Weekly Buzz: Rental policy, supply, disputes

Western Canada's top commercial real estate stories, featuring coverage on rental housing

By
Western Investor
May 31, 2019





for rent
— Mario Bartel

 

This week’s top stories focus on rental housing – from a new zoning policy in Burnaby, to suggested solutions to the supply shortage. Meanwhile, a dispute between PoCo renters and a building owner taken to the Residential Tenancy Branch has ruled against renovictions that would have displaced tenants.

Here is Western Investor’s pick of the most buzzworthy commercial real estate stories published this week.

 

UPDATE: Burnaby passes bold rental-only zoning plan to protect, create housing – Burnaby NOW

Developers building in commercial zones could add rental units to their buildings, as long as the overall building conforms to community plans, according to the new policy.

Hundreds of rental apartments have been demolished in Burnaby in recent years, while few new ones have been built.

Now, the city has passed an ambitious plan to turn the tide.

On Monday, city council voted ananimously to endorse an implementation strategy for rental-only zoning. The plan aims to protect thousands of existing rental apartments from demolition and could lead to thousands more being built, Mayor Mike Hurley said.

Between Jan. 1, 2011 and April 30, 2019, there were 685 purpose-built rental units demolished in Burnaby’s Metrotown neighbourhood alone, according the city. The dramatic loss in rental stock was largely the result of developers razing low-rise apartment building to make way for new condo towers.

Thousands of renters were displaced in the process.

“It’s time to start turning that trend around,” Hurley said.

Burnaby was the first B.C. municipality to take advantage of new rental-only zoning powers, adding a suite of new zoning classifications to its bylaws in December 2018. While other cities have since used rental zoning in limited instances, Burnaby city staff have been developing an all-encompassing plan for implementation.

“I think there's other municipalities that have touched on individual points, but never as a package like this that comprises the whole gamut,” Burnaby’s assistant director of current planning, Johannes Schumann told the NOW.

One-to-one rental replacement

The plan requires developers to replace every rental apartment they demolish in a redevelopment on a one-to-one basis.

And those replacement apartments would have to be rented out at affordable rates, defined as 20-per-cent below the rental market average determined by the Canada Mortgage and Housing Corporation. In 2018, CMHC found the average rents for one-bedroom apartments were $1,253 in Burnaby’s Central Park/Metrotown neighbourhood, $1,094 in southeast Burnaby and $1,329 in North Burnaby.

The CMHC average takes into account all rentals in an area, meaning the rates are far lower than typical rents for new builds, Schumann said. He estimates the prescribed rates for replacement apartments will be 40-per-cent below typical market rates for new purpose-built rental units.

“This is really just laying down the gauntlet,” Schumann said. “You gotta replace one to one - it’s gotta be affordable.”

Displaced tenants would also be given the opportunity to move into the new apartments once they’re complete.

The Mayor’s Task Force on Community Housing is currently finalizing its tenant relocation policy recommendations, Hurley said. He said the plan will ensure fair treatment and compensation for displaced renters.

Rental units in new builds

City staff are also recommending council endorse a plan that would require 20 per cent of units in all new multi-family developments to be purpose-built rentals. The city would be able to protect those units as rentals in perpetuity by applying rental-zoning to specific units, while the rest of the building would fall under different zoning for stratified units.=

Adding rentals to commercial zones

Developers building in commercial zones could add rental units to their buildings, as long as the overall building conforms to community plans for the area, Schumann said.

For example, if a developer plans to build a 10-storey office tower in an area where city plans call for a maximum of 20 storeys, they could add 10 storeys of rental housing, Schumann said. Only 51 per cent of the total floor area would have to be for commercial use.

[Burnaby NOW]

 

LandlordBC on Burnaby's rental policy: 'The numbers just aren't going to work' – Burnaby NOW

Burnaby’s new rental policies have been met with mixed reviews.

Burnaby’s new rental policies have been met with mixed reviews – enthusiastic approval from councillors, muted praise from a housing activist and disappointment from a landlord advocate.

On Monday, city council unanimously approved a plan to put new rental zoning powers to work.

