How Much Does It Cost to Build a Laneway Home in Toronto (2025)?

Why More Homeowners Are Choosing Them Over Basement Apartments or Additions

If you live in Toronto and have a property that backs onto a laneway, you’ve probably heard of laneway homes, and you might be wondering if building one is worth it.

In 2025, laneway suites have become one of the most popular ways for homeowners to create extra living space or generate rental income. But how much do they really cost, and how do they compare to other options like basement units or full home additions?

Let’s break it down in simple terms.

The Average Cost to Build a Laneway Home in Toronto (2025)

Building a laneway suite in Toronto now costs between $400,000 and $550,000, depending on the size, layout, and finishes.

Here’s a general breakdown of where the money goes:

Item

Estimated Cost

Drawings & Permits

$25,000 to $40,000

Construction

$350,000 to $450,000

Utility Hook-ups and Site Preps

$15,000 to $30,000

Taxes (HST)

13% Extra

 

Most laneway homes range between 600–1,000 square feet and are fully self-contained with a kitchen, bathroom, bedroom, and separate entrance.

While the cost might seem high, many homeowners look at this as a long-term investment — especially if you plan to rent it out.

Why Laneway Homes Are Becoming So Popular?

More Toronto homeowners are choosing laneway suites instead of basement apartments or expensive home additions. Here’s why:

1. More Privacy

Laneway homes are fully detached, so renters or family members have their own entrance, outdoor space, and no shared walls. It’s ideal for multigenerational living or private rentals.

2. Better Light & Comfort

Unlike basement units, laneway homes offer natural light, ventilation, and above-ground living — making them more attractive to renters.

3. No Need to Split or Sell Land

You still own your full property. You’re just making better use of the space you already have — especially if your backyard connects to a laneway.

4. Rental Income

Most 1-2 bedroom laneway homes in Toronto can bring in $2,500 to $3,500 per month in rent, helping you offset mortgage payments or even generate profit.

5. Adds Value to Your Property

A well-built laneway suite can increase your home’s resale value by hundreds of thousands of dollars. Buyers see it as a flexible space they can use for family, work, or income.

Laneway Homes vs. Basement Apartments vs. Additions

Here’s a quick comparison to help you decide what fits your needs:

Feature

Laneway Home

Basement Apartment

Home Addition

Privacy

High

Low

Medium

Rental Income

High

Medium

Low

Natural Light

Excellent

Poor

Good

Separate Entrance

Yes

Yes

Sometimes

Build Time

6–9 months

2–4 months

8–12 months

Cost

$400K–$550K

$80K–$150K

$250K–$500K

Impact on Main House

None

Shared space

Shared space

Is Building a Laneway Home Worth It?

If your property qualifies under the City of Toronto’s laneway housing rules, a laneway home can be a smart and flexible investment. Whether you want to create space for aging parents, generate rental income, or increase your property value, it’s worth exploring.

And in a city where space is limited and housing prices keep climbing, using your backyard to its full potential just makes sense.

 

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