UBC Theses and Dissertations

UBC Theses Logo

UBC Theses and Dissertations

The residential construction industry : problems in shifting from new construction to renovation activities Dodds, Carol 1985

Your browser doesn't seem to have a PDF viewer, please download the PDF to view this item.

Item Metadata

Download

Media
831-UBC_1985_A8 D63.pdf [ 5.2MB ]
Metadata
JSON: 831-1.0096493.json
JSON-LD: 831-1.0096493-ld.json
RDF/XML (Pretty): 831-1.0096493-rdf.xml
RDF/JSON: 831-1.0096493-rdf.json
Turtle: 831-1.0096493-turtle.txt
N-Triples: 831-1.0096493-rdf-ntriples.txt
Original Record: 831-1.0096493-source.json
Full Text
831-1.0096493-fulltext.txt
Citation
831-1.0096493.ris

Full Text

THE RESIDENTIAL CONSTRUCTION INDUSTRY: PROBLEMS IN SHIFTING FROM NEW CONSTRUCTION TO RENOVATION ACTIVITIES by CAROL DODDS B.A.(Special) U n i v e r s i t y Of A l b e r t a , 1980 A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS in THE FACULTY OF GRADUATE STUDIES School. Of Community And Regional P l a n n i n g We accept t h i s t h e s i s as conforming to the r«<|uir«*d standard THE UNIVERSITY OF BRITISH COLUMBIA J u l y 1985 © C a r o l Dodds, 1985 In p r e s e n t i n g t h i s t h e s i s i n p a r t i a l f u l f i l m e n t of the requirements f o r an advanced degree at the U n i v e r s i t y of B r i t i s h Columbia, I agree that the L i b r a r y s h a l l make i t f r e e l y a v a i l a b l e f o r r e f e r e n c e and study. I f u r t h e r agree that p e r m i s s i o n f o r e x t e n s i v e copying of t h i s t h e s i s f o r s c h o l a r l y purposes may be granted by the Head of my Department or by h i s or her r e p r e s e n t a t i v e s . I t i s understood that copying or p u b l i c a t i o n of t h i s t h e s i s f o r f i n a n c i a l gain s h a l l not be allowed without my w r i t t e n p e r m i s s i o n . Department of School Of Community And Regional Planning The U n i v e r s i t y of B r i t i s h Columbia 2075 Wesbrook Pl a c e Vancouver, Canada V6T 1W5 Date: A b s t r a c t T h i s t h e s i s studies' the response o f the r e s i d e n t i a l ' c o n s t r u c t i o n i n d u s t r y to the growing market f o r r e s i d e n t i a l r e n o v a t i o n , and i t s a b i l i t y and w i l l i n g n e s s to t r a n s f e r o p e r a t i o n s i n t o renovation a c t i v i t i e s . The i n d u s t r y i n c l u d e s f i r m s s p e c i a l i z i n g i n l a n d development, new h o u s e - b u i l d i n g , s p e c u l a t i v e and c o n t r a c t r e n o v a t i o n p r o j e c t s . The t h e s i s i s concerned with the i n h e r e n t i n d u s t r y c o n s t r a i n t s i n meeting housing demand. The i n c r e a s i n g importance of r e s i d e n t i a l r enovation r e l a t i v e to new housing c o n s t r u c t i o n i s examined. A review of the new r e s i d e n t i a l and r e n o v a t i o n s e c t o r s f o l l o w s , comparing and c o n t r a s t i n g the nature and c h a r a c t e r i s t i c s of both s e c t o r s . I t i s found that small and medium-sized firms w i t h i n the new r e s i d e n t i a l c o n s t r u c t i o n s e c t o r are most ab l e to enter i n t o r e s i d e n t i a l r e n o v a t i o n a c t i v i t i e s . The t h e s i s r e v e a l s that the i n d u s t r y has so f a r shown a sm a l l s c a l e response to the p o t e n t i a l market f o r r e s i d e n t i a l r e n o v a t i o n , and has been i n h i b i t e d by a number of b a r r i e r s to e n t r y . These i n c l u d e r i g i d i t i e s i n the i n s t i t u t i o n a l approach to the r e s i d e n t i a l r e n o v a t i o n c o n s t r u c t i o n p r o c e s s . Other b a r r i e r s a r i s e from the inherent d i f f e r e n c e s between ren o v a t i o n and new c o n s t r u c t i o n a c t i v i t i e s . P r o p o s a l s are made to f a c i l i t a t e a more e f f e c t i v e and e f f i c i e n t r e novation c o n s t r u c t i o n p r o c e s s . These should induce the i n d u s t r y to be more able and w i l l i n g to ad j u s t to the inc r e a s e d pace and s c a l e of r e s i d e n t i a l r e n o v a t i o n a c t i v i t y expected i n the f u t u r e . In t u r n , the maintenance and r e j u v e n a t i o n of the e x i s t i n g housing stock w i l l be f a c i l i t a t e d in accordance with f u t u r e housing demand. Table of Contents A b s t r a c t i i L i s t of Tables v i i L i s t of F i g u r e s v i i i Acknowledgement ix CHAPTER I INTRODUCTION 1 A. RESEARCH FOCUS 1 B. BACKGROUND TO THE RESEARCH 1 C. SIGNIFICANCE OF THE THESIS 2 D. RESEARCH OBJECTIVES 3 E. DEFINITIONS 4 CHAPTER II THE INCREASING IMPORTANCE OF RESIDENTIAL RENOVATION 6 A. THE AGEING HOUSING STOCK 6 B. DEMOGRAPHIC FACTORS 10 1 ._ P o p u l a t i o n Growth 10 2. Age S t r u c t u r e 12 3. Household And Family Formation 14 4. Household S i z e 14 5. Impact Of Demographic Trends On Housing Demand 15 C. ECONOMIC FACTORS 17 1. The S p e c u l a t i v e Renovator: Economic I n f l u e n c e s 17 2. The Homeowner: Economic I n f l u e n c e s 21 3. Economic Trends: Changing V a l u a t i o n Of The Housing Stock 21 D. LIFESTYLE FACTORS 22 E. HOUSING POLICY 23 F. SUMMARY 26 CHAPTER III STATISTICAL REVIEW OF THE CANADIAN RESIDENTIAL CONSTRUCTION INDUSTRY, 1962-1980 28 A. INTRODUCTION 28 V B. FLUCTUATION IN THE NUMBER OF ESTABLISHMENTS BY SIZE: CANADA (1974-1 980) 29 C. PROPORTION OF FIRMS BY SIZE CATEGORY (1962-1980) 34 1 . 1 962 - 1 973 34 2. 1974 - 1 980 36 D. CAPTURE OF CONSTRUCTION INVESTMENT BY SIZE CATEGORY ( 1 962-1980) 38 1. D i s t r i b u t i o n Of D w e l l i n g U n i t Completions By S i z e C l a s s Of B u i l d e r , 1962-73 38 2. Capture Of C o n s t r u c t i o n Investment By S i z e Category; 1974-1980 39 E. DWELLING TYPE SPECIALIZATION BY SIZE CATEGORY (1974-1980) 41 F. REPAIR CONSTRUCTION BY SIZE CATEGORY;' ( 1974" 1980 ) 41 G. CONCLUSION 42 CHAPTER IV CHARACTERISTICS OF THE HOUSE-BUILDING AND RESIDENTIAL RENOVATION SECTORS OF THE INDUSTRY 44 A. INTRODUCTION 44 B. CHARACTERISTICS OF THE LARGE DEVELOPER-BUILDER 45 1 . F i n a n c i n g , 46 2. Economies Of Scale 47 1. Land A q u i s i t i o n 47 i i . P u b l i c P o l i c y Requirements 48 i i i . C o n s t r u c t i o n 49 i v . G e ographical D i v e r s i f i c a t i o n 49 v. I n d i v i d u a l P r o j e c t 50 3. Corporate I n t e g r a t i o n 51 4. Diseconomies Of S i z e 52 5. Industry R e s t r u c t u r i n g 53 C. CHARACTERISTICS OF THE MEDIUM-SIZED FIRM 58 1 . F i n a n c i n g 58 2. Economies Of Scale 58 3. Corporate Organization-Management 59 D. CHARACTERISTICS OF THE SMALL-SIZED HOUSEBUILDER 60 1 . F i n a n c i n g 61 2. The C o n s t r u c t i o n Process 61 3. O r g a n i z a t i o n And Management 63 E. CHARACTERISTICS OF THE RESIDENTIAL RENOVATION SECTOR ..63 1 . Financ ing 65 2. The C o n s t r u c t i o n Process 67 i . D i f f i c u l t i e s Of R e s i d e n t i a l Renovation C o n s t r u c t i o n 68 i i . S c a l e Economies 69 v i i i i . C o n s t r u c t i o n O r g a n i z a t i o n ;...70 3. Firm O r g a n i z a t i o n And Management 71 CHAPTER V BARRIERS TO ENTRY INTO RESIDENTIAL RENOVATION ACTIVITIES ACTIVITIES 75 A. FIRMS WHO POSSESS THE ABILITY TO ADJUST TO RESIDENTIAL RENOVATION ACTIVITIES 80 1. B a r r i e r s To Entry For The S m a l l - s i z e Firms ...81 2. B a r r i e r s To Entry A f f e c t i n g Medium-Sized Firms 82 3. B a r r i e r s To Entry A f f e c t i n g L a r g e - s i z e d Firms 84 4. B a r r i e r s To Expansion A f f e c t i n g C o n t r a c t Renovation Firms 84 B. SYNOPSIS 85 C. CONCLUSION 88 CHAPTER VI CONCLUSIONS 90 SUMMARY 90 PROPOSALS 93 A. THE REGULATORY PROCESS 95 B. FINANCING 99 C. MANAGERIAL, ENTERPRENEURIAL AND CONSTRUCTION SKILLS SKILLS 101 D. CONCLUSIONS 104 E. AREAS OF FURTHER RESEARCH 105 POSTSCRIPT 106 BIBLIOGRAPHY 107 v i i L i s t of Tables I. Comparison of Age of Stock i n 1979 and 2000 7 I I . New Housing Requirements 8 I I I . The P a t t e r n of R e s i d e n t i a l Investment i n Canada, 1975-1980 ($ thousands) 9 IV. The P a t t e r n of R e s i d e n t i a l Investment i n Canada, 1975-1980 (% of t o t a l ) 9 V. P o p u l a t i o n P r o j e c t i o n s f o r Canada, 1976-2001 11 VI. Changes i n Age D i s t r i b u t i o n of the Canadian P o p u l a t i o n , 1981-2001 ' 13 V I I . Household P r o j e c t i o n s For Canada, 1976-2001 14 V I I I . R e s i d e n t i a l General B u i l d i n g C o n s t r u c t i o n Industry Operating S t a t i s t i c s C l a s s i f i e d by S i z e of Group: Canada 1974, 1976, 1978, 1980 31 IX. Si z e of NHA Operations of B u i l d e r s O b t a i n i n g NHA Loans for New Housing: Canada 1 962-73 35 X. P r o p o r t i o n of Firms Composing the Industry by S i z e Category; 1974-80 36 XI. Capture of C o n s t r u c t i o n Investment by S i z e Category; 1974-80 39 X I I . The P a t t e r n of R e s i d e n t i a l Investment i n Canada, 1975-1980 42 v i i i L i s t of F i g u r e s 1. Components of P o p u l a t i o n Growth, Canada 1951-2001 12 2. F l u c t u a t i o n In The Number of Establishments by S i z e Category: Canada 1 974-1980 33 3. P r o p o r t i o n of Firms by Si z e C l a s s Category: Canada 1974-1980 37 4. Capture of T o t a l D o l l a r Value of C o n s t r u c t i o n Output by S i z e C l a s s of Firm: Canada 1974-1980 40 ix Acknowledgement I would l i k e to thank P r o f e s s o r Henry Hightower f o r h i s guidance and c r i t i c i s m , Jay Wollenberg who gave me the d i r e c t i o n to sharpen my concepts through h i s p r a c t i c a l i n s i g h t s and P r o f e s s o r Brahm Wiesman, D i r e c t o r of the School of Planning f o r h i s c o n t i n u i n g support throughout the course of my academic c a r e e r . I wish to express s p e c i a l a p p r e c i a t i o n to Dino f o r h i s generous and p a t i e n t encouragement and my f r i e n d s and f a m i l y f o r t h e i r enduring support. F i n a l l y , I would l i k e to g r a t e f u l l y thank Canada Mortgage and Housing C o r p o r a t i o n f o r awarding me a U n i v e r s i t y S c h o l a r s h i p , thereby making t h i s t h e s i s p o s s i b l e . 1 CHAPTER I. INTRODUCTION A. RESEARCH FOCUS The purpose of t h i s t h e s i s i s to i d e n t i f y o b s t a c l e s that l i m i t the a b i l i t y and w i l l i n g n e s s of the r e s i d e n t i a l c o n s t r u c t i o n i n d u s t r y to s h i f t from new c o n s t r u c t i o n to renovation a c t i v i t i e s . Based on these f i n d i n g s , a c t i o n s are recommended that government and othe r i n s t i t u t i o n s c o u l d take to f a c i l i t a t e and encourage i n d u s t r y adjustment. B. BACKGROUND TO THE RESEARCH In the 1950's, 1960's and 1970's, Canadian housing demand was met through a dramatic i n c r e a s e i n the housing stock by new c o n s t r u c t i o n . Future housing market c o n d i t i o n s to the year 2000 w i l l change i n response to changing demands. Demographic trends i n d i c a t e a slower r a t e of p o p u l a t i o n growth which w i l l r e s u l t i n a d e c l i n i n g demand f o r new housing. Consequently, an i n c r e a s i n g p r o p o r t i o n of f u t u r e housing demand w i l l be met by the e x i s t i n g housing stock, r a t h e r than through the c o n s t r u c t i o n of new housing. Other f a c t o r s that w i l l make renovation of the housing stock a t t r a c t i v e i n c l u d e : • economic f a c t o r s t h a t f a v o r re-use of the housing stock, as opposed to d e m o l i t i o n and replacement; • a s h i f t i n t a s t e toward an a p p r e c i a t i o n of urban l i f e s t y l e s and o l d e r homes found w i t h i n urban l o c a t i o n s ; and • the r e c o g n i t i o n by the Fed e r a l housing agency, CMHC, that the c o n s e r v a t i o n and i n t e n s i f i c a t i o n of 2 the housing stock i s one way of meeting f u t u r e housing demand. Despi t e the growing demand f o r renovation work, the r e s i d e n t i a l c o n s t r u c t i o n i n d u s t r y i s d i s p l a y i n g i n e r t i a i n t r a n s f e r r i n g o p e r a t i o n s to re n o v a t i o n a c t i v i t i e s . As a p r o p o r t i o n of the t o t a l r e s i d e n t i a l renovation i n d u s t r y the renovation segment i s i n s i g n i f i c a n t both i n s c a l e and capture of investment. T h i s t h e s i s s e t s out to d i s c o v e r i f there are any impediments to i n d u s t r y t r a n s i t i o n and, i f so what measures are needed to overcome, these- obstacles.. S p e c i f i c a l l y , the t h e s i s addresses the a b i l i t y and w i l l i n g n e s s of the i n d u s t r y to adapt to renovation c o n s t r u c t i o n . C. SIGNIFICANCE OF THE THESIS The r e s i d e n t i a l c o n s t r u c t i o n i n d u s t r y ' s f u n c t i o n in the housing market i s to supply housing to meet demand. I t i s e s s e n t i a l t h e r e f o r e , to ensure that the i n d u s t r y responds to f a c t o r s changing the u n d e r l y i n g demand f o r housing. One housing a n a l y s t suggests that i n order to maintain and renew the e x i s t i n g housing stock to meet the f u t u r e demand f o r housing, the i n d u s t r y must i n c r e a s e both i t s pace and s c a l e of renovation a c t i v i t i e s ( Hulchanski: 1982, p.56). T h e r e f o r e , an understanding of the i n d u s t r y ' s w i l l i n g n e s s and a b i l i t y to adapt to r e n o v a t i o n a c t i v i t i e s i s c r i t i c a l . 3 D. RESEARCH OBJECTIVES The o b j e c t i v e s of t h i s t h e s i s a r e : 1. To review the l i t e r a t u r e on the r o l e of the renovation of the e x i s t i n g housing stock compared to new c o n s t r u c t i o n i n meeting f u t u r e housing demand. 2. To use data on the r e s i d e n t i a l c o n s t r u c t i o n i n d u s t r y from 1962-1982 to compare the s t r u c t u r e and op e r a t i o n s of the new housing c o n s t r u c t i o n and r e s i d e n t i a l renovation c o n s t r u c t i o n s e c t o r s . 3. To i d e n t i f y the o b s t a c l e s impeding i n d u s t r y t r a n s i t i o n to r e n o v a t i o n a c t i v i t i e s . T h i s w i l l be based on two sources of i n f o r m a t i o n : a review of the l i t e r a t u r e d i r e c t l y r e l e v a n t to the s u b j e c t , and i n f o r m a l i n t e r v i e w s of ten medium s i z e d h o u s e - b u i l d i n g firms a c t i v e i n the Greater Vancouver a r e a . 4. To suggest ways that government and other i n s t i t u t i o n s c o u l d encourage and f a c i l i t a t e a d a p t a t i o n by the r e s i d e n t i a l c o n s t r u c t i o n i n d u s t r y to r e s i d e n t i a l r e novation a c t i v i t i e s , thereby f a c i l i t a t i n g an in c r e a s e d pace and s c a l e of renovation a c t i v i t y . 