The strategy includes rezoning existing rental apartments to protect them from development; requiring developers to replace demolished apartments and rehouse displaced tenants; and demanding that one in five units in new developments be purpose-built rental.

"This is a very bold step in addressing the rental housing crisis," Coun. Pietro Calendino said at Monday’s council meeting.

The sentiment was echoed by Calendino’s council colleagues, including Coun. Joe Keithley who said the move affirmed “that housing is a right and not a privilege.”

Landlord advocate sees problems

But not everyone was equally impressed.

“I think there's really quite a few problems here,” said David Hutniak, CEO of LandlordBC.

The landlord advocate said he likes a provision in Burnaby’s rental-zoning plan allowing rental zoning additions to commercial and mixed-use developments and he supports a robust tenant relocation policy.

But, Hutniak said, the plan will not lead to the creation of new rental housing.

“The numbers just aren't going to work,” he said. “You start out with what looks like, on the surface, some sort of a progressive policy – but if it's structured on such a basis that the economics just don't work, that means that nothing is going to to get built.”

He said using “inclusionary zoning” to require 20 per cent rental housing in new buildings will do little to recoup the hundreds of rental apartments destroyed by developers in Burnaby in recent years.

“To get a couple thousand rental units – which is just a drop in the bucket for what Burnaby needs – that means we need to build 10,000 condo units,” Hutniak said.

Burnaby would do better to follow Vancouver’s lead by offering incentives to developers to build 100-per-cent rental developments, he said.  

Mayor inherrited sinking ship: activist

Murray Martin, a spokesperson for Burnaby ACORN who led many demoviction protests and now sits on the city’s housing task force, offered faint support for the city’s rental zoning plan.

“This would have been a good start if they did this in 2011,” he said.

Mayor Mike Hurley inherited a housing crisis that can largely be blamed on his predecessor, Derek Corrigan, according to Martin. The activist said the former mayor deserves little credit, despite initiating the creation of rental zoning bylaws months before the 2018 election.

“Corrigan was on the Titanic. He hit the iceberg and he jumped overboard on a lifeboat and took off and told (Hurley), ‘Hey you might want to consider these plans.’ And Hurley is at the helm of the Titanic and he's just trying to seal the leak,” Martin said, referring to the city’s stock of rental housing being lost to demovictions. “So who knows when they're going to get to New York.”

[Burnaby NOW]

 

Two solutions to help provide much-needed rental housing – Cape Group

As industry leaders meet to discuss housing, we need to work together to build much more rental supply, writes Zack Ross.

There is much discussion about Metro Vancouver housing and those who feel unable to find a home they can afford. As one of the most desirable places in the world, the region also has some of the highest home prices. We need to start taking a closer look at purpose-built rental and examine why there has been so few built in our city over the past 30 years. With housing organization leaders meeting in Surrey today for the annual RENT summit, it’s timely to examine some solutions on how we can increase the supply of rental housing in the region.

Purpose-built rental needs to be the backbone of the Lower Mainland’s housing market, as it is specifically designed and built as long-term rental accommodation. These homes are always used to house those who are renting rather than being purchased by investors looking to achieve a capital gain. These rental homes rarely sit empty, versus an investor/owner who may rent their condo one year but choose not do so the next.

In the 1960s-70s, there was a strong push for the development of rental housing in Metro Vancouver. If you look around the region, most rental buildings are from these two decades. After this, developers significantly decreased the number of purpose-built rental buildings due to multiple factors including the lengthy approvals process, increase in construction costs, and a large increase in building operating expenses.

There are two focus areas that we should consider in an effort to build more purpose-built rental homes for Metro Vancouver residents – improve and expand rental partnership, and re-think design.

Improve and expand rental partnerships

There is potential to diversify partnerships and create projects that benefit all parties involved. The key stakeholders need to align values and change the way we partner on building homes. There are currently a variety of potential spaces for building more rental housing. Partners include city-owned land, the school boards, golf courses and non-profit buildings. We have already seen developers successfully partner with local churches on building homes and we need to expand on this idea while putting the focus primarily on rental homes.

