Mayor’s task force overlooks major tool to address housing affordability

Thousands of homes could be released into Metro Vancouver's costly rental market

If you’ve lived in Metro Vancouver for any length of time, the topic of housing affordability has likely come up at the dinner table. With the average price of a Vancouver home pegged at more than $1 million, it’s fairly obvious why this issue has captured our attention.

This week, Vancouver City Hall released yet another report on how to increase housing affordability in one of the most expensive places to live on Earth. While the task force should be commended for its efforts, I note the report had one glaring omission.

It failed to address B.C.’s Strata Property Act and how it manages to discourage affordable rental units from entering the market.

Section 141 of the act allows a strata council to limit how many rentals are permitted in a condo complex. In other words, if you are a condo owner and want to place it on the rental market, you may not be able to legally do so.

In fact, even if up to 25% of the condo owners in your strata want to rent their units, the legislation enables the other 75% of owners to impose an outright ban.

24 Hours VancouverOne of the consequences of this legislation is a number of older condo buildings forbid rentals. Many real estate listings even proudly boast “no rentals” as prominently as they do new granite countertops.

In 2010, the province amended the act slightly to ensure prospective purchasers would be protected from rental-averse strata councils.

Developers are now allowed to register with Victoria when they are selling new units that permit rentals. Once this is done, future strata councils cannot override it. Hence, many of the newer buildings that authorize rental suites will have to continue doing so for years to come.

One way to solve our affordability problem might be to modernize the act to ensure it requires a minimum 10% of units in any strata complex can be placed into the rental market. Of course, the legislation would only apply if an individual owner actually decides they want to put their place up for rent.

Strata councils would still be able to ensure 90% of the condo units are owner-occupied.

It’s clear from the city’s report that a lot of work needs to be done to help make Vancouver more affordable. Let’s hope the task force will be open to exploring this during the forthcoming consultation period.

Vancouver's own study proves available rental housing sits empty

The City of Vancouver released a report back in 2009 which had some great analysis on how the Strata Property Act was impacting affordability and access to rental units. Here are a few excerpts to put this whole debate in context:

  • The impact of the prevailing rental restrictions on the potential of the condominium rental market to be rented has been significant.
  • Between 9% and 15% of the apartment condominium stock cannot be rented, representing 6,000 to 10,000 units. Of the remaining stock that allows rentals, more than half of the units had partial restrictions in place. On average, these buildings allowed 15% to 17% of their units to be rented, based on the review of strata bylaws and survey of strata councils.
  • None of the strata buildings had bylaws that permitted more than 50% of their units to be rented. By extrapolation, we roughly estimate that an additional 20,000 to 25,000 units have been excluded from the rental markett as a result of partial rental restrictions.
  • In all three data sets, the smaller buildings were found to be more likely to have a restrictive bylaw in place, while the larger buildings were less likely to limit rentals. The pattern of rental restrictions also showed that as buildings get older, there is an increased likelihood of rental restrictions. According to the review of strata bylaws, restrictions were typically introduced nine years after the registration of the strata corporation. In the survey of CHOA members, the strata corporations adopted their rental restriction bylaws on average after 14 years of occupancy.
  • Generally, Downtown and the West End were found to have the least restrictions of all sub-areas in the city.
  • Since the 1980s, in parallel to the decline of purpose-built rental housing starts, privately owned strata condominiums have played an increasingly important role in the city of Vancouver’s rental housing market.
  • In 2009, there were approximately 23,000 units that were investor-owned in Vancouver or 35% of the city’s apartment condominium stock. More than half of the investor-owned units were located Downtown (53%). Fairview/Kitsilano, and the West End areas housed another 31% of investor units.
  • Canada Mortgage and Housing Corporation’s rental market survey provides estimates of the percentage of condominium rentals in Vancouver. According to the Fall 2008 survey, approximately 17,000 units, or 27% of Vancouver’s apartment condominium stock, were rented.

– post by Daniel


Tremors are here to stay
Vivian Krause signs off

Broken image or link? Click here to report it or visit citycaucus.com/typo.