4 E. DEFINITIONS There i s no commonly acce p t e d d e f i n i t i o n o f "renovation"'. The term i s used i n t e r c h a n g a b l y with r e h a b i l i t a t i o n , r e p a i r , r e f u r b i s h , r e t r o f i t and renewal. For purposes of t h i s t h e s i s , the f o l l o w i n g d e f i n i t i o n s w i l l be used. The terms (a-d) are d e r i v e d from the O n t a r i o M i n i s t r y of Housing (1980a) d e f i n i t i o n s ; the l a s t term (e) i s d e r i v e d from F r e n e t t e (1978). a. R e h a b i l i t a t i o n ; improving a b u i l d i n g up to minimum prop e r t y standards. b. Renovation; improving a b u i l d i n g t o a standard beyond minimum pro p e r t y standards. c. Conversion; c o n v e r t i n g e x i s t i n g detached or semi-detached s i n g l e f a m i l y d w e l l i n g s to m u l t i p l e d w e l l i n g s . d. Redevelopment; demolishing r e s i d e n t i a l and non-r e s i d e n t i a l b u i l d i n g s i n b u i l t - u p , s e r v i c e d p a r t s of urban areas and r e p l a c i n g them with new r e s i d e n t i a l u n i t s . e. G e n t r i f i c a t i o n : r e n o v a t i o n i n v o l v i n g the t r a n s f e r of occupancy from low-income households to middle or upper-income households. Terminology d e f i n i n g the types of firms i n the r e s i d e n t i a l c o n s t r u c t i o n i n d u s t r y i n c l u d e s : f. Land Development Firm: s p e c i a l i z e s i n the a c q u i s i t i o n of raw land f o r development, p l a n n i n g and i n s t a l l a t i o n of s e r v i c e s i n p r e p a r a t i o n f o r s a l e to b u i l d e r s . No b u i l d i n g c o n s t r u c t i o n i s undertaken (Anderson e t . a l . : 1980, p. 90). 5 g. D e v e l o p e r - B u i l d e r : a w e l l organized c o n s t r u c t i o n o p e r a t i o n that aims to maintain a co n t i n u e d s a l e s volume of new houses. The f i r m operates as a land development company to create- i t s own l o t s , or i t may buy l o t s from others (Anderson e t . a l . : 1980, p. 90) . h. S p e c u l a t i v e Renovator: purchases a p r o p e r t y , redesigns and r e h a b i l i t a t e s or renovates i t and then s e l l s i t on the market. The renovator aims to maintain a continuous s a l e s volume. i . C o ntract Renovator: c o n t r a c t s s e r v i c e s to homeowners to renovate or r e h a b i l i t a t e t h e i r p r o p e r t y to design s p e c i f i c a t i o n s . I t may f u n c t i o n as a ge n e r a l c o n t r a c t o r i n o r g a n i z i n g and s u p e r v i s i n g trade work or i t may operate on i t s own performing minor r e p a i r work. 6 CHAPTER I I . THE INCREASING IMPORTANCE OF RESIDENTIAL RENOVATION T h i s chapter shows that r e n o v a t i o n w i l l become i n c r e a s i n g l y important in the next 20 years r e l a t i v e to new c o n s t r u c t i o n , and that market demand for renovation w i l l i n c r e a s e at a f a s t e r r a t e than the c a p a c i t y of the i n d u s t r y to renovate the housing stock, u n l e s s some supply s i d e a c t i o n s are taken. The f a c t o r s c o n t r i b u t i n g to the i n c r e a s i n g importance of renovation i n c l u d e : the ageing housing stock; demographic f a c t o r s ; economic f a c t o r s ; l i f e s t y l e f a c t o r s ; and housing p o l i c y . Since these f a c t o r s i n f l u e n c e each other, o v e r l a p p i n g r e f e r e n c e s to them w i l l be made throughout the d i s c u s s i o n . P r e d i c t i o n s are based on the r e l a t i v e , not a b s o l u t e increase of r e s i d e n t i a l r e n o v a t i o n , s i n c e i t i s d i f f i c u l t to make long range p r o j e c t i o n s of the a b s o l u t e l e v e l of housing supply a c t i v i t y . A. THE AGEING HOUSING STOCK In c o n t r a s t to post World. War II decades when housing demand was met through new housing, the supply of f u t u r e demand w i l l depend more on the e x i s t i n g housing stock. As new c o n s t r u c t i o n has slowed r e l a t i v e to the t o t a l supply, the housing stock has been ageing, and t h i s t r e n d i s expected to c o n t i n u e . The i n c r e a s i n g p r o p o r t i o n of o l d e r housing c r e a t e s a l a r g e r p o t e n t i a l f o r r e n o v a t i o n . There i s no d e f i n i t e , c r i t i c a l age at which a b u i l d i n g must be r e h a b i l i t a t e d because d e t e r i o r a t i o n of b u i l d i n g components i s a f u n c t i o n of the causes of d e t e r i o r a t i o n to which they are exposed (weather, wear and t e a r , e t c . ) and the q u a l i t y of c o n s t r u c t i o n and maintenance of these components. (Peter 7 and modernization of a b u i l d i n g ' s components, i t s l i f e i s v i r t u a l l y i n f i n i t e . Notwithstanding these c o n s i d e r a t i o n s , the benchmark age f o r major r e h a b i l i t a t i o n i s 50 years and 25 years f o r r e p a i r work (CMHC: 1980c, p.24, Housing O n t a r i o : October 12, 1981, p.20). The t a b l e below, d e r i v e d from the 1974 n a t i o n a l Survey of Housing U n i t s , i l l u s t r a t e s t h a t housing b u i l t a f t e r WW II i s i n need of r e p a i r and approaching the major r e h a b i l i t a t i o n stage. Twenty percent of the housing stock i s over 50 years o l d , at the c r i t i c a l age needing major r e h a b i l i t a t i o n . F u l l y 55 percent of the-, c u r r e n t t o t a l housing stock i s over 20 years of age, i n c r e a s i n g to 63 percent by the year 2000. Table I - Comparison of Age of Stock i n 1979 and 2000 Age (Yrs) Stock 1979 Stock 2000 T o t a l Over 20 Over 50 8,005,079 100.0% 4,131,564 54.6% 1,589,376 19.9% 11,556,557 100.0% 7,292,581 63.1% 2,637,215 22.8% Source: Survey of Housing U n i t s , 1974 Ac c o r d i n g to the 1974 Survey of Housing U n i t s , of the n a t i o n a l t o t a l of 7.5 m i l l i o n housing u n i t s , approximately 13.4 percent were i n need of r e h a b i l i t a t i o n at that time. No more c u r r e n t estimate i s a v a i l a b l e . By tenure, 66 percent of those u n i t s needing r e h a b i l i t a t i o n were r e n t a l and 34.3 p e r c e n t were n o n - r e n t a l u n i t s (Tsang: 1979,p. 44). Compounding the problem of the ageing housing stock i s the decrease i n demand f o r new housing due to demographic changes as shown i n the f o l l o w i n g s e c t i o n . Consequently, a c c o r d i n g to one 8 housing a n a l y s t , 73 percent of the housing stock r e q u i r e d i n 2001 i s a l r e a d y b u i l t (Brown: 1981, p.19). New housing s t a r t s r e l a t i v e to the t o t a l housing stock are expected to d e c l i n e from 2.5 percent i n 1981 to 0.9 percent i n 2001 (Brown: 1981, p.21). Cl a y t o n Research A s s o c i a t e s s p e c u l a t e s t h a t new housing c o n s t r u c t i o n w i l l d e c l i n e to an average annual l e v e l of 220,000 u n i t s i n 1981-1986 compared to 229,000 u n i t s i n 1976-1981 and 257,000 u n i t s from 1971-1976 (1981, p.1). Of f u t u r e new housing demand, r e n t a l u n i t s w i l l experience the most dramatic d e c l i n e , as shown i n Table I I . Table II - New Housing Requirements Year Rental Ownership T o t a l 1985 69,700 144,200 213,900 1986 58,800 142,700 201,500 1987 47,400 141,600 189,000 1988 37,400 139,300 176,700 1989 28,900 136,800 165,700 1990 28,000 128,200 156,200 1991 29,500 120,100 149,600 Source: Market A n a l y s i s and F o r e c a s t s D i v i s i o n , CMHC: 1980, p.22. In reviewing housing stock trends J.E. Smith, CMHC's R e h a b i l i t a t i o n Program Development O f f i c e r comments: . . . t h i s s h i f t away from new c o n s t r u c t i o n means that f o r the f i r s t time i n our h i s t o r y , t here are more e x i s t i n g u n i t s being renewed than there are new u n i t s being b u i l t (Smith, J.E. i n Second Canadian B u i l d i n g Congress Proceedings: 1979, p.127). Housing a n a l y s t s suggest that p o t e n t i a l housing 9 r e h a b i l i t a t i o n investment c o u l d be as hig h as $230 b i l l i o n (1978$) between 1980 and 2001 (CMHC: 1980c, p. 39). The t r e n d toward i n c r e a s i n g r e h a b i l i t a t i o n and reno v a t i o n investment i s r e v e a l e d by t r a c i n g recent p a t t e r n s of r e s i d e n t i a l investment, Tables III and IV. Table III - The P a t t e r n of R e s i d e n t i a l Investment i n Canada, 1975-1980 ($ thousands) New Housing Major Year C o n s t r u c t i o n Renovation Repair T o t a l 1975 5,896,316 1 ,217,541 1,575,805 8,689,662 1976 8,384,939 2,467,593 1,816,814 12,669,346 1977 8,360,132 2,571,822 2,018,674 12,950,628 1978 8,861,704 2,588,846 2,329,408 13,779,958 1979 8,736,614 2,745,146 2,329,408 14,152,695 1980 8,595,350 2,934,170 3,010,836 14,540,356 Table IV - The P a t t e r n of R e s i d e n t i a l Investment i n Canada, 1975-1980 (% of t o t a l ) Year New Housing C o n s t r u c t i o n Major Renovat ion Repair T o t a l 1 975 67.9 14.0 18.1 100.0 1976 66.2 19.5 14.3 100.0 1977 64.5 19.9 15.6 100.0 1978 64.3 18.8 16.9 100.0 1979 61 .8 19.3 18.9 100.0 1980 59. 1 20. 1 20.8 100.0 Source: S t a t i s t i c s Canada, C o n s t r u c t i o n i n Canada, 1976-1978, and S t a t i s t i c s Canada, S e r v i c e B u l l e t i n : C o n s t r u c t i o n S t a t i s t i c s , V o l . 3, No. 2, A p r i l , 1980. "Major Renovation" f i g u r e s i n c l u d e c o n v e r s i o n s and a l s o such mi s c e l l a n e o u s items as summer co t t a g e s (Source: CMHC 1980c, p.33). 10 In summary, the combination of an ageing housing stock wi'th d e c l i n i n g l e v e l s of new housing c o n s t r u c t i o n means that g r e a t e r emphasis w i l l be placed on the e x i s t i n g housing stock to accommodate f u t u r e housing demand. B. DEMOGRAPHIC FACTORS The demand f o r housing i s shaped by such demographic f a c t o r s as p o p u l a t i o n , age s t r u c t u r e , household s i z e and r a t e s of household formation. I t i s important to examine Canadian demographic trends and t h e i r impact on the housing stock i n the next 20 ye a r s . The b i r t h of the baby boom i n the post war years, r e s u l t i n g i n dramatic p o p u l a t i o n growth, has been a major demographic event. The f o l l o w i n g d i s c u s s i o n of demographic trends i n v o l v e s a t r a c i n g of the p a t t e r n s of household and f a m i l y formation of the baby boom g e n e r a t i o n . 1. P o p u l a t i o n Growth R e l a t i v e to previous p e r i o d s , p o p u l a t i o n growth r a t e s are expected to be low and d e c l i n i n g due to the f a l l i n g b i r t h r a t e and i n t e r n a t i o n a l m i g r a t i o n r a t e s . 11 Table V - P o p u l a t i o n P r o j e c t i o n s f o r Canada, 1976-2001 Year Pop u l a t i o n Average Annual Growth Rate COOO's) 1976(Census) 22,992.6 1 .26 (1971- 1976 A c t u a l ) 1981(Census) 24,343.0 1.17 (1976- 1981 A c t u a l ) 1 986 25,405.5 0.87 (1981- 1 986) 1991 26,619.4 0.96 (1986- 1991 ) 1 996 27,784.5 0.88 (1991- 1996) 2001 28,860.6 0.77 (1996- 2001) Source: Brown: 1981, p.4. I t i s expected that n a t u r a l i n c r e a s e w i l l be the p r i n c i p l e source of p o p u l a t i o n growth which i s c u r r e n t l y at the lowest l e v e l ever i n Canada. 1 2 F i g u r e 1 - Components of Population Growth, Canada 1951 2001 In Thousands 5 0 0 r 4O0-30O-200-100 1961-1906 1958-1961 1961-1966 1968-1971 1971- 1976- 1981-1976 1981 1986 1986- 1991- 1996-1991 1996 2001 Source: D i v i c : 1981, p.15. Age S t r u c t u r e Canada's p o p u l a t i o n i s ageing. The 1980's w i l l see a l a r g e percentage i n c r e a s e i n the 35-44 (45.9 percent) and 65+ (25.1 percent) age groups r e l a t i v e to the p r e v i o u s decade (see Table V I ) . The 1990's i s expected to witness s u b s t a n t i a l i n c r e a s e s of 45-54 year o l d s (46.5 p e r c e n t ) and small i n c r e a s e s of 55-64 year 13 ol d s (16.4 p e r c e n t ) . Accompanying these trends are expected d e c l i n e s i n the numbers of 15-25 year o l d s ; a 16.9 percent d e c l i n e over the whole 1981-2001 period(Brown: 1981, p. 7). Table VI - Changes i n Age D i s t r i b u t i o n of the Canadian P o p u l a t i o n , 1981-2001 1981-1991 1991-2001 1981-2001 Age Absolute % Absolute % Absolute % Group Change Change Change Change Change Change 0-14 +353.2 + 6.4 +442.0 + 7.6 +795.2 + 14.5 1 5-24 -942.2 -20.5 +165.0 + 4.5 -777.2 -16.9 25-34 +559.0 + 13.1 -1014.6 -21 .0 -455.6 -10.7 35-44 + 1357. 1 + 45.9 +566.9 + 13.1 +1924.0 + 65.1 45-54 +395.7 + 16.0 + 1 333.0 + 46.5 +1728.7 + 70.0 55-64 +142.9 + 6.7 +378.8 + 16.7 +521.7 + 24.5 65 + +569.8 + 25. 1 +370.2 + 13.0 +940.0 + 41.3 Canada T o t a l +2435.5 + 10.1 + 2241 .3 + 8.4 +4676.8 + 19.3 Source: Brown, 1981, p. 9. 1 4 3. Household And Family Formation The dramatic growth of non-family households i s expected to continue from 1981 to the year 2001. According to Brown, non-f a m i l y households are expected to i n c r e a s e by 58 percent while f a m i l y households w i l l i n c r ease by 31 percent dur i n g t h i s p e r i o d (1981, p. 12). Although household formation i s i n c r e a s i n g at a d e c l i n i n g r a t e , i t i s expected to remain g r e a t e r than the average annual growth r a t e of the p o p u l a t i o n . Table VII - Household P r o j e c t i o n s For. Canada, 1976-2001 Year Households Average Annual Growth Rate Average Annual Populat ion Growth Rate l976(Census) 7,166.1 3.40 (1971-1976)* 1 .29* 1981(Census) 8,281 .5 2.94 (1976-1981)* 1 .04* 1986 9,329.7 2.42 (1981-1986) 0.99 1991 10,236.9 1.87 (1986-1991) 0.94 1 996 10,895.0 1.25 (1991-1996) 0.86 2001 1 1 ,387.9 0.89 (1996-2001) 0.76 * A c t u a l Source: Brown, 1981, pp. 4,12. 4. Household S i z e The source of non-family household growth d e r i v e s from i n c r e a s e s i n one and two person households. T h i s t r e n d towards "undoubling" and " s i n g l i n g " r e f l e c t s c u r r e n t s a t t i t u d e s to d i v o r c e and marriage which are expected to remain unchanged i n the f u t u r e (Miron: 1982, p. 67-80). Household s i z e i s p r o j e c t e d to f u r t h e r d e c l i n e from 2.9 persons per household i n 1 5 1981 to 2.5 i n 2001 (Brown: 1981, p.22). 