As retirement looms, many older Canadians find themselves confronting a major question: what should they do with the family home? For those living in large, mortgage-free houses, the traditional choices have long been to stay put for as long as possible or to sell and downsize to a condo or a smaller home near to family or in a less expensive community.

Increasingly, however, there’s a third option, which is becoming more popular thanks to new zoning laws in many of the big urban centres throughout Canada.

In order to deal with the housing affordability crisis, cities like Vancouver, Victoria, Calgary, Edmonton, Toronto and surrounding GTA and Ottawa have changed their zoning bylaws to permit homeowners to adapt single-family dwellings by dividing them into four or six units, commonly called multiplexes.

Urban planners refer to this as the “middle-housing option” – the goal is to create more living spaces in residential areas while providing an appealing option to living in one of the many glass-and-steel condos that pepper the downtown urban centres. 

And, says Brandon Sage – who, through his Toronto firm LandLord Property & Rental Management, helps acquire, develop and manage income properties – by turning their homes into multiplexes, people can also generate a healthy retirement revenue.

Sage, whose firm manages 400 “multi-unit” buildings around Toronto, says the multiplex concept really took off in 2023 when City Hall adopted its Expanding Housing Options in Neighbourhoods initiative, allowing people to renovate their single-family homes into duplexes, triplexes, fourplexes and, in some cases, sixplexes on residential lots across the city, without needing a zoning amendment or public consultation. Crucially, the city has also waived developer fees on multiplex development. 

“Someone who owns a large Victorian single-family home is asking: ‘How do I optimize the value of this asset?’” says Sage. With changes to zoning laws, homeowners can generate regular income by adapting the property they already live in and adding additional units. They’re choosing to remain in their homes and familiar neighbourhoods, converting their properties into multi-unit residences, and renting out the additional suites as a steady source of retirement income.

Sage personally owns four multiplexes, and when the time comes, he’ll use the rental income from these to fund his retirement: “I plan on being on a boat in the warmest possible place.” 

This strategy works best when the homeowner converts the dwelling into a four or six-unit multiplex, lives in one apartment, and uses the rental income from the others to offset the costs of mortgage and maintenance, while also building long-term equity. A one-bedroom apartment in a nice neighbourhood in Vancouver or Toronto can fetch up to $2,000 per month in rental income, while the same size unit might go for $1,600 a month in Calgary, Montreal or Halifax. Not only will your personal living expenses be smaller than they were when you were carrying the whole house, when you rent out the other units, your returns will pile up.

The “live and rent” strategy sounds tempting but Sage warns homeowners not to rush into it without considering the pitfalls that inevitably crop up with becoming a landlord, which, he says, “could undermine what would’ve otherwise been a comfortable retirement.” He outlines five key issues that prospective landlords will have to deal with in order to go the multiplex route. And while his advice is based on his experiences in Toronto’s housing market, many of the same issues apply across the country.

City Hall

Although Toronto’s city council agreed to allow multiplex development, “it seems that no one told the staff,” says Sage. He recounts a long and frustrating litany of delays with getting permission to develop multiplexes because the staff are either overwhelmed or just don’t know how to handle these new projects. He suggests that if a city is really serious about promoting this housing solution, it should appoint a property czar who can “knock heads” internally to make sure that permissions flow smoothly and staff is up to speed.

Contractor Delays

Sage advises that you should also prepare for delays the contractors will face getting things like permits, hydro and gas hookups, HVAC systems, minor variances, committee adjustments, etc. “What if I have to wait eight months for Toronto Hydro to upgrade my electrical service from 200 to 400 amps (to increase the home’s electrical capacity)? Sage asks? “If I have no energy coming into place, I can’t get renters in there.” Without tenants paying rent, cash flow can become an issue, which will put a large dent in your income strategy.

Swollen Budgets

Your final renovation budget, notes Sage, will depend largely on scope and size of your project. If you’re demolishing your home and rebuilding, this will generally set you back about $500 per square foot. However, if you’re renovating an existing structure, which could cost significantly less, $200 to $400 per square foot – so for a 1,000 sq.-foot apartment, the reno bill will likely be between $200,000 and $400,000. Although the city has waived developer fees for multiplexes, you will have to budget $5,000 to $10,000 for building permits and structural reviews. You should also factor in costs to install separate hydro meters, fire separations, HVAC controls, and adding private exterior entrances for each unit. Most banks will finance your development with a construction loan, which should be relatively easy to secure if you show them you have paid off your mortgage and have investments and savings. Sage says you should crunch the numbers and consider tax implications with your financial advisor to see if the venture makes financial sense.

Bad Tenants

“What happens if you have a bad renter?” asks Sage. “Suppose your tenant just stops paying rent today, you’re not getting them out in less than a year.” You’ll have to arrange a hearing with the Landlord and Tenant Board, which means time and legal expenses. And while the hearing is ongoing, your rental income will be severely affected.

Unhappy Neighbours

Sage says he understands neighbours who push back against multiplexes: they’ve heard horror stories from other communities and are expecting a worst-case scenario to unfold in their own backyards. He blames this negative impression on multiplex builders who rush to get the job over the finish line and don’t care about the property after it’s closed. This means they might not water the grass or remove the weeds in the front lawn, neglect to build a place for waste bins, forget to account for extra parking spots, or – his pet peeve – put up bright lights that shine into other houses. If you live in one of the units, neighbours might be less likely to complain. “Owners who live in really want the place to look nice, and you can see that pride in every aspect of the home and in their regard for those who live in the community.”