About The Author

  • Higgins

    But Daniel, Robertson stated publicly that his bike is his ‘Tool”! Ha, ha, ha! 🙂

  • Julia

    If there is going to be an easing of the Strata Act, there needs to be some tools available to Strata Corporations to deal with bad renters and indifferent landlords.

    Reluctance to allow rentals is based on fear and sadly, a lot of that fear is legitimate. Pets, noise, and other bylaw infractions are fined to the owner not the tenant. How does a Strata ensure that renters abide by the same rules that everyone else does.

    Also, when the owner is absent, it is very hard for a Strata to move forward with maintenance requirements – especially if they involve assessments. The owner cannot recover the additional costs in rent and are not living in the deteriorating situation and therefore are far less eager to approve these needed expenditures. As as result – the remaining owners are stuck in procedural gridlock.

    It is not as simple as it appears.

    • Paul T.

      Excellent comment Julia! You’ve hit the nail on the head. The reason why Stratas have banned rentals is because there have been issues with renters not caring to follow the rules and owners who are indifferent to what happens. They view the building as a hotel and their strata fees are enough to cover all the expenses of dealing with their tenant. There are even short term rental companies that rent out suites without even showing their tenants to the building. It’s a procedural nightmare when everything goes well, and when things go south it’s even more tough.

      A Strata’s only option is to fine the owner, but (in my experience) most owners of problem tenants also don’t pay attention to fines until they get up into the thousands of dollars. This delays the process and in the meantime the rest of the owners are stuck with the bill for the problem tenants.

      I agree with Julia, until a more streamlined method of dealing with tenants is developed, please don’t touch the Strata Property Act to force owners to allow rentals.

  • Dean

    Dear Mr. Fontaine:

    In reference to your column this morning in 24 Hours – I specifically chose to purchase my apartment in a building that did not allow rentals. In fact, it was an essential criteria for reasons I don’t feel obliged to list or defend.

    I resent your suggestion that the Condo Act be modified to require a minimum of 10 percent of all units be available for rental. You are talking about private property and the law is more than sufficient to enable rentals in a building if that is what the owners in a building want – not the government.

    How about this instead? Why not make a law that compels the owner of every single family residence in the City to rent out a portion of their house? Not in a laneway house – in their house. My building is my “house”. Get off my property.

    (Editor’s Note: This was sent in by email to City Caucus)

    • Eric

      I agree with this commenter. People who buy in non-rental allowing strata buildings are often choosing to do so specifically for that reason, as well as the reasons that Julia mentioned in the above post.

      Their property is private property and their rights are based on government approved collective rights and responsibilities.

      Absentee landlords and disruptive, destructive and disastrous tenants are not an unusual phenomenon and those that wish to avoid them should be able to do do, without social engineers forcing them to do otherwise, for any reason.

      Further, and importantly, there is absolutely no evidence that more rental stock would simply create a more affordable market, which is the impetus for this concept.

      Were there loads and loads more rental suites available then, of course, the prices might come down but prices would also come down if loads and loads more bad renters caused buildings to deteriorate, as could well be possible. A casual tour of rental properties, as opposed to resident owned properties, just about anywhere in the world, unfortunately demonstrates quite clearly that renters do not care for their properties the way owners do. Too bad but a fact.

      If there is a decent business case for increased rental stock then the market will take care of it and it will be built. Affordability is altogether another issue. The City of Vancouver just this week approved construction of a 22 storey rental tower in the West End. DCCs were forgiven and the FSR was allowed at a massively higher rate than normal. The result will be units starting around $800 a month. Is this yet cheap enough with all the City sweeteners thrown in?

  • Steven Forth

    Very good post Daniel. Thank you. Do you have any insight into what the provincial government is thinking to do on this. Is Vancouver’s affordability an issue that resonates at all in Victoria?

    • Julia

      To make this fly, it would/should require revisions to the Residential Tenancy Act. I can’t see that happening – not with an election on the horizon.

  • Richard Unger

    Oh dear,

    In the past fifteen years this city have become a transient community. There are no neighborhoods, neighbor helping neighbors, there is only a buy & sell activity that makes the rounds of the city.
    For that we have to thank to all the previous governments (municipal, provincial and federal) for selling us to the developers and their friends.

    Vision Vancouver is only the latest beneficiary of the goodies. Are they worse than previous administrations? I think they are.