5. Impact Of Demographic Trends On Housing Demand' The above demographic changes w i l l have an impact on type, tenure and amount of housing demanded from 1981-2001. The l i t e r a t u r e makes a number of o b s e r v a t i o n s on t h i s p o i n t : • The model c o n s t r u c t e d by Brown 1 p r e d i c t s that the average annual requirement f o r home ownership w i l l d e c l i n e by 41 percent from 1981-2001 while the average annual requirement f o r r e n t a l accommodation w i l l d e c l i n e by 70 percent. However, the p r o p o r t i o n of owner occupied housing w i l l increase' from 59 percent to 74 percent from 1981-2001 (Brown: 1981, pp. 14-16). • The in c r e a s e i n one and two person households i m p l i e s a d e c r e a s i n g demand f o r the s i n g l e f a m i l y home (which composes c l o s e to 60 percent of the housing stock) and a gr e a t e r demand f o r smaller s i z e d housing with l e s s and cheaper maintenance (Levenson: 1979, p.10). The t r a d i t i o n a l p r e f e r e n c e by Canadian households f o r s i n g l e f a m i l y homes however, w i l l ensure continued demand f o r s i n g l e f a m i l y u n i t s . • With d e c r e a s i n g numbers of c h i l d - o r i e n t e d households as the p o p u l a t i o n middle ages ( i n c r e a s i n g numbers of households i n the 35-44 age groups i n the 1980's and 45-54 age groups i n the 1990's), there w i l l be l e s s demand fo r " s t a r t e r " homes. Given that the m a j o r i t y of the baby boom ge n e r a t i o n w i l l have purchased t h e i r s t a r t e r home by the mid-1980's, t h e i r f u t u r e housing options w i l l be to e i t h e r to "trade up" to a more expensive home or a l t e r t h e i r e x i s t i n g home to s u i t t h e i r needs. • The ageing of the housing stock i n c o n c e r t with d e c l i n i n g p o p u l a t i o n growth r a t e s i m p l i e s that there w i l l be l e s s demand f o r new housing u n i t s from 1981-2001. A key component of t o t a l housing demand to 2001 w i l l be the growth of one and two person households, which i s expected to outpace the growth r a t e of the 1 Brown a r r i v e s at estimates f o r housing requirements by tenure by c a l c u l a t i n g the d i s t i n c t occupancy p a t t e r n s by u n i t types and tenure f o r d i f f e r e n t age and household types. Data are drawn from the 1976 census and a p p l i e d to the demographic p r o j e c t i o n s (1981:p.13). 16 p o p u l a t i o n as a whole. Hulchanski notes that these households tend to have l a r g e r incomes and p r e f e r f a m i l y type urban housing u n i t s . Those s m a l l - s i z e d households who e i t h e r cannot a f f o r d or do not p r e f e r l a r g e r f a m i l y type u n i t s , w i l l tend to p r e f e r the s m a l l e r s i z e d u n i t s t y p i c a l l y provided by c o n v e r s i o n and r e n o v a t i o n . (Brown: 1981, p.19; Harvey: 1980, p.2; Levenson: 1979, p.10; Hulchanski: 1982, p. 24; S i l v e r : 1 9 8 1 , p.86-90). Other f a c t o r s which support the a d a p t a t i o n of the e x i s t i n g housing stock i n response to f u t u r e housing consumption trends i n c l u d e s economic and l i f e s t y l e f a c t o r s d i s c u s s e d i n d e t a i l i n the f o l l o w i n g s e c t i o n s . Renovation can be more economic than new c o n s t r u c t i o n . In a d d i t i o n , many housing consumers p r e f e r an urban l i f e s t y l e and have an a p p r e c i a t i o n f o r o l d e r homes found i n urban l o c a t i o n s . The extent to which demographic changes w i l l have an impact on the demand f o r renovated and converted housing u n i t s w i l l be determined by a number of u n p r e d i c t a b l e f a c t o r s . B r i e f l y these i n c l u d e : • The l e v e l of economic growth w i l l determine the d i s p o s a b l e income of i n d i v i d u a l s and t h e i r p r o p e n s i t y to purchase housing. • The l e v e l of household formation as determined by p r e v a i l i n g a t t i t u d e s towards marriage and d i v o r c e . • The extent to which "empty n e s t e r s " ( e l d e r l y - households without c h i l d r e n ) f r e e up s i n g l e f a m i l y housing by f i n d i n g accommodation i n r e n t a l , or condominium and c o o p e r a t i v e u n i t s . • The l e v e l of i n t e r n a t i o n a l m i g r a t i o n which i s v o l a t i l e because of i t s f l u c t u a t i o n with f e d e r a l immigration p o l i c i e s . • The low f e r t i l i t y r a t e . 17 C. ECONOMIC FACTORS There are two economic arguments supporting renovation as opposed to replacement of the housing stock. F i r s t , a number of economic reasons u n d e r l i e the d e c i s i o n of the s p e c u l a t i v e renovator and home owner to renovate a s t r u c t u r e . Second, c e r t a i n l a r g e r economic t r e n d s , toward c o n s e r v a t i o n of l i m i t e d r e s o u r c e s , support renovation of the housing stock. 1 . The S p e c u l a t i v e Renovator; Economic I n f l u e n c e s The d e c i s i o n of a s p e c u l a t i v e renovator to renovate a b u i l d i n g as opposed to demolishing i t and r e p l a c i n g i t with a new s t r u c t u r e i s dependent upon which a l t e r n a t i v e o f f e r s minimum cos t to produce a given standard of product (Tsang: 1979, p.29). F a c t o r s which enter i n t o the d e c i s i o n framework i n c l u d e : • c o s t of f i n a n c i n g - the rate of i n t e r e s t on c a p i t a l ; 1 • f u t u r e economic l i f e of a renovated b u i l d i n g compared t o a new b u i l d i n g ; • d i f f e r e n c e s between annual o p e r a t i n g and maintenance c o s t s of renovated compared to a r e b u i l t p r o p e r t y ; • the form and amount of government loans, grants and tax i n c e n t i v e s and d i s i n c e n t i v e s ; and • the d i f f i c u l t y i n complying with b u i l d i n g and zoning standards and the i n c r e a s e d time r e q u i r e d to o b t a i n a p p r o v a l s compared to new c o n s t r u c t i o n . Renovation c o n s t r u c t i o n enjoys a higher r a t e of r e t u r n on investment on average compared to new c o n s t r u c t i o n (16.2 percent and 10.4 perc e n t i n 1975 r e s p e c t i v e l y ) . Along with i n c r e a s i n g r a t e s of r e t u r n are i n c r e a s i n g measures of r i s k (Tsang: 1979, p. 7-8). T h e r e f o r e , lenders g e n e r a l l y extend c r e d i t to renovators at h i g h e r i n t e r e s t r a t e s than f o r new c o n s t r u c t i o n (McKee: 1979, p. 33-34). 18 • d i f f e r e n c e s between estimated market p r i c e s and expected s a l e s p e r i o d f o r a renovated b u i l d i n g compared to a new b u i l d i n g . In choosing to renovate r a t h e r r e p l a c e a s t r u c t u r e the s p e c u l a t i v e renovator w i l l balance the p o t e n t i a l b e n e f i t s of h i s c h o i c e . He w i l l assess whether he can achieve higher market value , lower o p e r a t i n g and maintenance c o s t s and longer economic l i f e compared to the p o t e n t i a l c o s t s i n c l u d i n g i n t e r e s t , p r o p e r t y taxes, inconvenience and income l o s s through renovation (Rahra and Wilson: 1979, p.3). G e n e r a l i z e d statements concerning investment c o s t s and b e n e f i t s of renovation are d i f f i c u l t to make because of v a r i a b l e c o n d i t i o n s and c o s t s . A number of s t u d i e s d i s c u s s the c o s t -e f f e c t i v e n e s s of renovating a b u i l d i n g to .its "highest and best use" and d e s c r i b e c o n d i t i o n s or c r i t e r i a which are e s s e n t i a l f o r the success of renovation p r o j e c t s . B e l l i n "How to Recycle Real E s t a t e S u c c e s s f u l l y " , u r g e s the s p e c u l a t i v e renovator to spend s u f f i c i e n t "up f r o n t " time and expense to reach a thorough understanding of the p h y s i c a l p r o p e r t y and the p o t e n t i a l t a r g e t market (1977, p.30). The s p e c u l a t i v e renovator should review such c r i t e r i a as: • The s i t e and b u i l d i n g : would the renovated b u i l d i n g be economically and p h y s i c a l l y compatible with the neighbourhood? • Zoning: what i s the f l o o r space r a t i o p e rmitted f o r the renovated b u i l d i n g compared to a new s t r u c t u r e ? • S u i t a b i l i t y of the s h e l l f o r c o n v e r s i o n : what are the estimated c o s t s of b r i n g i n g the s t r u c t u r e up to c u r r e n t standards? 19 • Design p o t e n t i a l : are there unique design f e a t u r e s i n the e x i s t i n g b u i l d i n g ? • F e a s i b i l i t y of the r e n o v a t i o n p r o j e c t : what are the c o s t s and r e t u r n s on a per d w e l l i n g u n i t b a s i s or cost per r e n t a b l e square foot (1977, p. 26-30). Downs, in " I n v e s t i n g i n Housing R e h a b i l i t a t i o n Can Be S u c c e s s f u l " , confirms B e l l ' s argument that renovation can be p r o f i t a b l e p r o v i d e d c e r t a i n r u l e s are followed. He notes four p r i n c i p l e s of a s u c c e s s f u l major or "gut" r e s i d e n t i a l r enovation p r o j e c t : • The b u i l d i n g t a r g e t market should s h i f t from a low-rent to h i g h - r e n t paying occupant to provide a reasonable r e t u r n . • The b u i l d i n g should be purchased in a neighbourhood undergoing t r a n s i t i o n from a low to high income market. • Renovation should be c a r r i e d out on a small s c a l e , one p r o j e c t at a time. • The renovator must be i n t e n s i v e l y i n v o l v e d with a l l a c t o r s i n the renovation p r o j e c t - the c o n t r a c t o r s , v a r i o u s trades and the a r c h i t e c t . Downs concludes that although renovation work consumes more time, i n v o l v e s higher c o s t s of d e s i g n , and has i n e f f i c i e n t space u t i l i z a t i o n , higher f r o n t - e n d and management c o s t s than new c o n s t r u c t i o n , renovation can s t i l l g i v e s u f f i c i e n t r e t u r n on investment (1976, p.68-73). L i s t o k i n and S t e r n l i e b performed a c o s t - b e n e f i t a n a l y s i s of three r e n o v a t i o n p r o j e c t s d i f f e r i n g i n the amount and extent of c o s t s i n v o l v e d . They found that on average the t o t a l p r o j e c t cost of r e n o v a t i o n (development + c o n s t r u c t i o n ) i s 20 percent cheaper than new c o n s t r u c t i o n . T h i s estimate however v a r i e s 20 with the degree of renovation undertaken. I f the ch o i c e i s between replacement or ren o v a t i o n , g r e a t e s t cost saving are made with " l i g h t " r e novation c o n s t r u c t i o n i n s t a b l e neighbourhoods. Conversely, given the same c h o i c e , replacement i s a more favou r a b l e c h o i c e i f ex t e n s i v e "gut" l e v e l s of renovation i n b l i g h t e d neighbourhoods i s the a l t e r n a t i v e . L i s t o k i n concludes that based on the study f i n d i n g s , "a strong emphasis on renovation i s warranted" (1976: p.1034). McKee, Clatworthy and F r e n e t t e found that r e s i d e n t i a l renovation was c o s t - e f f e c t i v e , based on c o s t i n g s of recent p u b l i c and t h i r d s e c t o r p r o j e c t s i n v o l v i n g 1,500 d w e l l i n g u n i t s i n Winnipeg, Manitoba. Data a n a l y s i s r e v e a l e d : R e l a t i v e to new housing c o n s t r u c t i o n , which c o s t s about $30-35,000/unit, major renovation can be accomplished f o r approximately one t h i r d of the c o s t . A c q u i s i t i o n and reno v a t i o n of s t r u c t u r e s from the e x i s t i n g stock can be accomplished for approximately two t h i r d s of the cost of new development (1979: p.47). The Canadian A s s o c i a t i o n of Housing and Renewal O f f i c i a l s (CAHRO) a l s o found that r e s i d e n t i a l renovation was c o s t -e f f e c t i v e . F u r t h e r , they found that cost e f f e c t i v e n e s s c o u l d be improved with l a r g e s c a l e c o n s t r u c t i o n e f f o r t s through the simultaneous renovation of groups of b u i l d i n g s . (CAHRO and CMHC: 1981, p. 7). T h i s c o n c l u s i o n c o n t r a d i c t s B e l l ' s recommendation that r e n o v a t i o n should be c a r r i e d out on a small s c a l e , one b u i l d i n g at a time. In summary, although these s t u d i e s d i f f e r i n approach to renovation p r o j e c t s ( s c a l e , t a r g e t market, degree of renovation V 21 e f f o r t ) they agree that r e n o v a t i o n can o f f e r the s p e c u l a t i v e renovator the o p p o r t u n i t y to obt a i n g r e a t e r r e t u r n s on investment through r e n o v a t i o n than through redevelopment. However, i t i s important to note that s p e c u l a t i v e renovation c a r r i e s g r e a t e r r i s k s than new c o n s t r u c t i o n . 2. The Homeowner: Economic I n f l u e n c e s U n c e r t a i n economic f a c t o r s such as mortgage i n t e r e s t r a t e s , f u t u r e income flows and the r e c e s s i o n a r y economic c l i m a t e have prompted homeowners and purchasers of housing to act c a u t i o u s l y i n the housing market. Improvements to e x i s t i n g housing are p e r c e i v e d by the homeowner as adding to the p o t e n t i a l value of an investment. The purchase of o l d e r homes l o c a t e d c l o s e to employment, s e r v i c e s and amenities i s a l s o viewed by many p o t e n t i a l homeowners as a way of c u t t i n g down on t r a n s p o r t i o n c o s t s . C o l l e c t i v e l y , these f a c t o r s have c o n t r i b u t e d to many home owners' d e c i s i o n to r e t a i n and renovate t h e i r e x i s t i n g home ra t h e r than trade-up to a more expensive home (CHMC: 1980c, p.2; Levenson: 1979, p.24; F i n a n c i a l Post: August, 1983, p.29; Canadian B u i l d i n g Magazine: A p r i l 1981, p.14). 3. Economic Trends: Changing V a l u a t i o n Of The Housing  Stock Current and p r o j e c t e d economic trends are changing the s p e c u l a t i v e r e n o v a t o r ' s , homeowner's and housing a n a l y s t ' s v a l u a t i o n of the housing stock. In times of economic turb u l e n c e 22 marked by r e c e s s i o n , i n f l a t i o n , and expected f u t u r e l e v e l s of d i m i n i s h i n g p r o s p e r i t y , emphasis i s placed on making more e f f i c i e n t use of the e x i s t i n g stock of housing. James R i p l e y , the former e d i t o r of Canadian B u i l d i n g Magazine, encourages b u i l d e r s to view the b u i l d i n g stock as "...the most enduring investment base and the r e a l ' e s t a t e ' of the n a t i o n " ( A p r i l 1979: p.1). Housing a n a l y s t s such as Reid Levenson f u r t h e r add: To destory "obsolescent" housing consumes v a l u a b l e m a t e r i a l s , equipment, l a b o r , energy, money and time... resources we can i l l a f f o r d to mismanage (1979, p. 17) . D. LIFESTYLE FACTORS In c o n t r a s t to the 1950's and 1960's when suburban areas were p r e f e r r e d l o c a t i o n s f o r housing, the 1970's and 1980's r e v e a l market p r e f e r r e n c e f o r both suburban and urban l o c a t i o n s f o r housing. I n c r e a s i n g l y , housing consumers are r e s i s t a n t to suburban l o c a t i o n s because of the time and c o s t of commuting ( F i n a n c i a l Post: Aug. 27, 1983, p.29). One and two person households, where a l l household heads work, f i n d l e s s time a v a i l a b l e to maintain a house and p r o p e r t y . A l s o , s i n c e households have fewer c h i l d r e n or no c h i l d r e n , l e s s value i s given to c h i l d - o r i e n t e d housing; a fundamental a t t r a c t i o n of suburban r e s i d e n t i a l l o c a t i o n s . Complementing the "push" away from suburban l o c a t i o n s i s the " p u l l " of the c i t y . P u l l f a c t o r s or a t t r a c t i o n s of the c i t y 23 are numerous i n c l u d i n g p r o x i m i t y to work, shopping, r e c r e a t i o n , entertainment and am e n i t i e s ( I n s i g h t : 1982, Oct/Nov/Dec., p.2). Housing consumers who seek an urban l i f e s t y l e can choose between r e n t a l or ownership u n i t s . Condominiums, a v a i l a b l e s i n c e the mid 1970's, o f f e r the household with one or two person s a l a r i e s " a f f o r d a b l e " home ownership and a way of g e t t i n g i n t o the market. As part of an a p p r e c i a t i o n of an urban l i f e s t y l e , there i s a growing s o c i e t a l d e s i r e to preserve and conserve r a t h e r than d i s c a r d what i s o l d . R e c y c l i n g the o l d r e q u i r e s a change i n a t t i t u d e of a l l the p a r t i c i p a n t s , a c u l t u r a l r e c o g n i t i o n that to co n t i n u o u s l y d e s t r o y or leave behind what e x i s t s as i t gets o l d r a t h e r than remodeling, r e p a i r i n g , reshaping i s , i n the long run, a waste of res o u r c e s , both n a t u r a l and human ( W h i t t l e , Milgram and Barber, as quoted by McKee: 1977, p. 84). Many housing consumers p r e f e r the l o c a t i o n a l advantages and urban amenities o f f e r e d by housing l o c a t e d i n urban areas. The d e s i r e f o r an urban l i f e s t y l e , supplemented by an a p p r e c i a t i o n of o l d e r b u i l d i n g s , r e i n f o r c e s the c o n t e n t i o n that renovation of the housing stock w i l l be i n c r e a s i n g l y important i n the f u t u r e . E. HOUSING POLICY The t h r u s t of F e d e r a l housing p o l i c y toward "renewal" or r e h a b i l i t a t i o n has s h i f t e d i n approach i n the l a s t 30 ye a r s . "Renewal" of housing i n the 1950's and 1960's meant "slum" c l e a r a n c e or replacement of o l d e r low income housing with p u b l i c 24 housing. C i t i z e n o u t c r y a g a i n s t the p h y s i c a l and s o c i o - c u l t u r a l b u l l d o z i n g of t h e i r communities brought harsh c r i t i c i s m . With the r e l e a s e of the F e d e r a l Task Force on Housing and Urban  Development i n 1969, the urban renewal program came to an abrupt h a l t . In i t s d e c l a r a t i o n of p r i n c i p l e s , the. Task Force a s s e r t e d the F e d e r a l s h i f t i n p o l i c y f o c u s : towards renewal of the housing stock through p r e s e r v a t i o n and r e h a b i l i t a t i o n . P r i n c i p l e 8 s p e l l e d out the F e d e r a l commitment: ...economic, s o c i a l , and a e s t h e t i c c o n s i d e r a t i o n s demand that g r e a t e r care and e f f o r t be taken to preserve, and where necessary, r e h a b i l i t a t e the e x i s t i n g housing stock. (CMHC: 1969, p.23) In 1973, out of the ashes of the urban renewal program, the Neighbourhood Improvement Program (NIP) and the R e s i d e n t i a l R e h a b i l i t a t i o n A s s i s t a n c e Program (RRAP) were born. These programs were e s t a b l i s h e d to f u n c t i o n as complements to each other i n meeting low-income housing needs, with NIP's goal to upgrade the p h y s i c a l and s o c i a l s e r v i c e s and am e n i t i e s of e n t i r e neighbourhoods, and RRAP's goal to preserve and upgrade to minimum standards of i n d i v i d u a l d w e l l i n g s l o c a t e d i n NIP area s . Although the F e d e r a l government, through i t s housing agency CMHC, i n i t i a t e d NIP and RRAP, a d m i n i s t r a t i o n was dependent upon p r o v i n c i a l and mu n i c i p a l c o o p e r a t i o n . A cost s h a r i n g agreement was formulated: CMHC pr o v i d e d 50 percent of the funds on the c o n d i t i o n t hat p r o v i n c i a l and m u n i c i p a l governments would each assume 25 percent of the c o s t . CMHC took on the r o l e of funder, guide and monitor of NIP and RRAP (Peter Barnard A s s o c i a t e s : 25 1973, p.8). In 1978, NIP was phased out, r e p l a c e d by block funding to m u n i c i p a l i t i e s for p h y s i c a l ( i n f r a s t r u c t u r e ) and s o c i a l s e r v i c e s . NIP was removed p r i m a r i l y i n response to government cutbacks i n s o c i a l programs ( W i l l s o n : 1980, p.12). Although RRAP was severed from i t s companion NIP, i t s u r v i v e d to f u n c t i o n under i t s o r i g i n a l mandate to preserve and upgrade i n d i v i d u a l d w e l l i n g u n i t s . I t i s adm i n i s t e r e d by m u n i c i p a l i t i e s i n " r e h a b i l i t a t i o n a r eas" s e l e c t e d by them. In May, 1982 the Canada Home Renovation Program (CHRP) was-c r e a t e d , geared to moderate and middle income households. In over a year s i n c e program funds were made a v a i l a b l e , $235 m i l l i o n of Fe d e r a l grant money has been spent generating an estimated $840 m i l l i o n worth of reno v a t i o n business ( F i n a n c i a l Post: Aug 27, 1983, p.29). E s s e n t i a l l y , the program was designed t o : (1) a i d middle income groups, (2) promote r e h a b i l i t a t i o n of the housing stock, and (3) c r e a t e employment for the c o n s t r u c t i o n s e c t o r and i t s spin o f f i n d u s t r i e s ( F i n a n c i a l Post: June 11, 1983, p.25). In the l a t e 1970's, the Canada Home I n s u l a t i o n Program (CHIP) was i n i t i a t e d by CMHC to promote r e s i d e n t i a l energy c o n s e r v a t i o n . On A p r i l 1, 1981, the program was assumed by Energy, Mines and Resources. CMHC has s i n c e acted under c o n t r a c t as t h i s Department's agent i n d e l i v e r i n g the CHIP Program. In 1980, at the peak of the program, the t o t a l amount of grants was $198 m i l l i o n (CMHC: Annual Reports 1980 and 1981, p.22). _ 26 Since the e a r l y 1970's, CMHC has i n c r e a s i n g l y emphasized the r e h a b i l i t a t i o n of the housing stock through such programs as NIP, RRAP, CHRP and CHIP. The extent to which CMHC w i l l c ontinue to support the r e h a b i l i t a t i o n and renovation of the housing stock as opposed to i t s replacement i s d i f f i c u l t to p r e d i c t . Housing p o l i c i e s and programs are determined by a wide range of u n p r e d i c t a b l e f a c t o r s , most importantly changes i n f e d e r a l p o l i t i c a l power. Notwithstanding, t h i s s e c t i o n i l l u s t r a t e s that CMHC re c o g n i z e s the value of mai n t a i n i n g and re j u v e n a t i n g the: e x i s t i n g housing stock. Katherine W i l l s o n , author of Housing R e h a b i l i t a t i o n i n Canada: A Review of P o l i c y  Goals and Program Design, s t a t e s : The experience gained through these programs (NIP,RRAP) w i l l be important i n the 1980's, p a r t i c u l a r l y as r i s i n g energy c o s t s , demographic changes and f i s c a l r e s t r a i n t make the maintenance and the e f f i c i e n t use of the e x i s t i n g housing stock an important p r i o r i t y f o r housing p o l i c y ( W i l l s o n : 1980, p. i ) . F. SUMMARY T h i s chapter e s t a b l i s h e d the premise that renovation of the e x i s t i n g housing stock w i l l become i n c r e a s i n g l y important to 2001 i n accommodating f u t u r e housing demands. F a c t o r s o u t l i n e d which support t h i s premise i n c l u d e : • the ageing of the housing stock; • the expected d e c l i n e of new housing c o n s t r u c t i o n which w i l l compose a d e c l i n i n g p r o p o r t i o n of the t o t a l housing stock, as a r e s u l t of the d e c l i n i n g r a t e of p o p u l a t i o n 27 growth; economic f a c t o r s which favor re-use and i n t e n s i f i c a t i o n of the housing stock as opposed to d e m o l i t i o n and replacement; l i f e s t y l e f a c t o r s which p o i n t towards an a p p r e c i a t i o n of an urban l i f e s t y l e and o l d e r homes found w i t h i n urban l o c a t i o n s , combined with a n t i c i p a t e d smaller household s i z e l e a d i n g to c o n v e r s i o n of the e x i s t i n g housing stock; and the r e c o g n i t i o n by CMHC that r e h a b i l i t a t i o n and renov a t i o n of e x i s t i n g housing i s one way to meet f u t u r e housing demand. 28 CHAPTER I I I . STATISTICAL REVIEW OF THE CANADIAN RESIDENTIAL  CONSTRUCTION INDUSTRY, 1962-1980 A. INTRODUCTION T h i s chapter reviews s t a t i s t i c a l i n f o r m a t i o n on the r e s i d e n t i a l c o n s t r u c t i o n i n d u s t r y from 1962-1980. The establishment of a s t a t i s t i c a l background of the i n d u s t r y w i l l l a y a foundation f o r understanding i t s nature and s t r u c t u r e . F o l l o w i n g the s t a t i s t i c a l review, summary statements w i l l be-made about i n d u s t r y composition, r e l a t i v e dominance i n numbers and investment share by f i r m s i z e , areas of s p e c i a l i z a t i o n and response to consumer demand f l u c t u a t i o n s . S t a t i s t i c s to be d i s c u s s e d concerning the . Canadian r e s i d e n t i a l c o n s t r u c t i o n i n d u s t r y i n c l u d e : • f l u c t u a t i o n s i n the number of firms a c t i v e l y i n v o l v e d i n c o n s t r u c t i o n ; • p r o p o r t i o n of firms by s i z e category who compose the i n d u s t r y ; • capture of c o n s t r u c t i o n investment by f i r m s i z e category; • d i s t r i b u t i o n of d w e l l i n g u n i t completions by f i r m s i z e c a t e g o r y ; • s p e c i a l i z a t i o n by s i z e of f i r m i n r e p a i r and re n o v a t i o n c o n s t r u c t i o n . U n f o r t u n a t e l y , c o n s i s t e n t s t a t i s t i c a l measures c o v e r i n g the 1962-1980 p e r i o d are u n a v a i l a b l e . S t a t i s t i c a l i n f o r m a t i o n c o v e r i n g the 1962-1973 p e r i o d i s d e r i v e d from data c o l l e c t e d on b u i l d e r s who obtained NHA loans f o r new housing. T h i s i n f o r m a t i o n g i v e s an i n d i c a t i o n of one segment of b u i l d e r 29 a c t i v i t y that may not be r e p r e s e n t a t i v e . However, s t a t i s t i c s are a v a i l a b l e f o r the 1974-1980 p e r i o d that g i v e a complete and acc u r a t e r e p r e s e n t a t i o n of b u i l d e r a c t i v i t y . C o n s i s t e n t s t a t i s t i c a l measures from 1962-1980 are a l s o not a v a i l a b l e to d e s c r i b e many of the i n d u s t r y " f e a t u r e s " . T h e r e f o r e , a v a r i e t y of measures w i l l be used to d e s c r i b e each i n d u s t r y f e a t u r e . For example, to d e s c r i b e the capture of c o n s t r u c t i o n investment by s i z e of b u i l d e r , measures of both the percentage d i s t r i b u t i o n of d w e l l i n g u n i t completions by s i z e of b u i l d e r , and capture of c o n s t r u c t i o n d o l l a r output by s i z e of b u i l d e r w i l l be used. B. FLUCTUATION IN THE NUMBER OF ESTABLISHMENTS BY SIZE; CANADA  (1974-1980) Table VIII p r o v i d e s data on r e s i d e n t i a l c o n s t r u c t i o n firms i n the years 1974, 1976, 1978 and 1980. Looking s p e c i f i c a l l y at the change i n t o t a l firms by s i z e category, the f o l l o w i n g percentage f l u c t u a t i o n s were d e r i v e d (see a l s o F i g u r e 2 ) : T o t a l E s t a b l i s h m e n t s 1974-76 1976-78 1978-80 + number of firms by 151.0% 24.5% 55.7% + Small Firms ($10,000 - $499,000) 1974-76 1976-78 1978-80 + number of fi r m s by 159.0% 31.0% 72.0% + Medium Firms ($500,000 - $999,000) 1974-76 1976-78 1978-80 + number of firms by 101.0% 28.0% 10.0% + + 30 Large Firms ($1,000,000 and over) 1974-76 + number of firms by 128.0% 1976-78 + 5.1% 1978-80 - 10.4% (+ i n c r e a s e / - decrease) 31 Table VIII - R e s i d e n t i a l General B u i l d i n g C o n s t r u c t i o n Industry O p e rating S t a t i s t i c s C l a s s i f i e d by S i z e of Group: Canada 1974, 1976, 1978, 1980 1974 T o t a l $10,000- $500,000- $1,000,000 $499,999 $999,999 and over T o t a l e s t a b l i s h m e n t s 321 1 2665 270 276 Type of c o n s t r u c t i o n : S i n g l e 2951 251 5 223 213 Double 63 33 20 10 Row housing 61 31 10 20 Apartments 1 36 86 17 33 Type of work: New c o n s t r u c t i o n 3036 2498 265 273 Repair c o n s t r u c t i o n 1 75 167 5 3 T o t a l value of c o n s t r u c t i o n output: C l a s s i f i c a t i o n Value $l0,000-$499,999 $652,245,231 $500,000-$999,999 $310,577,736 $1,000,000 and over $1 ,677, 115,023 T o t a l $2,639,937,990 1976 T o t a l $10,000- $500,000- $1 ,000,000 $499,999 $999,999 and over T o t a l e s t a b l i s h m e n t s 8070 6897 543 630 Type of c o n s t r u c t i o n : S i n g l e 741 7 6473 463 481 Double 1 42 102 16 24 Row housing 1 1 7 49 1 5 43 Apartments 394 273 39 82 Type of work: New c o n s t r u c t i o n 6993 5857 518 618 Repair c o n s t r u c t i o n 1077 1 040 25 12 T o t a l value of c o n s t r u c t i o n output: C l a s s i f i c a t i o n Value $l0,000-$499,999 $806,414,343 $500,000-$999,999 $377,786,652 $1,000,000 and over $2,679,947,958 T o t a l $3,864,130,953 32 1978 T o t a l $10,000- $500,000- $1,000,000 $499,999 $999,999 and over T o t a l e s t a b l i s h m e n t s 6089 4732 695 662 Type of c o n s t r u c t i o n : S i n g l e 551 5 4456 591 468 Double 165 81 46 38 Row housing 1 03 50 17 36 Apartments 306 1 45 41 1 20 Type of work: New c o n s t r u c t i o n 5446 41 29 667 650 Repair c o n s t r u c t i o n 643 603 28 12 T o t a l value of c o n s t r u c t i o n output: C l a s s i f i c a t i o n Value $1 0, 000-$499-,999 $752,472,178 $500,000-$999,999 $399,689,462 $1,000,000 and over $3,311,702,71 1 T o t a l $4,543,871,351 1980 T o t a l $10,000- $500,000- $1,000,000 $499,999 $999,999 and over T o t a l e s t a b l i s h m e n t s 9478 8121 764 593 Type of c o n s t r u c t i o n : S i n g l e 8627 7474 686 464 Double 1 62 1 18 18 26 Row housing 60 21 1 6 24 Apartments 632 508 44 80 Type of work: New c o n s t r u c t i o n 8853 7554 720 579 Repair c o n s t r u c t i o n 625 567 44 14 T o t a l value of c o n s t r u c t i o n output: C l a s s i f i c a t i o n Value $10,000-$499,999 $1 ,074,408,608 $500,000-$999,999 $528,858,117 $1 ,000 , 000 and over $2,952,940,927 T o t a l $4,556,207,652 Source: S t a t i s t i c s Canada Catalogue 64-208 (1974,1976,1978, 1980). Fig 2: Fluctuation In The Number of Establishments by Size Category: Canada 1974-1980 180-. 170--40 J 1 1 1 1974-76 1976-78 1978-80 Year 34 The i n d u s t r y i s s u b j e c t to v o l a t i l i t y i n the numbers of firms a c t i v e i n c o n s t r u c t i o n . In the extreme case of s m a l l -s i z e d f i r m s , numbers i n c r e a s e d by 159 percent d u r i n g one time p e r i o d (1974-1976) and decreased by 31 percent d u r i n g the next time p e r i o d (1976-1978). S m a l l - s i z e d firms e x h i b i t the g r e a t e s t v o l a t i l i t y while l a r g e firms e x h i b i t the l e a s t v o l a t i l i t y . The number of f i r m s who enter and e x i t the market p l a c e r e v e a l s an inherent f l e x i b i l i t y to respond to economic c o n d i t i o n s . Small-s i z e d firms are more responsive to v a r y i n g economic c o n d i t i o n s than l a r g e - s i z e d f i r m s , p o s s e s s i n g the. " f l e x i b i l i t y " to. exit- the-i n d u s t r y i n slow economic p e r i o d s and enter d u r i n g times of economic growth. C. PROPORTION OF FIRMS BY SIZE CATEGORY (1962-1980) 1 . 