Basement Apartment Conversion in Toronto: Requirements and Costs

# Basement Apartment Conversion in Toronto: Requirements and Costs

With Toronto's housing affordability crisis showing no signs of easing, converting a basement into a legal rental apartment has become one of the most popular home improvement projects in the city. A basement apartment can generate $1,500 to $2,200 or more per month in rental income while adding significant value to your property. However, creating a legal secondary suite involves meeting strict building code and fire safety requirements. This guide covers everything Toronto homeowners need to know about basement apartment conversions in 2026.

## Ontario's Secondary Suite Legislation

The legal landscape for secondary suites in Ontario has shifted dramatically in recent years, largely in favour of homeowners who want to add rental units to their properties.

### Bill 23: More Homes Built Faster Act (2022)

The Ontario government's Bill 23, the More Homes Built Faster Act, made sweeping changes to how municipalities handle secondary suites:

- **As-of-right permissions** — municipalities cannot prohibit secondary suites in most residential zones, meaning you do not need a rezoning or special permission to create one

- **Up to three units per lot** — Ontario now permits up to three residential units on most single-family lots (the original house plus two additional units, such as a basement apartment and a garden suite)

- **No additional parking required** — municipalities cannot impose additional parking requirements for secondary suites

- **Reduced development charges** — secondary suites are exempt from development charges in many cases

### Toronto's Secondary Suite Policies

The City of Toronto has been relatively progressive on secondary suites, having permitted them in most residential zones even before Bill 23. However, Toronto still requires that all secondary suites:

- Comply with the Ontario Building Code

- Obtain a building permit

- Pass all required inspections

- Be registered with the City (through RentSafeTO for buildings with 3+ units, or through the municipal licensing process)

- Meet fire safety, health, and maintenance standards under Toronto's property standards bylaws

The key point is this: while you have the right to create a secondary suite, you must still build it to code and obtain proper permits. An unpermitted basement apartment is still illegal, regardless of the provincial as-of-right provisions.

## Minimum Ceiling Height Requirements

Ceiling height is often the biggest challenge — and the biggest expense — in Toronto basement conversions. The Ontario Building Code sets clear minimums:

- **Habitable rooms** (living room, bedroom, kitchen): minimum **1.95 metres (6 feet 5 inches)** clear ceiling height

- **Non-habitable rooms** (bathroom, laundry, hallway): minimum **1.85 metres (6 feet 1 inch)** clear ceiling height

- **Beneath beams, ducts, and pipes**: height can be reduced to **1.85 metres** for short spans, but the overall room must still meet the minimum

Many older Toronto homes — particularly bungalows and wartime homes in East York, Scarborough, North York, and Etobicoke — have basement ceiling heights of 6 feet or less. In these cases, **underpinning** (lowering the basement floor by excavating beneath the existing footings) is required to achieve the necessary height.

### Underpinning Costs

Underpinning is one of the most expensive components of a basement conversion:

| Scope | Estimated Cost |

|-------|---------------|

| Partial underpinning (lowering select areas) | $30,000-$60,000 |

| Full basement underpinning | $50,000-$100,000+ |

| Bench footing alternative | $20,000-$40,000 |

The cost depends on the depth of excavation, soil conditions, access, and the size of the basement. A structural engineer must design the underpinning, and the work must be performed by an experienced underpinning contractor with proper shoring and sequencing.

## Fire Separation Requirements

Fire safety is the most critical aspect of a legal basement apartment conversion, and it is the area where the Ontario Building Code is most stringent:

### Fire-Rated Assemblies Between Units

- A minimum **1-hour fire resistance rating** is required for all separations between the basement unit and the upper unit

- This includes floors, walls, and ceilings that form the boundary between the two dwelling units

- Fire separation must be continuous — every penetration (pipes, ducts, wires, recessed lights) must be properly fire-stopped with approved materials and methods

### Specific Fire Separation Requirements

- **Ceiling assembly** — the floor/ceiling assembly between the basement and main floor must be rated to 1 hour. This typically involves specific combinations of drywall layers, insulation, and framing configurations

- **Shared walls** — any walls between units (such as around a shared stairwell) must also achieve 1-hour fire resistance

- **Ductwork** — HVAC ducts that pass through fire separations must have fire dampers installed

- **Plumbing and electrical** — all penetrations through the fire separation must be fire-stopped with approved caulking, putty pads, or intumescent materials

- **Doors in fire separations** — must be rated fire doors with proper hardware (self-closing, latching)

### Smoke Alarms and Carbon Monoxide Detectors

- **Interconnected smoke alarms** are required on every level and in every sleeping area of both units

- **Carbon monoxide detectors** are required near all sleeping areas and on every level

- Alarms within each unit must be interconnected so that when one sounds, all alarms in that unit sound

- Alarms between units are NOT interconnected — each unit operates independently

## Separate Entrance Requirements

A legal secondary suite must have its own **separate entrance** that does not require passing through the other unit:

- The entrance can be a direct exterior entrance (side door, rear door) or through a shared vestibule/hallway

- If a shared hallway is used, it must be separated from both units with fire-rated construction

- The entrance must provide a clear, unobstructed path to the public way (street or laneway)

- Stairs to the basement entrance must meet code requirements for width, headroom, handrails, and slip resistance

- Exterior stairs and landings must be designed to handle snow and ice accumulation and must have adequate drainage

Most Toronto basement apartments use a **side entrance** with exterior stairs leading down to the basement level. In semi-detached and row houses, this can be challenging due to narrow side yards, and creative solutions may be needed.

