires renovations to meet the requirements of a secondary unit.
  • In most cases, the unit must be inhabited within 12 months after the renovation is completed.”

The government knows it can’t meet the demand for new housing. Instead, they’re going to largely rely on everyday Canadians to add additional units to properties to increase supply.

This tax credit is another example of that. The government’s essentially saying, "we know there’s a need for this type of housing. We don’t have the time and resources to address this problem. You go put in the time and work and we’ll give you a tax break."

What does this mean for investors?

While investors may not qualify for this newly proposed tax credit (unless you were adding the second suite to your own home for a family member), there is still an opportunity to be had here.

Adding secondary and third units to properties is becoming more common for investors and these infill projects are great ways to meet demand.

Multigenerational houses differ from your standard second suite design.

Basement suites aren’t ideal for aging parents or young families. With an older demographic, ground-floor units are ideal. So, it's becoming increasingly common for families to build these homes to fit their unique needs. And there are already a handful of companies in Ontario specializing in designing homes for multigenerational living.

The addition of accessory dwelling units (ADUs) could be a game-changer.

Image Source: www.SuiteAdditions.com

Being able to add a flat off of the house or behind the house can provide added privacy and a sense that both parties have their own home and space, even if it is on the same lot. And you can add ground-floor living to your property without major renovations to the existing home.

Since the province has approved the addition of ADUs, more and more towns and municipalities are allowing them.

And whether you’re planning to rent out multiple units on a property, or build and sell, it’s good to know that demand is on the rise.

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