1962 - 1973 Table IX o u t l i n e s the s i z e of b u i l d e r s o b t a i n i n g NHA ( N a t i o n a l Housing Act) loans f o r new housing i n Canada,' 1962-1973. S m a l l - s i z e d firms compose the bulk of the i n d u s t r y , averaging 86 percent of firms i n the i n d u s t r y over the time p e r i o d . In c o n t r a s t , l a r g e - s i z e d firms over the same p e r i o d averaged 2.75 percent of the i n d u s t r y . 35 Table IX - S i z e of NHA Operations of B u i l d e r s O b t a i n i n g NHA Loans f o r New Housing: Canada 1962-73 B u i l d e r A c t i v i t y by Number of Dwelling U n i t s Small F i rms Medium Firms Large Firms 1-25 26-50 51-100 100 + T o t a l YEAR %B %U %B %U sB %U %B %U #B #U 1962 1 963 1 964 1965 1 966 1967 1968 1969 1 970 1 971 1 972 1 973 89.2 88.6 87.4 88. 1 89.3 89. 1 88.2 86.3 84.2 80.0 80.9 81.1 42.0 35.8-35.1 37.4 41.1 42.3 34. 1 30.2 24.4 23.9 25. 1 21.8 6.2 17.5 6.4 17.5* 6.6 17.3 6.9 19.7 6.4 19.4 7.2 21.8 5.6 14.8 6.7 14.8 7.5 13.2 10. 1 16.3 8.9 15.1 8.4 14.2 3.1 19.2 3.1 16.3 3.7 17.7 3.2 18.3 2.9 16.7 2.3 12.8 4.3 21.8 4.0 17.9 4.8 14.6 5.3 16.5 5.8 18.9 6.2 20.8 1.5 21.3 1.9 30.4 2.3 29.4 1.8 24.6 1.4 22.8 1.5 23.1 1.9 29.2 3.0 37.0 4.1 47.7 4.8 43.4 4.4 41.0 4.4 43.2 2264 248-1 2226 2334 2158 2206 1763 1 154 2151 2344 2419 1816 27858 33852 30647 301 63 261 14 261 34 24402 18146 42803 52554 52229 38537 B - b u i l d e r s U - u n i t s Source: Canadian Housing S t a t i s t i c s Centre, (1962-1973), Ottawa 36 2. 1974 - 1980 The f o l l o w i n g f i g u r e s , which express the p r o p o r t i o n of f i r m s by s i z e category, are d e r i v e d from Table V I I I . A graphic i l l u s t r a t i o n of these f i g u r e s i s shown on F i g u r e 3. Table X - P r o p o r t i o n of Firms Composing the Industry by S i z e Category; 1974-80 Year Small Firms $l0,000-$499,000 Medium Firms $500,000-$999,999 Large Firms $1 ,000,000 and over 1974 83.0% 8.4% 8.6% 1 976 85.0 6.7 7.9 1 978 78.0 11.4 10.4 1 980 86.0 8.1 6.2 During t h i s time p e r i o d , s m a l l - s i z e d firms c o n t i n u e d to dominate the i n d u s t r y on a numerical b a s i s , comprising an average 83 percent of the i n d u s t r y from 1974-1980. Large and medium-sized f i r m s continued to be n u m e r i c a l l y weak, with l a r g e f i r m s comprising an average 8.4 percent of the i n d u s t r y . Large-s i z e d f i r m s however, have grown in number r e l a t i v e to the 1962-1973 time p e r i o d . Fig 3: Percentage of Firms Composing the Industry by Size Class Category: Canada 1974-1980 100 80-- A — 60 -Size Of Firm A S m a l l ( $ 1 0 , 0 0 0 - $ 4 9 9 . 9 9 9 ) X M e d i u m ( $ 5 0 0 , 0 0 0 - $ 9 9 9 , 0 0 0 ) • L a r g e ( $ 1 , 0 0 0 , 0 0 0 a n d over) 40 20 :# = = r 1974 1976 1978 1980 Year 38 D. CAPTURE OF CONSTRUCTION INVESTMENT BY SIZE CATEGORY (1962- 1 980) To d e s c r i b e the d i s t r i b u t i o n of c o n s t r u c t i o n investment by s i z e category of f i r m , two measures are used: 1) percentage d i s t r i b u t i o n of d w e l l i n g u n i t completions by s i z e c l a s s of b u i l d e r , 1962-73 (Table I X ) ; and, 2) capture of c o n s t r u c t i o n d o l l a r output by s i z e c l a s s of b u i l d e r , 1974-1980. (Table V I I I ) 1. D i s t r i b u t i o n Of Dwelling U n i t Completions By S i z e  C l a s s Of B u i l d e r , 1962-73 From 1962-73, s m a l l , medium and l a r g e - s i z e d b u i l d e r s each averaged about 32 percent take-up of NHA d w e l l i n g u n i t completions. Breaking t h i s p e r i o d i n t o two time p e r i o d s ; 1962-1967 and 1968-1973, an i n t e r e s t i n g r e v e r s a l becomes e v i d e n t . S m a l l - s i z e d f i r m s averaged 39 percent of t o t a l d w e l l i n g u n i t take-up from 1962-67 and 26.5 percent i n the 1968-1973 p e r i o d . Meanwhile, l a r g e - s i z e d f i r m s averaged 25.5 percent of t o t a l d w e l l i n g u n i t completions from 1962-1967 and 40.4 percent from 1968-1973. L a r g e - s i z e d f i r m s then toward the end of t h i s p e r i o d , assume dominance i n d w e l l i n g unit completions and a b i l i t y to capture investment d o l l a r s , once h e l d by s m a l l - s i z e d f irms. 39 2. Capture Of C o n s t r u c t i o n Investment By S i z e Category;  1974-1980 Using Table VIII data, the capture of c o n s t r u c t i o n investment by s i z e category of f i r m s was d e r i v e d . The f o l l o w i n g f i g u r e s express the d i s t r i b u t i o n of c o n s t r u c t i o n investment by s i z e on a percentage b a s i s . Table XI - Capture of C o n s t r u c t i o n Investment by S i z e Category; 1974-80 Year Small Firms $10,000-$499,000 Medium Firms $500,000-$999,999 Large Firms $1 ,000,000 and over 1974 24.7% 11.8% 64.0% 1976 20.8 9.8 69.4 1978 16.5 8.7 72.8 1980 21 .5 11.6 64.8 Although s m a l l - s i z e d f i r m s dominate i n numbers of fi r m s i n o p e r a t i o n , they capture only a small amount of c o n s t r u c t i o n output. While on average from 1973-1980 s m a l l - s i z e d firms compose 83 percent of the i n d u s t r y , they captured only 21.3 percent of t o t a l c o n s t r u c t i o n investment. In c o n t r a s t , while l a r g e - s i z e d f i r m s i n the same time p e r i o d composed on average 8.4 percent of the i n d u s t r y , they captured the l i o n s share of c o n s t r u c t i o n output: 67.8 pe r c e n t . T h i s c o n t i n u e s the tr e n d of the p r e v i o u s time p e r i o d 1962-1973, when s m a l l - s i z e d firms a l s o l o s t ground to l a r g e - s i z e d f i r m s . G e n e r a l l y , l a r g e - s i z e d f i r m s s i n c e the mid 1960's expanded o p e r a t i o n s , e x h i b i t i n g i n c r e a s e d s t r e n g t h and dominance i n the i n d u s t r y (see' F i g u r e 4 ) . Fig 4: Capture of Total Dollar Value of Construction Output By Size Class of Firm: Canada 1974-1980 100 90 80-J ^ 70 60-5.0-40 30-_2 20-10 -X-Size Of Firm A Small ($10,000 - $499,999) X Medium ($500,000 - $999,000) • Lorga ($1.000,000 and over] 1974 1975 1976 1977 Year 1978 1979 1980 41 E. DWELLING TYPE SPECIALIZATION BY SIZE CATEGORY 1974-1980 A l l s i z e c l a s s e s of b u i l d e r s s p e c i a l i z e i n the c o n s t r u c t i o n of s i n g l e detached d w e l l i n g s . Small and medium-sized f i r m s tend to be a c t i v e i n s i n g l e detached c o n s t r u c t i o n to a gr e a t e r degree with 93.4 percent and 85.6 percent r e s p e c t i v e l y a c t i v e from 1974-1980 (see Table V I I I ) . Of l a r g e - s i z e d f i r m s , 75.4 percent r e p o r t e d s i n g l e detached c o n s t r u c t i o n as the p r i n c i p l e type of c o n s t r u c t i o n . Large and medium-sized firms are a c t i v e i n m u l t i f a m i l y housing c o n s t r u c t i o n to a grea t e r extent than s m a l l -s i z e d f i r m s . F. REPAIR CONSTRUCTION BY SIZE CATEGORY; 1974-1980 Of a l l firms a c t i v e i n r e p a i r c o n s t r u c t i o n s i n c e 1974, s m a l l - s i z e d firms p l a y e d the g r e a t e s t r o l e : 94 percent of a l l f i r m s a c t i v e i n r e p a i r work were s m a l l - s i z e d f i r m s . A r e p o r t prepared f o r the Canada Mortgage and Housing C o r p o r a t i o n e n t i t l e d , ' An Examination of the C h a r a c t e r i s t i c s of R e h a b i l i t a t i o n C o n t r a c t e r s : P i l o t Study f o r Ottawa concurs with these f i n d i n g s . The r e p a i r i n d u s t r y was found to be the l a r g e s t "cottage" i n d u s t r y i n Canada. The m a j o r i t y of c o n t r a c t o r s surveyed were small (gross income under $499,999), not l i s t e d i n the phone d i r e c t o r y , and obtained employment by word of mouth co n t a c t ( C l a r k : 1981, p. 38). Repair and re n o v a t i o n c o n s t r u c t i o n s i n c e 1975 has grown, comprising a gr e a t e r p r o p o r t i o n of t o t a l c o n s t r u c t i o n investment i n Canada (CMHC: 1980c, p. 33) (see Table X I I ) . 42 Table XII - The P a t t e r n of R e s i d e n t i a l Investment i n Canada, 1975-1980 ($ thousands) New Housing Major Year Cons t r u c t ion Renovat ion Repair T o t a l 1975 5,896,316 1,217,541 1,575,805 8,689,662 1 976 8,384,939 2,467,593 1,816,814 12,669,346 1 977 8,360,132 2,571,822 2,018,674 12,950,628 1978 8,861,704 2,588,846 2,329,408 13,779,958 1 979 8,736,614 2,745,146 2,670,935 14, 1 52,695 1980 8,595,350 2,934,170 3,010,836 14,540,356 (% of t o t a l ) New Housing Major Year Cons t r u c t ion Renova.t ion Repair T o t a l 1975 67.9 14.0 18.1 100.0 1 976 66.2 19.5 14.1 100.0 1 977 64.5 19.9 15.6 100.0 1978 64.3 18.8 16.9 100.0 1979 61 .8 19.3 18.9 100.0 1980 59. 1 20.1 20.8 100.0 Source: CMHC, 1980c, p.33. G. CONCLUSION A number of summary statements can be made about the r e s i d e n t i a l c o n s t r u c t i o n i n d u s t r y based on the p r e v i o u s d i s c u s s i o n : • The i n d u s t r y f l u c t u a t e s g r e a t l y i n the number of f i r m s a c t i v e l y i n v o l v e d i n c o n s t r u c t i o n . T h i s r e v e a l s a " f l e x i b i l i t y " to respond to consumer demand f o r housing; expanding o p e r a t i o n s d u r i n g h i g h demand p e r i o d s and c o n t r a c t i n g o p e r a t i o n s d u r i n g p e r i o d s of low demand. 43 L a r g e - s i z e d firms are l e s s v u l n e r a b l e to c y c l i c a l f l u c t u a t i o n s i n demand. • The i n d u s t r y i s p r i n c i p a l l y composed of small-s-ized firms compared to the small number of medium and l a r g e -s i z e d f i r m s . From 1962-1980 the p r o p o r t i o n of small s i z e d f i r m s ranged from 80-90 per c e n t . • The numerical s t r e n g t h of s m a l l - s i z e d firms i s not r e f l e c t e d i n t h e i r a b i l i t y to a t t r a c t c o n s t r u c t i o n investment d o l l a r s . L a r g e - s i z e d firms s i n c e the mid 1960's matched and surpassed the former dominance of s m a l l - s i z e d f i r m s . S m a l l - s i z e d firms l o s t t h e i r c o m p e t i t i v e edge and were outpaced by l a r g e - s i z e d firms in d w e l l i n g u n i t completions. L a r g e - s i z e d f i r m s are a dominant f o r c e in the i n d u s t r y i n c a p t u r i n g both a g r e a t e r p o r t i o n of c o n s t r u c t i o n investment and d w e l l i n g u n i t completions. • The i n d u s t r y , d e s p i t e d i f f e r e n t i a t i o n by s i z e c l a s s , tends to s p e c i a l i z e i n s i n g l e detached c o n s t r u c t i o n . Most d w e l l i n g u n i t take-up f o r m u l t i f a m i l y housing i s shared between medium and l a r g e - s i z e d f i r m s . • S m a l l - s i z e d firms are r e s p o n s i b l e f o r almost 100 percent of r e p a i r c o n s t r u c t i o n . Using t h i s s t a t i s t i c a l review of the r e s i d e n t i a l c o n s t r u c t i o n i n d u s t r y , the f o l l o w i n g chapter w i l l d i s c u s s the c h a r a c t e r i s t i c s of the i n d u s t r y i n terms of v a r i o u s f i r m s i z e c l a s s e s and the new versus r e n o v a t i o n c o n s t r u c t i o n s e c t o r s . 44 CHAPTER IV. CHARACTERISTICS OF THE HOUSE-BUILDING AND  RESIDENTIAL RENOVATION SECTORS OF THE INDUSTRY A. INTRODUCTION T h i s chapter h i g h l i g h t s the key f e a t u r e s of the house-b u i l d i n g and r e s i d e n t i a l r e n o v a t i o n s e c t o r s of the c o n s t r u c t i o n i n d u s t r y . For purposes of d i s c u s s i o n , the i n d u s t r y w i l l be d i v i d e d i n t o the f o l l o w i n g c a t e g o r i e s : • l a r g e development-building firms • medium-sized f i r m s • s m a l l - s i z e d f i r m s • s p e c u l a t i v e r e n o v a t i o n firms • c o n t r a c t r e n o v a t i o n f i r m s . Each f i r m category w i l l be d i s c u s s e d i n terms of access to f i n a n c i n g , the c o n s t r u c t i o n process and o r g a n i z a t i o n and management s t r u c t u r e . Comprehensive, s c h o l a r l y l i t e r a t u r e on the i n d u s t r y i s sparse. Perhaps an u n d e r l y i n g .reason f o r t h i s i s due to the fragmented and d i v e r s e nature of the i n d u s t r y . S c a l e , scope of o p e r a t i o n s and decision-making procedures vary g r e a t l y with each catego r y of f i r m , c r e a t i n g d i s t i n c t i v e c o r p o r a t e p e r s o n a l i t i e s (Chamberlain: 1972, p.45). Adding to t h i s i s the p l e t h o r a of a c t o r s r e l a t e d to the i n d u s t r y : innumerable trades and s u b c o n t r a c t o r s , a r c h i t e c t s , m a t e r i a l s manufacturers, l e n d i n g i n s t i t u t i o n s , b u i l d i n g i n s p e c t o r s and so on. These f a c t o r s 45 g r e a t l y complicate the task of i n d u s t r y c l a s s i f i c a t i o n . Notwithstanding, f o r the purpose of t h i s t h e s i s s i m p l i f i e d , systematic c a t e g o r i z a t i o n of the i n d u s t r y i s e s s e n t i a l to gain an understanding of i t s inner workings and as a b a s i s f o r making comparisons between f i r m types. B. CHARACTERISTICS OF THE LARGE DEVELOPER-BUILDER Almost a l l major h o u s e b u i l d e r s are a l s o l a r g e land developers ( G l u s k i n : 1976, p.124). Although many of these firms d i f f e r i n l o c a t i o n of o p e r a t i o n , scope and c o r p o r a t e management procedures, most l a r g e d e v e l o p e r - b u i l d e r s produce minimum volumes of 100 housing u n i t s y e a r l y , employing r e l a t i v e l y few s t a f f : f i f t y - s e v e n people on average (Charney: 1971, p.116). G e n e r a l l y , the d e v e l o p e r - b u i l d e r f o l l o w s t h i s e s s e n t i a l step-by-step approach to r e s i d e n t i a l c o n s t r u c t i o n : • arrange f i n a n c i n g ; • a c q u i r e land; • i n i t i a t e p l a n n i n g , e n g i n e e r i n g and d e s i g n work; • i n i t i a t e m a t e r i a l s purchasing and s u b c o n t r a c t i n g of t r a d e s , or use an in-house d i v i s i o n f o r these t a s k s ; • s u p e r v i s e c o n s t r u c t i o n ; • r e t a i n product as income p r o p e r t y or s e l l upon completion. The c h a r a c t e r i s t i c s of l a r g e d e v e l o p e r - b u i l d e r s w i l l be d e s c r i b e d through a d i s c u s s i o n of r e s i d e n t i a l c o n s t r u c t i o n f i n a n c i n g , economies of s c a l e and c o r p o r a t e i n t e g r a t i o n . 