    In order to heal, this city needs a cleansing first!
    The task force was a useless exercise, meant to show us that they are doing something worth the salaries we are paying them.
    I don’t think any of them earned them.
    No one builds housing by putting together reports!

    Vancouver is a sad city to live in today. Bikes or no bikes.

    Dr. Richard Unger MD (Ret)

  • Bill

    Apart from being a bad idea just from the point of view of taking away the rights of strata owners from deciding how they want to organize their strata complex, it does not necessarily increase the housing stock.

    First, what evidence is there to suggest that current strata units are sitting vacant because the owners would like to rent out the units but can’t because of strata by-laws. If in fact they are already occupied, converting them to rental units does not increase the housing stock.

    Second, such a change would attract those who are only interested in purchasing units as an investment. This would increase demand for units which, without an increase in supply, would only tend to drive prices even higher.

    If there were no problems with renters then Strata’s would not prohibit rentals because allowing rentals would improve the value on re sale. In fact, just the opposite is more likely.

    What is the experience in your strata complex Daniel?

  • Burnaby Resident

    In South burnaby, we own an apartment from 2002 at that time there was no restriction on rental. Recently strata council in the general meeting imposed a ban for rental.

    Is there any procedure where we can ask to lift the ban?

    (Editor’s Note: Submitted by email to City Caucus)

    • Julia

      It can’t be an imposed ban- it requires a change to your Strata bylaws.
      Resolution of such a nature are dealt with at an Annual General Meeting or a Special General Meeting and require a 3/4 vote. If changes come through in the Society Act – it will require 2/3 vote.

  • Paul H

    In the strata buildings I have owned and lived in, renter issues consumed the most amount of time and in some years expenses.

    I am all for exploring this issue however, if feels like we are pushing the problem onto strata owners. Is it really their problem to fix or does it belong with government to create an environment that fairly incentivizes purpose built rentals? If we do place part on strata owners, should we also look at requiring all detached homes to have a rental suit built in?

  • Everyman

    Daniel has apparently never lived in a condo building with a high perecentage of renters, or he wouldn’t be proposing this.

  • Angela

    The reason we don’t want to open up our condo building to rentals is simply because renters don’t care about the building the way owners do.
     
    They don’t care if someone litters, smokes pot, or shampoos/shaves in the hot tub.

    We can’t do anything to the renter, only the owner.

  • Eli

    I think Julia nailed it early on. Having been on the landlord end of a lengthy eviction I have learned that the RTB is an understaffed, largely privatized kangaroo court. Officers (who seem to work from home as private contractors and may or may not have any formal education) have final authority. Rulings generally favor tenants. Apparently two Residetial Tenancy Branch Offices serve the entire lower mainland?

    Great article, Daniel. If City Caucus could investigate the travesty that is the RTB today, that would be cool.

  • Julia

    It’s hard enough for Strata’s to deal with misbehaving owners – dealing with renters is enough to have an entire Council resign.

    Not wanting to be a snob, but if I was to move – it certainly would not be to a complex with rentals. It is like a neon light that flashes saying 1) the building is in decline and owners don’t want to live there or 2) there is a large risk that co-existence with my neighbours would be a living hell and I would simply have to suck it up. No thanks. I pay too much money for that.

  • babalu

    I think Daniel’s article was good and perhaps the City should have looked at getting the Strata Property Act changed that allows a certain amount of rentals. Or perhaps the city should have required that all new condo projects not be allowed to restrict rentals as a condition of approval.
    Friends of mine who live in strata buildings with renters tell me that the tenants who they have the most problems with are those with absentee landlords. Renters do care about the condos they rent if the owner does too.
    I am told the West End is 80% rentals. Yet it is one of he most beautiful, most inclusive and safest areas in all of Vancouver.

    • Daniel Fontaine

      It would be interesting to see how developers would react if they were all told by City of Vancouver that they had to ensure the rental option had to be part of the development. Are there any developers that would care to weigh in on the debate? If the city did this…it could have a dramatic effect over the mid to long term.

      • Eric

        Ask Bob. He could market a development in a new way, world wide. Bob could even start his own rental agency. Sell the units in bulk lots to investors as tax deductions with cash flows. Heck, why not go further and, if there’s a majority of rentals in a building, then allow renters to vote on Strata councils and then zero maintenance could be decided on, just to keep the rent costs down, you understand.

