Homes with illegal secondary suites have proliferated in Calgary during the last few decades, but with the city ready to crack down in January, investors need to know how to be on the right side of these changes.
“The City of Calgary has spent the last three years providing owners of illegal secondary suites an amnesty period to bring their units up to fire code and obtain legal secondary suite status quite easily, the deadline to take advantage of this is the end of the year,” said Natasha Phipps, a sales agent and investment specialist with CIR Realty. “The city will potentially start to enforce shutdowns of illegal suites next year, so it’s a great time to provide the market with the right kind of suites. There are fewer than 6,000 legal secondary suites in the City of Calgary and an estimated tens of thousands of illegal ones, so we’ll see supply and demand adjust here in the coming years as Calgary moves forward with its plans to start shutting down illegal suites.”
The municipal government has even mentioned establishing a taskforce to deal with the remaining illegal suites, and that likely means tenant migration is nigh. The question, though, becomes where will these people move?
“If they start decreasing some supply in the suburbs, it might push tenants to move downtown where there’s higher vacancy,” said Phipps. “They might be hoping for that, but people live where they live for a reason.”
There’s nevertheless an opportunity to develop legal secondary suites in Calgary and Phipps says that savvy out-of-province investors have already taken note. However, in general terms, housing is very affordable in the city and equity-rich investors are becoming a sizeable presence in the city’s housing market.
“I talk to people from Ontario, specifically, almost every single day,” said Phipps. “The reality is Ontario property owners have seen substantial gains in home equity over the last several years and they’re tapping into it and putting it to work elsewhere in the country. Alberta is a great place to look because there’s less taxation here, so their money goes a lot further than in Ontario. Landlord rules and regulations are a lot more fair compared to Ontario, too, so by investing in Calgary they’re putting their money in a safe place with positive cash flow and great long-term gains.”
Detached and semis are the best types of housing in which to add secondary suites, not just because of their size but because both market segments have led the way in appreciation, especially in the city’s immediate suburbs.
“Appreciation of detached homes was up 10.6% in August, and semis were up 9.9%. Real estate investors in Calgary want cash flow and if they can afford to get detached and semis with secondary suites, that’s where they will find the cash flow. Apartments, conversely, were only up 2.3%.”