46 1. Financ ing C a p i t a l i s the l i f e b l o o d o f d e v e l o p e r - b u i l d e r s ' o p e r a t i o n s . In a report prepared by The Royal Commission on Corporate C o n c e n t r a t i o n , a survey of t h i r t y - f i v e land and housing companies r e v e a l e d that on average 13.8 percent of a s s e t s were re p r e s e n t e d by e q u i t y ( G l u s k i n : 1976, p.183). Due to the i n d u s t r y ' s dependence on h i g h l y leveraged investments, the a v a i l a b i l i t y of f i n a n c i n g i s c r u c i a l . During i n f l a t i o n a r y p e r i o d s of i n c r e a s i n g house and land p r i c e s , leverage c o n t r i b u t e s g r e a t l y to high p r o f i t r e t u r n s . Leverage then f u n c t i o n s as an important and e x t e n s i v e l y used p r o f i t making t o o l (Rudin: 1978, p.50). Having secured h i g h d e b t - e q u i t y r a t i o s f o r a p r o j e c t , l a r g e d e v e l o p e r - b u i l d e r s may assume i n c r e a s e d r i s k s and expect p o t e n t i a l l y g r e a t e r r e t u r n s on investment. I r a G l u s k i n , a s e c u r i t y a n a l y s t s t a t e s : A company with $100 m i l l i o n of e q u i t y can l o g i c a l l y undertake p r o j e c t s that a $10 m i l l i o n company cannot ( G l u s k i n : 1976, p.17). In c o n t r a s t to s m a l l b u i l d e r s who are l i m i t e d to i n t e r i m l o a n s , l a r g e d e v e l o p e r - b u i l d e r s can o b t a i n f i n a n c i n g i n a v a r i e t y of ways, through b l o c k s of unsecured r a t e s and debentures, bank c r e d i t and stock warrants. I f companies are s t a b l e , with a sound r e c o r d of f i n a n c i a l s t r e n g t h , and maintain business d e a l i n g s with one or two banks, they may o b t a i n loans at r a t e s of one or two per cent above prime ( G r e b l e r : 1973, p.37). 47 Another source of l a r g e d e v e l o p e r - b u i l d e r ' s growth and p r o s p e r i t y , i n a d d i t i o n to c a p i t a l a v a i l a b i l i t y , i s t h e i r a b i l i t y to take advantage of c e r t a i n tax c o n c e s s i o n s . Given continued growth, firms can d e f e r income tax payment by m a i n t a i n i n g c a p i t a l c o s t allowances (CCA). Such d e f e r r a l s e s s e n t i a l l y serve as an i n t e r e s t f r e e loan from the government (Rudin: 1974, p.24). However, i n the absence of growth, developers are r e q u i r e d to pay d e f e r r e d taxes. 2. Economies Of Scale The advantages of economies of s c a l e - the achievement of decreased c o s t s per u n i t through volume p r o d u c t i o n - are a v a i l a b l e to l a r g e s i z e d f i r ms (Spurr: 1976, p.193). i . Land A q u i s i t i o n C o n t i n u i t y of volume p r o d u c t i o n i s ensured through the purchase of l a r g e t r a c t s of land w e l l i n advance of development. Large s i z e d f i r m s possess the f i n a n c i a l r e s o u r c e s , not a v a i l a b l e to smaller b u i l d e r s , to a c q u i r e and bank such t r a c t s of land ( G r e b l e r : 1973, p.147). Equipped with a constant source of l a n d supply, d e v e l o p e r - b u i l d e r s can r o l l - o v e r i n v e n t o r y next to e x i s t i n g urban areas using c a p i t a l a p p r e c i a t i o n to a c q u i r e l a n d having cheaper land p r i c e s f u r t h e r out (Spurr: 1976, p.212). Given t h i s constant flow of development, c o n t i n u i t y i s ensured i n p r o d u c t i o n volume, s a l e s , r e a l i z a t i o n of p o t e n t i a l p r o f i t s and r e t e n t i o n of s t a f f . Firms can t h e r e f o r e undertake long term 48 development p r o j e c t s , p e r m i t t i n g g r e a t e r f l e x i b i l i t y i n ti m i n g of development, knowing that l o c a t i o n and c o s t s are e s t a b l i s h e d . R e l a t i v e to r e t u r n s of almost any other type of r e a l e s t a t e venture, or r e t u r n s from income property, l a n d development r e c e i v e s the hig h e s t r e t u r n s (Spurr: 1976, p. 243; G l u s k i n : 1976, pp.124,145). Coupled with c a p i t a l a v a i l a b i l i t y , l a r g e l a n d i n v e n t o r i e s are paramount to the e x i s t e n c e and growth of the l a r g e d e v e l o p e r - b u i l d e r . T h i s has become evident i n Vancouver which has a- s c a r c i t y of l a r g e tracts^ of. l a n d . Medium* sized* developer-b u i l d e r s who produce between 25-100 u n i t s a n n u a l l y predominate. No indigenous d e v e l o p e r - b u i l d e r s are a c t i v e and branches of la r g e d e v e l o p e r - b u i l d e r s f u n c t i o n as s l i g h t l y e n l a r g e d medium-s i z e d f i rms ( P r i c e : 1970, p.91). i i . P u b l i c P o l i c y Requirements Planning p o l i c y has served to promote and n e c e s s i t a t e d e v e l o p e r - b u i l d e r ' s l a r g e land i n v e n t o r i e s and l a r g e s c a l e development. Regional pla n n i n g p o l i c y has encouraged "packaged" development, emphasizing the c o n s t r u c t i o n of new housing simultaneously with the c o n s t r u c t i o n of i n d u s t r i a l , commercial and r e c r e a t i o n a l f a c i l i t i e s (Spurr: 1976, pp.180-181). M u n i c i p a l r e g u l a t i o n s have i n c r e a s i n g l y r e q u i r e d developer-b u i l d e r s to pay f o r i n i t i a l s e r v i c i n g charges p r i o r t o development. (Greenspan: 1978, p.161). P u b l i c p o l i c y and r e g u l a t i o n requirements have p l a c e d medium s i z e d developer-b u i l d e r s , who lack the l a r g e land i n v e n t o r y and f i n a n c i a l 49 c a p a b i l i t y , at a com p e t i t i v e disadvantage. i i i . C o n s t r u c t ion In the process of c o n v e r t i n g l a r g e t r a c t s of raw land t o housing, economies of s c a l e i n r e s i d e n t i a l p r o d u c t i o n come i n pl a y , i n c l u d i n g : • d i r e c t bulk purchase of m a t e r i a l s at or near c o s t ; • g r e a t e r o p p o r t u n i t i e s f o r labour s p e c i a l i z a t i o n ; • i n c r e a s e d labour f a m i l i a r i t y with the product through r o u t i n e p r o d u c t i o n ; • i n c r e a s e d e f f i c i e n c e s i n s c h e d u l i n g c o n t r a c t o r s and o r g a n i z i n g the work o n - s i t e ; • o p p o r t u n i t i e s to provide f o r a c e n t r a l purchase and storage f a c i l i t y ( E i c h l e r : 1982, pp.63-78); • lower b i d s from s u b c o n t r a c t o r s and lower fees f o r p r o f e s s i o n a l s e r v i c e s ; p l a n n i n g , a r c h i t e c t u r e , and e n g i n e e r i n g ; • use of s t a n d a r d i z e d , p r e - f a b r i c a t e d p a r t s ( G r e b l e r : 1973, p.41). Through the use of s c a l e economics, d e v e l o p e r - b u i l d e r s a v a i l themselves to e f f i c i e n c i e s i n c o s t s , timing and o r g a n i z a t i o n . i v . G e ographical D i v e r s i f i c a t i o n S c a l e economies a l s o come i n t o e f f e c t when firms undertake m u l t i - a r e a o p e r a t i o n s spread g e o g r a p h i c a l l y across a v a r i e t y of r e g i o n a l markets. D e v e l o p e r - b u i l d e r s then possess the f l e x i b i l i t y to adapt to c y c l i c a l f l u c t u a t i o n s of the market, t r a n s f e r r i n g o p e r a t i o n s to p r o d u c t i v e markets while slowing p r o d u c t i o n i n down-turned markets (Rudin: 1978, p.13). 50 v. I n d i v i d u a l P r o j e c t Once p r o j e c t s are n e a r i n g completion, d e v e l o p e r - b u i l d e r s o f t e n mount a l a r g e s c a l e , s o p h i s t i c a t e d a d v e r t i s i n g campaign, making use of t e l e v i s i o n and r a d i o media. Again, l a r g e d e v e l o p e r - b u i l d e r s possess a c o m p e t i t i v e advantage r e l a t i v e to medium and s m a l l - s i z e d b u i l d e r s s i n c e per u n i t a d v e r t i s i n g expenses decrease over the l a r g e s i z e of the p r o j e c t ( G r e b l e r : 1973, p.62). The l i t e r a t u r e g e n e r a l l y supports the argument t h a t l a r g e d e v e l o p e r - b u i l d e r s possess a comparative advantage r e l a t i v e to small b u i l d e r s through s c a l e economies. However, one d i s s e n t i n g study c h a l l e n g e s t h i s view. The Task Force on the Supply and  P r i c e of S e r v i c e d R e s i d e n t i a l Land found by undertaking a survey of development p r o j e c t s that l a r g e s c a l e p r o j e c t s were e q u a l l y as p r o f i t a b l e as small s c a l e p r o j e c t s . I t was concluded that l a r g e d e v e l o p e r - b u i l d e r s are not more i n h e r e n t l y p r o f i t a b l e than small b u i l d e r s (Greenspan: 1978, p.108). However, the Task Force Survey examined land development p r o j e c t s s o l e l y , and d i d not d e a l with p o t e n t i a l r e t u r n s to s c a l e a v a i l a b l e through l a r g e s c a l e r e s i d e n t i a l c o n s t r u c t i o n . No other s t u d i e s have researched and r e p o r t e d on t h i s i s s u e . 51 3. Corporate I n t e g r a t i o n In the process of growing i n t o l a r g e l a n d and housing f i r m s , a s t r u c t u r a l t h r e s h o l d i s reached where management r e o r g a n i z a t i o n through v e r t i c a l and h o r i z o n t a l i n t e g r a t i o n can take p l a c e . V e r t i c a l i n t e g r a t i o n c o n s t i t u t e s the adoption of f u n c t i o n s i n house such as c o n s t r u c t i o n , f i n a n c i n g and pr o p e r t y management that was once c o n t r a c t e d out. Greater e f f i c i e n c i e s in s c h e d u l i n g and a d m i n i s t r a t i v e c o s t s r e s u l t . The p o t e n t i a l then e x i s t s f o r r e a l i z a t i o n of high e r p r o f i t s and c o n s t r u c t i o n of a s u p e r i o r product at a given p r i c e (Spurr: 1976, p.216). H o r i z o n t a l i n t e g r a t i o n i n v o l v e s the d i v e r s i f i c a t i o n of a c t i v i t i e s beyond r e s i d e n t i a l development i n t o o f f i c e , commercial and i n d u s t r i a l development. Such expansion a f f o r d s developers f l e x i b i l i t y to s h i f t o p e r a t i o n s from a l a g g i n g venture i n t o a more p r o f i t a b l e one. Management economies of s c a l e may be achieved not onl y through v e r t i c a l and h o r i z o n t a l i n t e g r a t i o n , but through conglomerate i n t e g r a t i o n as w e l l . J o i n t ventures with other firms permits p o o l i n g of s p e c i a l i z e d s k i l l s and shared s u b c o n t r a c t s . Spurr notes that such i n t e g r a t i o n s can: ...lower p r o d u c t i o n and f i n a n c e c o s t s , improve access to c a p i t a l , i n c r e a s e the m a r k e t a b i l i t y of new housing, and p r o v i d e s p e c i a l i z e d management f o r d i f f e r e n t phases of development (1976, pp.217-18). As a f i r m becomes i n t e g r a t e d and expands, management becomes more s o p h i s t o c a t e d . I t becomes more ' capable of undertaking such d i v e r s e tasks as land a c q u i s i t i o n , development 52 pla n n i n g , government n e g o t i a t i o n and p r o j e c t marketing (Rudin: 1978, p.39). In a d d i t i o n , management s k i l l s can be brought to bear i n a l t e r i n g housing types or designs i n response to quick s h i f t s i n demand. Given s u f f i c i e n t f i n a n c i a l r esources, l a r g e development-building f i r m s tend to be more w i l l i n g to take r i s k s than medium-sized firms i n promoting i n n o v a t i v e housing design and type (Rudin: 1978, p.55). 4. Diseconomies Of S i z e The f o l l o w i n g diseconomies may a f f e c t the p r o f i t s , growth and p o t e n t i a l l y the very e x i s t e n c e of l a r g e development-building f i r m s : (a) Since r e s i d e n t i a l c o n s t r u c t i o n i s management i n t e n s i v e , r e l y i n g upon day-to-day d e c i s i o n making and s u p e r v i s i o n , a s t r a i n on management e x p e r t i s e may r e s u l t i n poor, i n a p p r o p r i a t e l y timed d e c i s i o n s or inadequate s u p e r v i s i o n of ongoing c o n s t r u c t i o n . (b) U n l i k e other commodities that are f a c t o r y produced and s o l d n a t i o n a l l y , h o u s e - b u i l d i n g i s l o c a l market dependent, with each market area v a r y i n g i n demand. Diseconomies may occur through h o r i z o n t a l i n t e g r a t i o n (the use of m u l t i - p r o j e c t , m u l t i - a r e a o p e r a t i o n s ) . Supplying a standard product i n a v a r i e t y of l o c a l 53 markets c a r r i e s p o t e n t i a l p i t f a l l s . The developer-b u i l d e r must a d j u s t h i s product and mode of op e r a t i o n s i n accordance with p l a n n i n g r e g u l a t i o n s indigeneous to each m u n i c i p a l i t y . Consequently, m a i n t a i n i n g a steady p r o d u c t i o n flow i s a major task ( G r e b l e r : 1973, p 70-71). (c) Diseconomies may a l s o a r i s e through v e r t i c a l i n t e g r a t i o n . During p e r i o d s of market slow-down the f i r m may experience l o s s e s or d e c r e a s i n g p r o f i t r e t u r n s i f i t r e t a i n s u n d e r - u t i l i z e d s t a f f . I t may choose to bear these c o s t s i n p r e p a r a t i o n f o r a r e t u r n to normal market c o n d i t i o n s . 5. I n d u s t r y R e s t r u c t u r i n g D e s p i t e l a r g e d e v e l o p e r - b u i l d e r s ' s t r e n g t h s and advantages, these firms have s u f f e r e d a s e r i o u s setback i n the recent (1981) c y c l i c a l down-turn i n the economy. T h i s occurrence has d e f i e d c o n v e n t i o n a l wisdom reg a r d i n g t h e i r a b i l i t y to s u s t a i n t h e i r o p e r a t i o n s , i f not grow, d u r i n g economic downturns: While the output of l a r g e b u i l d e r s may drop somewhat du r i n g market slowdowns i t i s the small b u i l d e r who i s most a f f e c t e d by c y c l i c a l d e c l i n e s . T h i s occurs f o r two reasons: d u r i n g the more co m p e t i t i v e downturn p e r i o d s l a r g e d e v e l o p e r s are b e t t e r able t o u t i l i z e the v a r i o u s economies of s c a l e a v a i l a b l e to them to make t h e i r i n v e n t o r i e s s a l e a b l e ; and secondly, l a r g e developers are b e t t e r a b l e to a n t i c i p a t e and weather 54 these f l u c t u a t i o n s f i n a n c i a l l y (Herzog, as quoted by Rudin: 1978, p.44). I f as i t seems l i k e l y , l a r g e developers i n the Toronto area are s i m i l a r l y able to improve t h e i r r e l a t i v e p o s i t i o n s d u r i n g market slowdowns, t h i s r e p r e s e n t s a s i g n i f i c a n t change i n the growth dynamics of the i n d u s t r y where once the c y c l i c a l nature of the housing market l i m i t e d growth of l a r g e c o r p o r a t i o n s because of the high c o s t s of m a i n t a i n i n g i d l e c a p a c i t y , t h i s b a r r i e r to growth has e s s e n t i a l l y been, overcome-; i f not i n most cased r e v e r s e d (Rudin: 1978, p.44). Although the i n d u s t r y i s g e n e r a l l y able to weather economic c y c l i c a l f l u c t u a t i o n s , many fi r m s were caught o f f guard by a downturn of d e p r e s s i o n p r o p o r t i o n s . Some l a r g e r firms have d i v e r s i f i e d out of housing a l l together, while almost a l l are i n v o l v e d i n a s s e t and debt r e d u c t i o n programs through s a l e s of t h e i r land i n v e n t o r i e s . For example, one major western based land and housing d e v e l o p e r - b u i l d e r has entered i n t o a three year plan with f i n a n c i a l i n s t i t u t i o n s to d e f e r loan p r i n c i p l e