        It would make the leaky condo fiasco seem like a little shower instead of a real bath.

  • Mira

    Interesting no one talked about condo flip floppers!
    They are the disease not the renters! The renters are in the middle. To my amazement I heard an ad on the radio this morning from a guy who wants you to attend his seminar to teach you how to FLIP FLOP real estate in Vancouver with no money down. He said Vancouver is best for that. In the middle of this housing crisis, after the “mayor'” task force is giving us new ideas on how to deal with the crisis ghere’s this bozo trying to “help” you do just the opposite.
    Something is really really wrong with this city. Mentally! 🙁

    • Eric

      Listen carefully to that radio ad. It’s the same ad he uses in whichever city he’s doing his seminar and the “Vancouver” is spliced in.

  • Julia

    If the building/project is 100% rentals, then the owner or management company can affect repairs etc at their own discretion. Consensus is not an issue. As an owner, they can evict a problem tenant.

    Strata Councils cannot evict. They can only fine, or beg an owner to get rid of a problem tenant. If the owner is not on site, why would they forfeit rent – just because their tenant is causing a problem for the neighbours.

    Been there, done that… no thank you. Rental buildings should be rental buildings with centralized management and control. In my mind, that is the only way it can work. That is why the West End works! Everyone is in the same boat, everyone plays by the same rules and there is 1 boss.

    • Eric

      Essential and highly important points Julia.

      You’ve precisely defined how it works best, for all.

      Well said.

  • The Angry Taxpayer

    While I understand the wishes of some strata owners here to restrict the opportunity for renters to enter into an agreement in their building, I find the reasoning a little odd.

    You can’t decide who BUYS a condo in your building (we don’t have those NYC Upper East Side co-op boards vetting), so maybe you could rethink this situation. We could have a great opportunity to put some empty condos to work.

    Now, I am not suggesting that the residential tenancy act might not need changing in order for such a thing to happen. I would certainly support looking at the Act, in order to safeguard strata owners—especially where renters are not observing the building bylaws.

    • Julia

      At least when you are dealing with an owner in a Strata situation and you have legal leverage. When you are dealing with a renter in a strata environment you have zero authority.

      After serving for several years on a Strata Council you could not pay me to live in a building that had to contend with the added struggles of rental units. Homeowners were bad enough.

  • Brilliant

    @The Angry Taxpayer-An absentee investor-owner’s objectives are quite different from a homeowner who has made the biggest purchase of their life. The two don’t mix, I’ve learned from experience.

  • Daniel, you will find that the opinion of developers will vary considerably, depending on whether they are building a product that caters primarily to investors, or end users.

    As you are aware, most new condominium developments in Metro are targeted to both, with some like Marine Gateway and Woodwards ending up with quite a high percentage of investors. (Someone should survey just how many of the owners of the Woodwards development are ‘end-users’ but I am told it is a very small number)

    I personally agree with the sentiments above that suggest it is not appropriate to mandate a certain percentage of units being required to be rented. I think it is necessary to have flexibility to accommodate those buyers who for a variety of legitimate reasons may need to rent at some point, but that’s as far as I would go.

    I do agree, however, that your post has raised some important debates as to how best ensure that strata corporations do operate in the best interests of all owners. I personally think many older condos, with and without renters, are disasters waiting to happen.

    There are insufficient funds in the replacement reserves; the buildings are not being regularly maintained; comprehensive inspections have not been carried out and made available to owners and potential owners, etc.

    New legislation may address some of these problems, but does not go far enough.

    Last week a shopping centre collapsed in Elliot Lake. This will likely prompt a review of all similar developments. We should not have to wait for a condo to ‘fall down’ before addressing the bigger problem.

    Last year, the Toronto Star did a story on a Toronto high rise condominium that is in such bad shape, owners cannot sell at any price. While I suspect no one thinks that could ever happen here, it could. And one day it will. But that’s another story. Related…but another story.

    • Steven Forth

      Thank you Michael. This has been a lingering concern for us and has prevented us from investing in Vancouver condos. When can we start telling this ‘other story’?

