Updated October 3, 2026 · DF Property Management
The rule in one sentence
Under Ontario's Planning Act, as amended by the More Homes Built Faster Act, 2022 (Bill 23), municipalities cannot prohibit up to three residential units on a parcel of urban residential land: that is, a lot in a settlement area served by full municipal water and sewer.
These extra units are called additional residential units, or ARUs. They used to be called second suites, basement apartments, granny flats or coach houses.
The permitted combinations
On a lot with a detached house, semi-detached house or townhouse, the provincial permissions allow:
- Three units in the main building — for example, the main house plus a basement unit and a third-floor unit; or
- Two units in the main building plus one in an ancillary building — a garden suite, laneway suite or converted garage.
The province sets the floor; it doesn't stop a city from going further. Toronto permits up to four units in low-rise residential buildings citywide (since 2023), and up to six in a number of wards (since 2025).
What municipalities can no longer require
Bill 23 removed several common barriers for ARUs:
- Minimum unit sizes. A zoning by-law can't set a minimum floor area for these units. The Building Code still sets minimum room sizes.
- Heavy parking requirements. The province limits the parking a municipality can demand for ARUs. Under O. Reg. 299/19, a required space may be tandem, and where the main house doesn't need parking, the ARUs don't either. Toronto has already removed most parking minimums.
- Development charges and parkland fees on qualifying second and third units (see below).
The 2024 zoning overrides
In late 2024, Ontario amended O. Reg. 299/19 to strip out more of the zoning rules that were forcing ARU projects into minor variance hearings. For parcels of urban residential land with ARUs, the regulation:
| Zoning standard | Provincial override |
|---|---|
| Angular planes | Don't apply to buildings with ARUs |
| Lot coverage | At least 45% coverage for all buildings and structures |
| Floor space index (FSI) | Doesn't apply to parcels with ARUs |
| Minimum lot size | ARU-specific minimums don't apply |
| Building separation | Capped at a maximum of 4 metres |
Setbacks, height limits and the Building Code still apply. Toronto updated its own zoning for ARUs, garden suites and laneway suites in July 2025 to reflect these changes.
Development charges
Under the Development Charges Act, development charges are generally not payable for:
- A second or third unit created inside an existing detached, semi-detached house or townhouse, within the provincial limits.
- One unit in a building ancillary to an existing house, as long as the house has no more than two units and no other ancillary building has a unit.
- A second unit in a new house, where ancillary buildings contain no more than one unit in total.
- In an existing rental building with four or more units, the greater of one unit or 1% of the existing units.
Toronto goes further. Its development charges by-law exempts the second, third and fourth units, and reduces the charge for the fifth and sixth units to zero, on parcels with no more than six units. Parkland dedication is also waived for these small projects.
What hasn't changed
- The Building Code. Every new unit needs a building permit and has to meet fire separation, exit, alarm, ceiling height and plumbing requirements. Under the code, a three-unit house is treated as an apartment building, and drawings for a third unit generally must be prepared by an architect, engineer or BCIN-qualified designer.
- Servicing. Water, sewer and electrical capacity may need upgrades — and the costs are yours.
- Site access. An ancillary unit needs fire department access from the street.
- Trees. Municipal tree by-laws still protect large trees on the lot.
- Condo and other private rules. Provincial zoning permissions don't override a condominium declaration or a restrictive covenant on title.
Renting ARUs
An ARU is a rental unit under the Residential Tenancies Act like any other. A unit first occupied as a residence after November 15, 2018 is generally exempt from the annual rent increase guideline, but notice rules, the Ontario Standard Lease and the eviction process all still apply.
Practical points that decide how well a three-unit house rents:
- Separate utilities — or a clear, written split in each lease.
- Sound separation between floors. Most complaints in plexes are about noise.
- Laundry — shared, scheduled, or one machine per unit.
- Storage, bins and snow — who does what, written into the additional terms.
- Insurance — a multi-unit rental policy, not a homeowner's policy.
Where ARUs make the most sense in the GTA
Wide lots with laneway access in Roncesvalles, Leslieville and the east end suit a laneway suite. Deep post-war lots in Etobicoke and Scarborough suit garden suites. Brampton, Mississauga and Vaughan already have large numbers of basement units in houses built since the 1990s. Many of those were built without permits, and legalizing them is often the first ARU project.
Buying a house with ARUs in mind
If you're buying specifically to add units, check before you firm up. Look for a side entrance or room for one; basement height (1.95 m is the Building Code minimum for a basement unit); the electrical service size; the water service and sewer lateral; and whether there's a lane, a deep rear yard or a mature tree in the way. An existing unpermitted basement apartment is not a legal unit — budget to bring it up to code, and remember any sitting tenant stays protected by the RTA.
A planning sequence
- Confirm the lot — zoning, municipal services, lane or street access, protected trees.
- Model the numbers — construction cost, expected rents, development charge exemptions, financing, property tax after reassessment.
- Design to the code — with a qualified designer, especially for a third unit.
- Permits — building, ESA and any tree permit.
- Build, inspect, close permits.
- Lease up — with separate leases and clear additional terms for each unit.
How we help
We manage small multi-unit properties as a portfolio, not three separate headaches. Multi-unit management covers leasing, rent collection and maintenance for every unit. Our renovations team handles conversions, and residential management takes care of the house as a whole.
General information, not legal advice. Planning Act permissions, O. Reg. 299/19 and municipal zoning change often; confirm the rules for your specific lot with the municipality and a qualified designer.