payment with payments at a 5 percent i n t e r e s t r a t e , the remaining i n t e r e s t payable along with the p r i n c i p l e out of f u t u r e e a r n i n g s . Loans r e l a t i n g to p a r t i c u l a r p r o p e r t i e s w i l l be p a i d when those p r o p e r t i e s are s o l d , with the s h o r t f a l l a l s o p a i d out of a p o r t i o n of f u t u r e earnings ( F i n a n c i a l Post: June 25, 1978, p.26). T h i s i s r e p r e s e n t a t i v e of many agreements made between d e v e l o p e r - b u i l d e r s and l e n d e r s . Often a s s e t s a l e s have not r e s u l t e d i n s i g n i f i c a n t improvements i n the f i r m s ' f i n a n c i a l 55 s i t u a t i o n s . Despite a s s e t d i s p o s a l , another western based d e v e l o p e r - b u i l d e r has c a r r i e d a debt l o a d i n 1982 e s s e n t i a l l y e q u i v a l e n t to that i n 1981. An a n a l y s t from M e r r i l l Lynch, Royal S e c u r i t i e s L t d . comments on the f i r m ' s d i f f i c u l t f i n a n c i a l p o s i t i o n : The l i a b i l i t i e s are so l a r g e and t h e i r a b i l i t y to s e r v i c e those l i a b i l i t i e s has been very, very s i g n i f i c a n t l y reduced by the s a l e s of e x i s t i n g land i n v e n t o r y ( F i n a n c i a l Post: June 25, 1983, p.26). No- comprehensive e v a l u a t i o n or analysis*, has been- conducted on the impact of the r e c e s s i o n on the r e s i d e n t i a l c o n s t r u c t i o n i n d u s t r y . Taking a look backward, c o n v e n t i o n a l wisdom a t t r i b u t e s d e v e l o p e r - b u i l d e r growth i n the 1970's to long term debt, leverage and i n f l a t i o n ( F i n a n c i a l Post: A p r i l 17, 1983, pp.1-2). During the i n f l a t i o n a r y p e r i o d of the 1970's, h i g h l y leveraged l a n d purchases i n c r e a s e d i n value once converted i n t o housing, r i s i n g more q u i c k l y than the c o s t of money to purchase the l a n d . In t h i s way, with the i n f l a t i o n r a t e remaining at par or above the i n t e r e s t r a t e , d e v e l o p e r - b u i l d e r ' s f i n a n c i a l s t r e n g t h and source of growth - land i n v e n t o r i e s - f u r t h e r e d f u t u r e c o r p o r a t e growth. G l u s k i n notes, along with an a t t a c h e d caveat: The c r u c i a l part of the equation i s that a l l of these companies (the l a r g e firms) have a cushion to f a l l back on i f times get rough: t h e i r inherent land p r o f i t s . Often before they s t a r t b u i l d i n g they a l r e a d y have a p r o f i t i n the l a n d s . . . We have assumed in our b a s i c assumption that the l e v e l of land p r i c e s i s going to remain high ( G l u s k i n : 1976, p.134). 56 The r e c e s s i o n , however d r a m a t i c a l l y s h i f t e d the r e l a t i v e r a t e s of i n f l a t i o n and i n t e r e s t : d u r i n g 1981 reaching 12.5 percent and 23 percent r e s p e c t i v e l y . Consequently, developer-b u i l d e r s were caught with high short-term d e b t - t o - e q u i t y investments ( o f t e n debt made up by f l o a t i n g r a t e money), with inadequate cash flows to s e r v i c e debts ( F i n a n c i a l Post: November 6, 1982, p.36). The former sources of s t r e n g t h and competitive advantage r e l a t i v e to medium and s m a l l - s i z e d firms - high l e v e l s of c a p i t a l i n f u s i o n and l a r g e l a n d i n v e n t o r i e s - q u i c k l y turned i n t o ' l i a b i l i t i e s , t h r e a t e n i n g the f u t u r e s u r v i v a l o>f l a r g e d e v e l o p e r s - b u i l d e r s . The s i z e of t h e i r debt l o a d i s massive. In 1982, e i g h t of the major p u b l i c r e a l e s t a t e companies owed $12 b i l l i o n ( F i n a n c i a l Post: November 6, 1982, p.36). A number of media sources and trade j o u r n a l s o f f e r p r e d i c t i o n s regarding f u t u r e p r o s p e c t s of d e v e l o p e r - b u i l d e r s . These p r e d i c t i o n s are based on changing trends i n f i n a n c i n g : • A n a l y s t s don't b e l i e v e that l e n d e r s w i l l p u l l the plug on any of these l a r g e , p u b l i c firms ( F i n a n c i a l Post, A p r i l 17, 1982, p.2). • Developers are f o r e c a s t to become i n the 1980's merely the c o n s t r u c t i o n arms of the groups p r o v i d i n g t h e i r f i n a n c i n g (Globe and M a i l , September 21, 1982, p.B9). • E q u i t y f i n a n c i n g w i l l r e p l a c e debt f i n a n c i n g (Canadian B u i l d i n g : ( T o f t ) November/December, 1981). • Developers face dramatic changes i n r e a l e s t a t e f i n a n c i n g : they may end up b u i l d i n g f o r f i n a n c i a l i n s t i t u t i o n s f o r a f e e . . . I n s t i t u t i o n a l l e n d e r s , p a r t i c u l a r l y insurance and pension companies p r e f e r long-term e q u i t y i n the b u i l d i n g r a t h e r than repayments t i e d to i n t e r e s t r a t e s ( F i n a n c i a l Post: J u l y 25, 1981, pp.57-58). • I n s t i t u t i o n s have seen the l i g h t . In r e t u r n f o r long term funding, they want p a r t i a l ownership, and i n some 57 i n s t a n c e s , they are a c t u a l l y competing with us to buy development s i t e s . Then, the ownership r o l e i s pa s s i n g out of our hands... As t h e i r r i s k exposure i n c r e a s e s , so w i l l t h e i r s k i l l s . As they become our p a r t n e r s , they w i l l l e a r n i n c r e a s i n g to h i r e and t r a i n our s u b s t i t u t e s , and as they grow an in-house development bureaucracy, they w i l l l o s e t h e i r need f o r us.' (Canadian B u i l d i n g : (Lurz) November/December, 1982, p.24) Consequently, d e v e l o p e r - b u i l d e r s that w i l l s u r v i v e face s t r u c t u r a l changes i n t h e i r companies and the way they do business (Globe and M a i l : September 21, 1982, p.B9). • Large d e v e l o p e r - b u i l d e r s w i l l be a l o t s m a l l e r ; t h e y ' l l a l l be a a l o t wiser ( F i n a n c i a l Post: A p r i l 17, 1982, pp. 1-2). On the b a s i s of these p r e d i c t i o n s , d e v e l o p e r - b u i l d e r s w i l l i n c r e a s i n g l y take on the r o l e of merchant b u i l d e r , whose f u n c t i o n i s e s s e n t i a l l y that of development c o n s u l t a n t . The merchant b u i l d e r , l i k e the d e v e l o p e r - b u i l d e r , assembles land and b u i l d s houses. However, he uses c a p i t a l p r o v i d e d by f i n a n c i a l i n v e s t o r s such as pension funds and insurance companies. The d e v e l o p e r - b u i l d e r r e l i e s on c a p i t a l l e n t by c o n v e n t i o n a l f i n a n c i a l i n s t i t u t i o n s . In a d d i t i o n to changing sources of f i n a n c i n g , the d e v e l o p e r - b u i l d e r must a l s o respond to the f a l l - o f f i n housing s t a r t s and d e c l i n e i n demand r e f e r r e d to i n Chapter 2. These changes w i l l f u r t h e r r e s t r u c t u r e l a r g e d e v e l o p e r - b u i l d e r ' s c o r p o r a t e o p e r a t i o n s and c a p a b i l i t y to supply l a r g e s c a l e developments with adequate r e t u r n s on investment. O p p o r t u n i t i e s to use economies of s c a l e and expand through i n t e g r a t i o n , both v e r t i c a l l y and h o r i z o n t a l l y , are expected to be s e v e r e l y r e s t r i c t e d i n the f u t u r e . 58 C. CHARACTERISTICS OF THE MEDIUM-SIZED FIRM Medium-sized firms are d e f i n e d as producing volumes of 25-100 u n i t s per year, employing on average seventeen people (Charney: 1971, p.116). Firms may develop land i n p r e p a r a t i o n f o r b u i l d i n g or may s p e c i a l i z e i n h o u s e - b u i l d i n g o n l y . U n f o r t u n a t e l y , the l i t e r a t u r e i s sparse on medium-sized fi r m s and much of i t i s out of date. 1 . Financing^ As with l a r g e f i r m s , c a p i t a l a v a i l a b i l i t y v i a l e n d i n g i n s t i t u t i o n s i s c r i t i c a l . C a p i t a l i s made a v a i l a b l e on the b a s i s of f i n a n c i a l s t a b i l i t y , performance and a s s e t s ( P r i c e : 1970, p.28). F i n a n c i a l problems are s i m i l a r to those of the l a r g e d e v e l o p e r - b u i l d e r because of the r i s k a s s o c i a t e d with a high d e b t - e q u i t y r a t i o of le v e r a g e d investments. C a p i t a l i s r e q u i r e d to assume the r i s k s of c o n s t r u c t i o n and h o l d completed u n i t s u n t i l s o l d ( P r i c e : 1970, p.27). 2. Economies Of Sc a l e Since many of these f i r m s do not c a r r y e x t e n s i v e land i n v e n t o r i e s , economies of s c a l e comparable to l a r g e firms are i n a c c e s s i b l e . Land a v a i l a b i l i t y i s a major r e s t r a i n i n g f a c t o r to the expansion of medium-sized f i r m s , e s p e c i a l l y s m a l l , growing firms with a c a p i t a l shortage ( P r i c e : 1970, p.30). Medium-sized firms may b u i l d at the suburban f r i n g e or 59 s c a t t e r e d urban s i t e s . In suburban l o c a t i o n s , l a n d i s purchased near to e x i s t i n g developed areas, working with 10-50 l o t s at a time. U n l i k e l a r g e s c a l e d e v e l o p e r - b u i l d e r s , medium-sized firms possess n e i t h e r the f i n a n c i a l nor the l a n d c a p a b i l i t y to supply major community f a c i l i t i e s such as shopping and r e c r e a t i o n c e n t r e s . Firms aim to b u i l d i n s u f f i c i e n t volume to o b t a i n reduced c o s t s f o r m a t e r i a l s and s u b c o n t r a c t i n g . 3. Corporate Organization-Management The overhead of medium-sized f i r m s remains low through use of in-house s t a f f and s u b c o n t r a c t i n g of t r a d e s , while r e t a i n i n g the c a r p e n t r y or general c o n t r a c t i n g f u n c t i o n . R a r e l y are firms v e r t i c a l l y or h o r i z o n t a l l y i n t e g r a t e d , p r e f e r r i n g to s p e c i a l i z e i n a d e f i n a b l e market area. Due to s i z e l i m i t a t i o n s , market a n a l y s i s tends to be i n f o r m a l , based on "back of the envelope" e s t i m a t i o n s . A l s o , lack of funds and s u f f i c i e n t s c a l e prevent mounting of an e x t e n s i v e a d v e r t i s i n g campaign of completed u n i t s . The e s s e n t i a l f a c t o r s which serve as b a r r i e r s i n h i b i t i n g medium-sized f i r m expansion i n t o l a r g e s c a l e o p e r a t i o n s are summarized by P r i c e : ...land problems, lack of c r e d i t and an u n w i l l i n g n e s s to assume gr e a t e r r i s k s , p r e f e r r i n g a degree of s e c u r i t y i n t h e i r o p e r a t i o n s are probably the main r e s t r a i n t s . . . ( P r i c e : 1970, p.32). Medium-sized firms have a l s o reached a management t h r e s h o l d 60 which r e q u i r e s , f o r l a r g e s c a l e volume expansion, employing a d d i t i o n a l managers and s t a f f thereby removing the o r i g i n a l p a r t n e r s or owners from f i e l d o p e r a t i o n s . Owners would be r e q u i r e d to c o o r d i n a t e land assembly, arrange f i n a n c i n g , and work with c o n s u l t a n t s . E i c h l e r comments: ...no change was more wrenching than the jump i n annual volume from 50 to 100 u n i t s to about 300 u n i t s per year ( E i c h l e r : 1982, p.109). Many b u i l d e r s . chose to remain at e x i s t i n g volumes, p r e f e r r i n g the reasonable c e r t a i n t y of d i r e c t c o n t r o l of o p e r a t i o n s , p r o f i t margins and a r e l a t i v e l y simple o r g a n i z a t i o n a l s t r u c t u r e . D. CHARACTERISTICS OF THE SMALL-SIZED HOUSEBUILDER A small h o u s e b u i l d i n g f i r m i s c h a r a c t e r i z e d by low volume of under t w e n t y - f i v e u n i t s per year and a small s t a f f , employing at most four persons (Charney: 1971, p.116). Because the house-b u i l d i n g business i s a small s c a l e o p e r a t i o n , r e q u i r i n g no lumpy-fixed c a p i t a l expenditures common to other i n d u s t r i e s such as manufacturing and mining, there are no b a r r i e r s to entry ( G r e b l e r : 1973, p.155). Since entry i s easy, so i s e x i t (see Chapter 3). According to G l u s k i n , "... when t h i n g get tough they [ h o u s e b u i l d e r s ] simply go bankrupt" (1976, p.133). In c o n t r a s t to l a r g e r s c a l e d b u i l d e r s , they n e i t h e r have s u f f i c i e n t economies of s c a l e d u r i n g economic down-turns to make i n v e n t o r i e s more s a l e a b l e nor the f i n a n c i a l c u s h i o n i n g to 61 a n t i c i p a t e or weather such down-turns (Herzog: 1963, p.135). I t i s f o r these reasons that small s c a l e h o u s e - b u i l d i n g i s i n t e n s i v e l y c o m p e t i t i v e . 1. Financ ing C r e d i t i s extended to small b u i l d e r s through i n t e r i m loans v i a mortgage money on a p r o p e r t y ; the amount determined by i t s f i n a l s a l e p r i c e . 2. The C o n s t r u c t i o n Process The small housebuilder may c o n s t r u c t custom or s p e c u l a t i v e houses. B u i l d e r s on the lowest volume s c a l e (under ten houses per year) u s u a l l y s p e c i a l i z e i n custom c o n s t r u c t i o n . They b u i l d to design s p e c i f i c a t i o n s on a l o t purchased by the owner, acc e p t s incremental payment as work prog r e s s e s and r i s k l i t t l e of h i s own c a p i t a l . In c o n t r a s t , the s p e c u l a t i v e b u i l d e r purchases the l o t , p r o v i d e s h i s own f i n a n c i n g and chooses a standard house design compatible with surrounding r e s i d e n c e s . T y p i c a l l y s k i l l e d in c a r p e n t r y , the ho u s e b u i l d e r r e t a i n s t h i s f u n c t i o n while a c t i n g as a gen e r a l c o n t r a c t o r i n s u b c o n t r a c t i n g and s c h e d u l i n g v a r i o u s t r a d e s : framers, plumbers, e l e c t r i c i a n s , f i n i s h i n g c a r p e n t e r s and so on. Because a standard house design conforms to the i n t e n t and s p e c i f i c a t i o n of a zoning bylaw, g e n e r a l l y r e q u i r i n g no v a r i a n c e s , b u i l d i n g permit approval i s s w i f t . Thus, app r o v a l d e l a y s c o s t i n g b u i l d e r s time and money 62 are avoided. Firms tend to operate s e a s o n a l l y , f o r only the warm or dry p e r i o d s of the year. As a gen e r a l r u l e , an e x c e s s i v e number of b u i l d e r s compete with each other f o r s e r v i c e d l o t s . They purchase land at r e t a i l p r i c e s from p r i v a t e developers i n suburban or s c a t t e r e d urban l o c a t i o n s (Spurr: 1976, p . 