## Egress Window Requirements

Every bedroom in a basement apartment must have an **egress window** — a window large enough for a person to escape through in an emergency:

### Minimum Egress Window Dimensions

| Requirement | Minimum |

|------------|---------|

| Unobstructed opening area | 0.35 square metres (3.77 sq ft) |

| Minimum width | 380 mm (15 inches) |

| Minimum height | 380 mm (15 inches) |

| Maximum sill height above floor | 1,500 mm (59 inches) |

### Window Well Requirements

If the egress window is below grade, a **window well** is required:

- The window well must be large enough to allow the window to open fully and for a person to climb out

- If the window well depth exceeds 600 mm (24 inches), a **permanent ladder or steps** must be provided

- Window well covers are permitted but must be operable from inside without tools or special knowledge

- Drainage must be provided at the bottom of the window well to prevent flooding

Installing egress windows in an existing basement typically costs **$3,000-$8,000 per window**, including cutting through the foundation wall, installing the window, and building the window well.

## Plumbing Requirements

A legal basement apartment must have its own complete plumbing facilities:

- **Kitchen** — sink with hot and cold water supply

- **Bathroom** — toilet, sink, and bathtub or shower with hot and cold water

- **Laundry** — while not strictly required in every case, providing laundry hookups adds value and rentability

### Key Plumbing Considerations

- **Backwater valve** — the City of Toronto requires backwater valves on all sanitary sewer connections to prevent basement flooding during heavy rainfall. This is especially important for basement apartments

- **Separate shut-offs** — each unit should have accessible shut-off valves for maintenance

- **Hot water** — you will need either a larger hot water tank or a tankless system to serve both units, or separate water heaters for each unit

- **Drainage** — basement floor drains, weeping tile connections, and sump pumps must be properly maintained and may need upgrading

- **Sewage ejector pump** — if the basement bathroom is below the sewer line (common in older Toronto homes), a sewage ejector pump is required

## Electrical Requirements

The electrical system is another critical component:

- **Separate electrical panel** — the basement apartment should have its own electrical sub-panel or, ideally, a separate panel fed from the main service

- **Adequate service size** — your home's electrical service may need upgrading from 100 amps to 200 amps (or higher) to support two units. A service upgrade in Toronto typically costs **$3,000-$6,000**

- **Separate metering** — while not always required, separate hydro meters allow the tenant to pay their own electricity. Toronto Hydro can install a separate meter, typically costing **$1,500-$3,000+** plus installation

- **AFCI and GFCI protection** — arc-fault circuit interrupters are required in bedrooms and living areas; ground-fault circuit interrupters are required in kitchens, bathrooms, and any areas near water

- **ESA inspection** — all electrical work must be inspected and approved by the Electrical Safety Authority (ESA), separate from the City building permit inspection

## Parking Requirements

One of the most significant changes from Bill 23 is the elimination of additional parking requirements for secondary suites:

- **No additional parking spaces** are required when adding a secondary suite in Toronto

- This is a major benefit for homeowners in older neighbourhoods where lots are small and on-street parking is already at a premium

- If you have existing parking (driveway, garage), you are not required to provide a dedicated space for the tenant

## Typical Conversion Costs

A full, legal basement apartment conversion in Toronto is a significant investment. Here is a breakdown of typical costs:

| Component | Cost Range |

|-----------|-----------|

| Underpinning (if needed) | $50,000-$100,000+ |

| Framing and insulation | $8,000-$15,000 |

| Fire separation (drywall, fire stopping) | $5,000-$12,000 |

| Electrical (panel, wiring, fixtures) | $8,000-$15,000 |

| Plumbing (kitchen, bathroom, backwater valve) | $10,000-$20,000 |

| HVAC (separate heating/cooling for unit) | $5,000-$12,000 |

| Egress windows (2-3 windows) | $6,000-$20,000 |

| Separate entrance construction | $5,000-$15,000 |

| Kitchen (cabinets, countertops, appliances) | $8,000-$20,000 |

| Bathroom (fixtures, tile, vanity) | $5,000-$12,000 |

| Flooring | $3,000-$8,000 |

| Drywall, paint, trim | $5,000-$10,000 |

| Permits and professional fees | $5,000-$15,000 |

| **Total (without underpinning)** | **$80,000-$150,000** |

| **Total (with underpinning)** | **$130,000-$250,000+** |

## Revenue Potential

The financial case for a legal basement apartment in Toronto is compelling:

| Unit Type | Average Monthly Rent (2026) |

|-----------|---------------------------|

| Bachelor/studio basement | $1,300-$1,600 |

| One-bedroom basement | $1,500-$2,000 |

| Two-bedroom basement | $1,800-$2,200+ |

| Premium finish / newer areas | $2,000-$2,500+ |

Rental rates vary significantly by neighbourhood. Basement apartments in areas with strong transit access — along the subway lines, near GO stations in Mimico, Long Branch, or Weston, or in walkable neighbourhoods like the Danforth, Bloor West Village, or Yonge and Eglinton — command higher rents.

### Return on Investment

Using conservative estimates:

- **Conversion cost:** $120,000

- **Monthly rental income:** $1,800

- **Annual gross income:** $21,600

- **Less expenses (insurance increase, maintenance, vacancy):** $3,600

- **Annual net income:** $18,000

- **Simple payback period:** approximately 6.7 years

- **Property value increase:** $80,000-$150,000+ (a legal secondary suite significantly increases property value)

## Insurance Implications

Converting your basement to a rental unit has important insurance implications:

- **You must notify your insurance company** — failing to disclose a rental unit can void your entire homeowner's policy

- **Your premiums will increase** — expect a 10-25% increase in your homeowner's insurance premium

- **You may need a landlord policy** — some insurers require a separate landlord or rental dwelling policy

- **Liability coverage** — ensure your policy includes adequate liability coverage for tenant-related claims

- **Require tenant insurance** — include a clause in your lease requiring tenants to carry their own renter's insurance

## Landlord and Tenant Obligations

Once your basement apartment is rented, you become a landlord under Ontario's **Residential Tenancies Act (RTA)**:

### Key Landlord Obligations

- **Maintain the unit** in a good state of repair, meeting all health, safety, and maintenance standards

- **Provide vital services** — heat (minimum 20 degrees Celsius from September to June), hot and cold water, electricity (if included in rent)

- **Respect tenant privacy** — 24 hours written notice before entering the unit, except in emergencies

- **Follow rent increase rules** — rent can only be increased once every 12 months, and only by the Ontario guideline amount (unless the unit was first occupied after November 15, 2018, in which case it is exempt from rent control)

- **Use proper legal forms** — standard Ontario lease, proper N-forms for notices

### Rent Control Exemption

An important consideration: basement apartments in homes **first occupied as residential after November 15, 2018** are **exempt from Ontario rent control**. This means you can increase the rent by any amount with proper notice. Basement apartments in older homes that were previously occupied are subject to the annual rent increase guideline.

## Common Mistakes to Avoid

### Not Getting Proper Permits

This is the most common and most costly mistake. An unpermitted basement apartment:

- Cannot be legally rented

- Will not pass a home inspection when you sell

- May not be covered by your insurance

- Could result in City enforcement action, fines, and orders to cease renting

### Insufficient Fire Separation

Fire separation is not optional, and cutting corners puts lives at risk. Common fire separation failures include:

- Using regular drywall instead of fire-rated (Type X) drywall

- Failing to fire-stop penetrations for pipes, wires, and ducts

- Installing non-rated doors in fire separations

- Running ductwork through fire separations without fire dampers

- Leaving gaps or openings in the fire separation

### Inadequate Ceiling Height

If your basement ceiling height is below the minimum and you do not underpin, the space cannot legally be classified as habitable. No amount of creative framing or thin flooring systems can substitute for proper ceiling height if you are significantly below the minimum.

### Poor Moisture Management

Basements are inherently prone to moisture issues. Before converting to a living space:

- Address any water infiltration issues from the exterior

- Install or verify a functioning sump pump and backwater valve

- Ensure proper grading around the foundation

- Use moisture-resistant materials and proper vapour barriers

- Consider a dehumidifier as part of the HVAC system

### Ignoring Sound Transmission

While not a code requirement in all cases, poor sound insulation between a basement apartment and the main floor will make life miserable for both you and your tenant. Invest in sound-rated assemblies, resilient channels, acoustic insulation, and proper floor underlayment.

## Final Thoughts

A legal basement apartment conversion is a substantial project that requires careful planning, professional design, and experienced contractors. The upfront investment is significant, but the ongoing rental income, property value increase, and contribution to Toronto's housing supply make it a worthwhile endeavour for many homeowners.

The most important advice: do it legally. Get your permits, hire qualified professionals, and build to code. The consequences of cutting corners — both financial and safety-related — far outweigh any short-term savings. A properly built, legally permitted basement apartment is an asset that will serve you and your tenants well for decades to come.