Unlocking the Potential of Your Property: A Guide to Infill Development in the Okanagan

As a property owner in the Okanagan, you may be sitting on untapped potential. With the region's evolving housing landscape, there's an opportunity to maximize your property's value through infill redevelopment. This approach not only enhances land use efficiency but also contributes to addressing the housing needs of our growing communities.

What is Infill Housing?

Infill housing refers to the development of additional residential units within existing neighbourhoods, utilizing vacant or underused parcels of land. This can include building carriage homes, four-plexes, or even small apartment buildings on lots traditionally occupied by single-family homes. The goal is to increase housing density in a manner that maintains the character and livability of established communities. 

Why is this needed in the Okanagan?

Rapidly growing Okanagan regions such as Kelowna have implemented fast-track processes and dedicated infill housing strategies to prepare for future growth as one of Canada’s fastest-growing cities. Provincially, the BC government also recently introduced legislation requiring municipalities to update zoning bylaws to allow more infill housing to be built to meet targets aimed at addressing a shortage of homes across the province, along with rolling out a series of development cost charges and property transfer tax incentives.

Five Benefits of Infill Development for Landowners

1. Maximized Land Value: By adding more units to your property, you can increase its market value, build long-term cash flow from rental revenue, or sell the finished building for a larger one-off payday.
2. Utilization of Existing Infrastructure: Infill projects often leverage existing roads, utilities, and services, reducing the need for extensive new infrastructure investments.
3. Access to Financing Options: Using your home equity or financing options such as those offered by the Canada Mortgage and Housing Corporation (CMHC) provides financing solutions tailored for infill developments, making it more accessible for qualifying landowners.
4. Contribution to Community Growth: By providing additional housing options, you play a role in addressing local housing shortages and supporting community diversity.
5. Tax benefits: By partnering with a developer instead of outright selling, a property owner can potentially save on capital gains taxes and/or defer taxes to a later date. 

An Example of Leveraging Home Equity for Infill Development

Consider a homeowner in the Okanagan who owns a single-family home with an income suite (but lives elsewhere) on a commonly sized, MF1-zoned lot in Kelowna's Core Area. Their house is located near the front of their property, and with the urban location and a city-led push for gentle density, this property is well-positioned for infill redevelopment.

Rather than selling the home outright, the owner explores building a new three-unit building with parking on the excess land, creating a total of five rental units. Currently, the estimated hard construction costs for a modest wood-frame project are between $225 and $300 per buildable square foot, with soft costs typically adding another 15% to 40%. Land value depends a lot on location, market timing, lot dimensions, and more, but currently in Kelowna, these types of urban lots are selling in the $700,000 - $1,000,000 range. 

To finance the project, the homeowner utilizes their existing home equity and applies for CMHC’s MLI Select mortgage loan insurance program for projects of five units or larger. Designed to encourage sustainable, accessible rental housing, this program offers favourable terms for multi-unit residential development, including:

• Up to 95% loan-to-cost ratio (”LTC”) for new market rental construction (in reality, it’s likely closer to 80%-90%)
• Amortization periods up to 50 years if the project meets the 100-point MLI Select criteria
• Incentives for energy efficiency, affordability, and accessibility targets

With this funding in place, the homeowner can proceed without needing substantial additional capital up front. Once complete, the new units are rented out, generating a reliable income stream. This not only offsets financing and operational costs but also supports long-term financial stability, unlocking the potential of the property while contributing much-needed housing to the community.

How to Identify if Your Property is Suitable for Infill Development

Ideal Candidates Have:

• An Urban Location: Properties within city limits, especially those close to amenities and public transit.

• An Adequate Lot Size In a Correctly Zoned Area: Lots that meet the minimum size requirements set by local zoning bylaws are required. In Kelowna, more than 1,300 MF1-zoned laneless lots in the City's Core Area are now eligible for 'fast-track' approval.

• Access to Services: Availability of water, sewer, and other essential services for development.

• Generally Flat Topography: While not necessary, level lots are generally much easier and more cost-effective to develop.
  
  

Less Suitable Candidates Have:

• Rural or Isolated Locations: Properties far from urban centers may lack the necessary infrastructure to develop infill housing.

• A Small Lot Size: Lots that don't meet the minimum size requirements for additional units are not eligible.

• Restrictive Zoning: Areas with zoning that doesn't permit higher-density housing are a non-starter. Learn more about Kelowna’s zoning definitions and maps here.
  

Key Considerations

Before moving forward with an infill development project, it is important to carefully assess a few key factors. Start by reviewing your local zoning regulations or engaging an expert to understand what types of housing are permitted on your property and whether any rezoning or variances may be required. Design guidelines should also be considered, as most municipalities have specific requirements in place to ensure that new developments maintain the character and livability of existing neighbourhoods.

Financial planning is another crucial step, including obtaining accurate cost estimates and exploring available financing options, grants, or incentives that may be available to support your project. Lastly, successful infill developments often include early engagement with neighbours and the surrounding community, which can help address concerns, foster goodwill, and smooth the overall approval process.

Taking the Next Step

Embarking on an infill development project can be a rewarding endeavour, both financially and personally. To navigate the complexities of zoning, design, and construction, consider partnering with experienced professionals who specialize in such developments.

At SNFLWR, we offer comprehensive services and partnerships to assist landowners in realizing the full potential of their properties through thoughtful and efficient infill development. Learn how we can help you transform your property into a valuable asset that contributes positively to your community and your future.

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