  • Victor

    Check out this week’s Toronto Life cover story on badly constructed condos and other legal ramifications of condo onwership as Michael mentions.

    I would not live in a building that allows unlimited rentals.

    Volunteering on a Strata Council is time consuming enough in itself without the added headaches of “renters gone wrong”. As someone says above….the strata has very little clout to get rid of them. And their absent landlord who ignores fines and requests to deal with the problem tenant ties up condo finances. A real nightmare all around.

    But one reason I have heard, to live in a building with a concierge is so drug dealing renters can be observed and be gotten rid of fairly quickly.

    Sorry Daniel, I disagree strongly with your premise here.
    tenants have rights but strata owners dont have many on their side.

  • Julia

    2 scenarios within my family where condo complexes (3 storey wood frame over parking) were aging and the contingency reserves were simply insufficient to keep up, or enough to cover a huge project like an entire new exterior.

    In my case, I was becoming concerned about the building so I got myself on Council. I could see the head of the maintenance committee was looking after things based on his own ability to pay. There were 2 rentals out of 86 units. I was tired of being hit up every 3 years for a new project – roof, paint, carpets etc. What ever happened to proactive planning. I wanted a depreciation schedule and appropriate strata fees.

    Oh no… higher maintenance fees will make the units less desirable to prospective buyers was the throw back line. Let the next owner come up with the huge dollars all at once.

    Some owners don’t care about standards of maintenance – especially if they live elsewhere for half the year. It is a cheap hotel room, even if it sits empty for six months of the year. The owners of the 2 rentals – forget it – they wanted to make sure their Cap Rate was above 5%

    Anyway, the maintenance report was done thanks to looming new rules and guess what – the entire exterior was rotting under neath a brand new $85,000 paint job that cost me $2,500 for my share. Two years before that it was $3,000 for a new roof. My share of the exterior fix… $49,000.

    Even with all owners in the building, the 4 million dollar exterior fix was an uphill battle in terms of a 3/4 vote. Young couples could not afford the additional financing, older owners were reluctant to tinker with their equity or take on debt so the drama began. Months of haggling… all the while the walls continued to rot. I even looked into whether it was feasible to sell the entire complex, tear it down and start again – it may have been cheaper!

    I moved – that was enough for me. The work was eventually done on a shoestring but all the other aspects of the buildings disrepair have yet to be addressed and they won’t be any time soon, regardless of how urgent it might be. Contingency reserve is totally tapped out. Plumbing is failing… they are fixing one pipe at a time. Hall carpets are 20 years old and the courtyard membrane is failing.

    A unit in the complex is currently on MLS – listing sounding like it is the Taj Mahal. Strata minutes are so vague you would never know what is truly going on there.

    2 blocks down the street is a complex that my niece lives in. Similar problem only in her case, the building was primarily rentals. It took them six years and legal action to get work done. By the time they approved the work, the tab went from 4 million up to 6 million.

    Needless to say, she moved too.

    Unfortunately, I am still in a strata situation simply because that is all I can afford on my above average income but I purchased with very different eyes. I chose a smaller complex, no rentals, adult only, healthy contingency reserve and the knowledge that most of the owners were previous home owners who had downsized and understood the concept of maintenance. That was the best I could do to protect myself.

    I know we are talking about Stratas and affordable housing but lets be very careful about what we are asking and wishing for.

    My little story is waiting to happen all over the city and don’t think for a second that a cement building with walls of glass is going to save you.

    .

    • Eric

      Thanks again Julia. I may well print out your comment and take it to our next meeting. All the best!

      • Julia

        If my long winded story can save someone grief and heartache… it was well worth the effort.

        • Vancouver Kiddo

          real good comment. Isecond Eric on this one.

  • Caroline

    Not all renters are troublemakers or alcoholic drug addicts. Considering rents can be well over $1000.00 a month some of us care about where we live, the condition of the unit, the building, surrounding area and getting along with the neighbours.

    It is a pain to have to move and having a good reference for the next place makes it worthwhile to treat it as your own space, for the term of the lease anyways, one to be happy to call home.