One key area worth examining is the partnerships between non-profits and developers. We need a new model for developers and non-profits to work together on building homes. The current model is risky and expensive for both parties, with high tax payments on new rental buildings. If the federal government were to consider providing GST waivers for projects, this could help decrease costs and thus pass along these savings to future renters. In addition to the cost risks for developers, there is also the risk that the non-profit takes on when partnering with a developer. Non-profits may be “land rich” with the space for homes, but they do not have the ability to finance the job. Here, they rely on the developer. There needs to bemore cooperation from different levels of government to help facilitate these types of partnerships.

Re-think design

We have been building the same way for some time and we need to re-think the efficiency of the buildings we create. The current model is expensive and not entirely practical. We need to simplify things and start designing buildings that focus on what the residents really need.

Currently, we are creating buildings with expansive and expensive underground parking garages. Recent reports suggest that many of these underground parking spots are sitting empty as fewer residents are driving, many choosing public transit for bicycles. When a developer includes underground parking in a new building, it requires their construction team to dig, moving away massive amounts of dirt, construct a foundation and concrete parkade and build back up to ground level again. By the time they start building homes, they are often already one third of the way through their construction budget. We should stop spending so much money on underground parking and invest more into transit orientated developments throughout the region’s communities.

The other design feature worth reconsidering is the large ground-floor commercial component that is often required when building homes. This seems simple but is actually costly and risky for the developer to plan and incorporate. The costs of incorporating commercial spaces are significant and in a region where lease rates are high, securing retail tenants who please the community, and who can afford the space, is challenging. Mixed-use buildings are important but requiring commercial spaces often results in long periods of empty floor area, adding to the overall project cost. This has a direct impact on the affordability of the rent.

[Cape Group]

 

Port Coquitlam apartment renters win arbitration decision – Tri-City News

Residents of the 65-unit Bonnie Brae apartments in PoCo will be allowed to remain in their homes after a ruling from the Residential Tenancy Branch.

Eviction notices issued to residents of the Bonnie Brae apartments in Port Coquitlam have been cancelled following a Residential Tenancy Branch hearing last week.

The M1 Group, which owns the building at 1955 Western Dr., issued four-month evictions in February, saying the decision was necessary to allow for upgrades to the 51-year-old complex.

But arbitrator R. Lanon disagreed, writing in a decision that while the renovations would create challenges for the property owner, the work could proceed without displacing tenants.

“I find that the available statement evidence upon which the landlord relies does not sufficiently support the renovations are so extensive so as to require that a rental unit must be vacant or empty in order for them to take place,” Lanon stated in the ruling. “I further accept the evidence of the tenants that terminating the tenancies is not the only manner in which to achieve any necessary vacancy of the rental unit.”

Gary Crane, one of the residents of the 65-unit building, said in a statement that tenants were breathing a “sigh of relief” following the decision.

He said the renovations proposed by the property owner were mostly cosmetic and noted that all of the tenants who appeared at the hearing last week were willing to temporarily live in different comparable suites while work was being done.

"While it would have been nice to accommodate the landlord's construction schedule, it is refreshing to know that doesn't trump the rights of good tenants in the province of British Columbia," Crane said.

The Tri-City News contacted the M1 Group but the company was unable to immediately comment.

In court filings, the company had said it needed the building empty for at least nine months while it conducted renovations, including upgrades to plumbing and electrical systems, and the removal of asbestos. To cover the costs of the loan needed to pay for the improvements, the company stated rent increases are necessary.

“One of the terms of the construction loan is that the rental building will be rented out at market rents following the renovations,” the court documents state.

LAWSUIT AGAINST CITY OF POCO

Despite the Residential Tenancy Branch decision in favour of the tenants, the legal battles over the Bonnie Brae building are far from over.

When the property owner issued the eviction notices in February, it prompted PoCo city council to pass a bylaw amendment designed to protect renters from renovictions. The new regulations require rental apartments with five or more units to provide interim accommodations to tenants when they make repairs or renovations. The bylaw amendment also prohibits property owners from raising rents after the work is complete beyond what is already allowed in the Residential Tenancy Act.

[Tri City News]

 


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