    I was a renter for a long time but now I own now and see both sides. There is a wait list to rent in our building. I may want to rent it one day but who knows how long I’d have to wait. I know there has been someone who has rented without permission and someone who has said they have family there when they aren’t family. They may pay a penalty but that doesn’t seem to stop them from trying.

    The building isn’t my home. The unit is my home and I share the building and surrounding area. I think we will all have no choice but to live more co-operatively and closer together.

  • Everyman

    Perhaps the mayor and his task force should have taken a look at this Real Eststa article from the Globe & Mail which exemplifies a large problem they completely ignored:

    http://www.theglobeandmail.com/life/home-and-garden/real-estate/separate-wok-kitchen-seals-kitsilano-home-sale/article4241657/

    Highlights:
    -An out of town buyer asked agent Manny Riebeling to round up potential properties in Vancouver West with relatively new construction, at least three bedrooms and a price tag around $3-million.
    -The buyer was also swayed by the home’s high calibre finishes and smart design features, like the wok kitchen.

    • Julia

      Any Richmond builder with half a brain has been putting in wok kitchens (or at least roughing one in) for over a decade.

      Once upon a time it was roughed in plumbing in the basement for an illegal basement suite… remember those good old days?

      • Everyman

        Maybe, but the key is “out of town” buyer. So in all likelihood a perfectly livable bungalow was torn down for a 4,000 sq ft monstrosity that is rarely going to be lived in.

        Think its not that common? Check out this article on a historic West Van house earlier this week in the Sun:
        http://www.vancouversun.com/news/metro/West+Vancouver+mansion+restored+former+glory/6845308/story.html

        “The house changed hands and by 1986 it was bought by a Hong Kong investor who never lived there and allowed it to deteriorate until Good arrived.”

  • waltyss

    Forcing stratas to rent a certain percentage is to pick on condo owners to solve Vancouver’s affordability issues. It is not fair.
    It should however be said that absentee landlords and bad tenants are not restricted to stratas. We have lived through a grow op across the street run by an engineering student where the landlord who lived in North Vancouver really didn’t care that his house was being used as a grow op so long as he got the rent.
    We now live with three (yes three) empty houses in our block owned by absentee owners who are never there. One is a brand new gorgeous house that has never been lived in.
    My own view is that whether a house or a strata, suites or houses that are left empty should have property tax imposed at a much higher rate (say two or three times the normal rate). It might have the effect of opening up some rental stock while not forcing rentals on stratas who don’t want to for all the reasons stated.

  • In a world where I was the Prime Minister:

    – Partner with municipalities on a national housing program, starting with municipalities with the biggest population

    – The national housing program will work like this: cities will give up the land needed to build the housing, and run the housing program. Why? Because each city will have their own housing needs, something a massive federal bureaucracy cannot understand. But there will be conditions that all buildings must meet, like environmental standards

    – The federal government will provide the funding, and the profits from housing will be shared 50/50

    – These buildings will have commercial retail space on the ground level, which could possibly take up more floors, depending on a city’s needs, and apartments for single people, seniors and families (Pets will be allowed, and apartments will either be sound proof, or close to it for privacy)

    – A 1 bedroom will be 500-1,000sq, and families will live in a 4 bedroom apartment of 2,000-3,000sq. The rent-geared-to-income of 30% will stay as is

    – Having a national public housing program will not only raise the standard of living for renters, but the federal and municipal governments will have a new revenue source

    Now say there was 10 million people part of public housing, and on average were paying $500 per month in rent, that would equal $5 billion per month, $60 billion per year, minus operating costs.

    But as that is not the case, how about getting rid of Section 141?

    But if no condo owner wished to rent out their unit, it wouldn’t help ease the market unless they were forced to rent it out, which would be against a person’s rights, which is no different than a condo board telling a person that they can’t have Star Wars curtains.

    I know foreign buyers only make up a small % of the market, but at least get the CMHC to stop allowing foreign individuals from applying for a mortgage under the crown corporation, and perhaps even levying a tax against them, if they are not going to live in the condo for at least x amount of the year.

  • teririch

    My apartment building allows for 5 rental units (out of 20 units total)

    Right now, one is empty as the owner who took a work transfer for two years, does not wish to rent it due to issues we have faced with other rental untis.

    It is too bad that a few spoil it for the many.