2 4 2 ) . They do not engage i n land development themselves because of the l a r g e f i n a n c i a l requirement. Land i s purchased i n small q u a n t i t i e s , from one to three l o t s , at a time;. Due- to the small s c a l e of operations- and volume no o p p o r t u n i t i e s f o r s c a l e economies i n c o n s t r u c t i o n come i n t o p l a y . A p o s s i b l e exception to t h i s r u l e i s the achievement of minor r e t u r n s to s c a l e i n the repeated c o n s t r u c t i o n of a standard product. The completed house i s u s u a l l y o f f e r e d f o r s a l e by an independent r e a l e s t a t e f i r m . 3. O r g a n i z a t i o n And Management As would be expected of a small business, f i r m management i s at a simple, i n f o r m a l l e v e l . F u n c t i o n i n g as a p r o p r i e t o r s h i p or p a r t n e r s h i p , the small s i z e d housebuilder operates with l i t t l e overhead, using h i s home as an o f f i c e ( G r e b l e r : 1973, p.67). Operations use few exact records and l i m i t e d c o n s t r u c t i o n c o s t estimates and marketing i n f o r m a t i o n . C o n s t r u c t i o n i s based on short term demand h o r i z o n s . Ryan, i n Canadian B u i l d e r notes: 63 ...there i s a tendency to b u i l d whenever they can get mortgage money and have l o t s a v a i l a b l e without p o s s i b l y paying as much a t t e n t i o n to the marketing end as would be good for them (December, 1976, p.24). The e s s e n t i a l tasks performed by the housebuilder are a r r a n g i n g f i n a n c i n g , o b t a i n i n g b u i l d i n g permit a p p r o v a l , s c h e d u l i n g t r a d e s and s u p e r v i s i n g c o n s t r u c t i o n to completion. S i m i l a r to the medium-sized f i r m , the small housebuilder has reached a management p l a t e a u or t h r e s h o l d p r e v e n t i n g f i r m or p r o d u c t i o n expansion. To accomplish t h i s , f i r m s would need i n c r e a s i n g o u t l a y s of management c a p a c i t y and s k i l l s to match an i n c r e a s e i n volume i n order to keep c o s t s c o m p e t i t i v e . Given t h e i r l i m i t e d c a p i t a l , many b u i l d e r s p r e f e r to l i m i t r i s k s and r e t a i n t h e i r low overhead ( P r i c e : 1970, pp.24-25). Although s m a l l - s i z e d h o u s e - b u i l d e r s possess none of the advantages of s c a l e economies or c o r p o r a t e i n t e g r a t i o n , t h e i r p r i n c i p l e c o m p e t i t i v e advantage i s t h e i r s c a l e of o p e r a t i o n s . Low volume of a standard product, minimal overhead, o r g a n i z a t i o n s i m p l i c i t y and d i r e c t c o n t r o l over c o n s t r u c t i o n a f f o r d house b u i l d e r s a measure of c e r t a i n t y and f l e x i b i l i t y i n o p e r a t i o n s . E. CHARACTERISTICS OF THE RESIDENTIAL RENOVATION SECTOR The r e s i d e n t i a l r enovation s e c t o r i s d e s c r i b e d by Tsang as: . . . s m a l l , i n f o r m a l , p r o f i t a b l e but r i s k y , extremely labor i n t e n s i v e and i n s i g n i f i c a n t as a s u b - i n d u s t r y i n the r e s i d e n t i a l c o n s t r u c t i o n i n d u s t r y (1979, p.8). 64 I t i s d i s a g g r e g a t e d in nature, c o n s i s t i n g of a c o l l e c t i o n of p r o f e s s i o n a l s : c o n t r a c t o r s , l e n d i n g i n s t i t u t i o n s , p l a n n e r s , a r c h i t e c t s , m a t e r i a l s manufacturers and so on ( L e v a t i n o : 1979, pp.4-5; McKee ( e d . ) : 1977, p.142; Housing R e h a b i l i a t i o n : Proceedings of the Canadian Conference on Housing R e h a b i l i t a t i o n : 1973, p.47). Consequently, t h i s i l l - d e f i n e d and d i f f i c u l t to t r a c e s e c t o r has been more commonly r e f e r r e d to as, one of, i f not the, l a r g e s t c o t t a g e i n d u s t r y i n the country i n i t s c u r r e n t stage of m a t u r i t y ( C l a r k : 1981, p.38). L i k e small houses-building' o p e r a t i o n s , renovation- i s - a-hands-on bus i n e s s demanding i n t e n s i v e management of c o n s t r u c t i o n and business o p e r a t i o n s . As a r e s u l t , the t y p i c a l r e n o v a t i o n f i r m i s small both i n number of employees and p r o d u c t i o n c a p a b i l i t i e s . There are few b a r r i e r s to e n t r y i n t o the r e n o v a t i o n s e c t o r because of i t s small s c a l e of o p e r a t i o n s . T h i s i s another c h a r a c t e r i s t i c shared with the small house-b u i l d i n g f i r m . However, the s k i l l r e q u i r e d of management and labour i n r e n o v a t i o n a c t i v i t i e s i s g r e a t e r than i n new housing c o n s t r u c t i o n . Renovation may take p l a c e at a v a r i e t y of l e v e l s : a t the i n d i v i d u a l u n i t , at the m u l t i p l e u n i t , or at the l a r g e s c a l e neighborhood l e v e l , i n v o l v i n g a range of' types of u n i t s . There are two types of renovation f i r m s d e f i n e d by t h e i r area of s p e c i a l i z a t i o n : • r e n o v a t i o n on a c o n t r a c t b a s i s , t y p i c a l l y of s i n g l e f a m i l y d w e l l i n g units> and; • r e n o v a t i o n of d w e l l i n g u n i t s f o r purpose of r e s a l e ( B u i l d i n g Towards 2001 Conference Proceedings: 1981, 65 p. 26) . Renovation work i n v o l v e s v a r y i n g degrees o f e f f o r t ranging from: • p a r t i a l or cosmetic r e n o v a t i o n ; to • t o t a l r e b u i l d i n g , which o f t e n e n t a i l s major s t r u c t u r a l changes and c o n v e r s i o n or deconversion of u n i t s . 1. Financ ing F i n a n c i a l i n s t i t u t i o n s p e r c e i v e r e n o v a t i o n c o n s t r u c t i o n as a high r i s k r e l a t i v e to new c o n s t r u c t i o n f o r a number of reasons: • Renovation c o n s t r u c t i o n enjoys a higher r a t e of r e t u r n on investment on average compared to new c o n s t r u c t i o n (16.2% and 10.4% i n 1975 r e s p e c t i v e l y ) . I t i s g e n e r a l l y viewed that along with i n c r e a s i n g r a t e s of r e t u r n are i n c r e a s i n g measures of r i s k (Tsang: 1979, p.7-8). • Although there i s no s t a t i s t i c a l evidence to support or r e f u t e t h i s c l a i m , i t i s g e n e r a l l y viewed that the r a t i o of bad debts are g r e a t e r f o r r e n o v a t i o n than new c o n s t r u c t i o n (Tsang: 1979, p.8). • There i s a high p r o p o r t i o n of new business f a i l u r e i n the r e s i d e n t i a l r e n o v a t i o n s e c t o r : 95 of 100 businesses per year that s t a r t up i n renovation c o n s t r u c t i o n end i n s o l v e n t or i n s o l v e n t b a n k r u p t c i e s ( B u i l d i n g Toward 2001 Conference Proceedings: 1981, p.26-30; W.G Anderson et a l . : 1980, p.103). • The r e s i d e n t i a l r e n o v a t i o n i n d u s t r y s u f f e r s from a poor r e p u t a t i o n . Consumer and Corporate A f f a i r s c i t e r e s i d e n t i a l r enovation work as the number two complaint a f t e r car r e p a i r s . (Canadian B u i l d i n g : A p r i l 1981, p.26). The fundamental b a s i s f o r f i n a n c i a l i n s t i t u t i o n s ' 66 r e l u c t a n c e to finance renovators r e v o l v e s around r i s k s a s s o c i a t e d with r e - c o n s t r u c t i o n of o l d e r s t r u c t u r e s . Renovators cannot, with great c e r t a i n t y , estimate c o s t s of c o n s t r u c t i o n because of the d i f f i c u l t y of determining a b u i l d i n g ' s s t r u c t u r a l soundness and the extent of renovation r e q u i r e d . As a r e s u l t , renovators cannot p r e d i c t the amount of time needed to renovate a s t r u c t u r e . Lenders are a l s o wary because of the f i c k l e , trendy market f o r renovated housing and the l i m i t e d l i f e expectancy of o l d e r housing (McKee et a l . : 1979, p.34). McKee-confirms the- d i f f i c u l t y in- obtaining- adequate- c a p i t a l f o r r e n o v a t i o n ventures i n a survey of 50 l e n d i n g i n s t i t u t i o n s i n the C i t y of Winnipeg: There i s a major o b s t a c l e to p r o v i d i n g f i n a n c i n g f o r a c q u i s i t i o n and/or ren o v a t i o n of o l d e r apartment b u i l d i n g s and to a l e s s e r extent improvements to o l d e r r e s i d e n t i a l p r o p e r t i e s i n general (McKee et a l . : 1979, p.34). 1 Lenders were r e l u c t a n t to extend c r e d i t u n l e s s the borrower c o u l d provide a higher p r o p o r t i o n of e q u i t y i n investment than t h a t expected f o r new c o n s t r u c t i o n investment. Lenders d i d lend c a p i t a l but at higher i n t e r e s t r a t e s (3% above prime) to compensate f o r a r i s k y investment (Mckee; 1979, pp.33-34). In a recent study of f i f t e e n renovators a c t i v e i n the C i t y of Toronto, s i m i l a r f i n d i n g s were reached. Although s e c u r i n g f i n a n c i n g was not p e r c e i v e d by renovators as a problem (except 1 T h i s survey was conducted r e g a r d i n g inner c i t y r e s i d e n t i a l r e n o v a t i o n o p p o r t u n i t i e s . 67 f o r very small or new f i r m s ) , c r e d i t was extended in the form of demand loans s e v e r a l percentage p o i n t s above prime. Often f i n a n c i n g was secured on the b a s i s of a p e r s o n a l guarantee by the p r i n c i p a l ( s ) of the f i r m , or extended in the form of a demand loan s e v e r a l percentage p o i n t s above prime. Consequently, business f a i l u r e would r e s u l t i n p e r s o n a l bankruptcy. The study notes that to cope with the u n c e r t a i n t i e s inherent in r e s i d e n t i a l c o n s t r u c t i o n : . . . s u c c e s s f u l renovation companies have sympathetic bankers (W.G. Anderson et a l . : 1980, pp. 10-5-9). 2. The C o n s t r u c t i o n Process There are major d i f f e r e n c e s between new and r e n o v a t i o n c o n s t r u c t i o n . New c o n s t r u c t i o n i s r e l a t i v e l y uncomplicated to undertake compared to r e n o v a t i o n c o n s t r u c t i o n . The Chairman of the Canadian Conference on Housing R e h a b i l i t a t i o n comments: ...we s t a r t with v i r g i n t e r r i t o r y , a plan to f o l l o w , an o p e r a t i o n a l sequence t h a t i s g e n e r a l l y p r e d i c t a b l e , and - most important - no occupants (Conference Proceedings: 1973, p.15). Canadian B u i l d i n g Magazine i s s u e d a warning i n an a r t i c l e f o r b u i l d e r s c o n s i d e r i n g s w i t c h i n g o p e r a t i o n s from new to r e n o v a t i o n c o n s t r u c t i o n : ...watch out! Renovation and new c o n s t r u c t i o n are two completely d i f f e r e n t b a l l games, and while the d i f f e r e n c e s maybe s u b t l e , not knowing what they are can make f o r d i s a s t e r (Canadian B u i l d i n g : ( T o f t ) 68 January/Febuary, 1982, p.19). i . D i f f i c u l t i e s Of R e s i d e n t i a l Renovation C o n s t r u c t i o n Renovation c o n s t r u c t i o n i s d i f f e r e n t i n c o n s t r u c t i o n approach and p o t e n t i a l problems encountered i n the f o l l o w i n g ways: • Each re n o v a t i o n p r o j e c t i s unique, r e q u i r i n g a s p e c i f i c blend*-, of labour s k i l l s not a v a i l a b l e to. a l l c o n t r a c t o r s or l a b o u r e r s : b e t t e r s t r u c t u r a l , d e t a i l , m a t e r i a l and c r a f t knowledge versus new c o n s t r u c t i o n . • There i s l e s s c o n t i n u i t y of work w i t h i n a u n i t and from u n i t to u n i t due to the uniqueness of each s t r u c t u r e . • I t i s d i f f i c u l t and time consuming to a c q u i r e adjacent u n i t s / s t r u c t u r e s , p e r m i t t i n g j o i n t or s c a l e r e n o v a t i o n . • I t i s d i f f i c u l t t o a c c u r a t e l y p r e d i c t c o s t s or type of work r e q u i r e d before c o n s t r u c t i o n a c t u a l l y begins. • I t i s labour and management i n t e n s i v e . • I t r e q u i r e s c o o r d i n a t i o n and s c h e d u l i n g of interdependent t r a d e s f o r small o u t l a y s of work. • There i s a c o n f i n e d work s i t e to perform s t r u c t u r a l changes through d e m o l i t i o n . • C o n s t r u c t i o n i n one p a r t of the s t r u c t u r e may damage another p a r t of the adjacent b u i l d i n g ( s ) . • Adjacent areas to those being worked on r e q u i r e p r o t e c t i o n . • Removal of d e b r i s i s o f t e n d i f f i c u l t . • D a i l y clean-up i s r e q u i r e d i f the u n i t i s occupied. • Renewal of e x i s t i n g s u r f a c e s to present day b u i l d i n g code standards o f t e n r e q u i r e s more work than the a p p l i c a t i o n of new s u r f a c e s . Access to on s i t e storage i s o f t e n d i f f i c u l t . 69 • M a t e r i a l s waste can be h i g h . • There i s a s c a r c i t y of modern m a t e r i a l s that can be adapted to the appearance and d e t a i l i n g of ol d e r b u i l d i n g s . • Tenant problems a r i s e in re n o v a t i n g r e n t a l b u i l d i n g s , o f t e n r e q u i r i n g e v i c t i o n or displacement of tenants to temporary accommodation. (CMHC: 1980c, p.38; Downs: 1976, pp.70-73; Ha b i t a t 4/5: 1974, p.14; Canadian B u i l d i n g : ( T o f t ) January/Febuary 1982, p.23). i i . S c a l e Economies As a r e s u l t of the above c i t e d d i f f i c u l t i e s a s s o c i a t e d with r e n o v a t i o n c o n s t r u c t i o n , o p p o r t u n i t i e s f o r s c a l e economies are almost n i l . Since each p r o j e c t i s unique, c o n t i n u i t y of op e r a t i o n s based on p r o d u c t i o n of a standard product i s not p o s s i b l e . E f f i c i e n c e s i n labour and m a t e r i a l s s c h e d u l i n g and c o s t i n g are not a v a i l a b l e s i n c e most small s c a l e renovation p r o j e c t s are l o c a t e d a t s c a t t e r e d s i t e s . Such e f f i c i e n c e s are a l s o d i f f i c u l t to take advantage of given the u n a n t i c i p a t e d s t r u c t u r a l and c o n s t r u c t i o n problems common to r e n o v a t i o n . These f a c t o r s l e d one renovator to comment on the d i f f i c u l t y of a t t a i n i n g l a r g e volume output in the absence of r e t u r n s to s c a l e o p p o r t u n i t i e s : I f you are a house b u i l d e r , you've been used to having one of your f i n e s t s uperintendents go onto a new housing s i t e and he can put together a 125 u n i t s u b d i v i s i o n without t h i n k i n g t w i c e . When he goes i n t o the renovation b u s i n e s s , he can (only) do f i v e jobs at a time. Give him seven and h e ' l l mess-up two ( B u i l d i n g Toward 2001: 1981, p.29). 70 A New York c i t y renovator attempted to achieve some degree of s c a l e economies through " i n s t a n t " r e h a b i l i t a t i o n of a house i n 48 hours. E f f i c i e n c e s were expected to be achieved through the use of p r e f a b r i c a t e d m a t e r i a l s and continuous s c h e d u l i n g of labour a c t i v i t i e s . A host of problems emerged i n c l u d i n g u n a n t i c i p a t e d delays i n c o n s t r u c t i o n c r e a t i n g numerous labour s c h e d u l i n g problems, i n c u r r i n g excess c o s t s i n t r a n s p o r t a t i o n , storage and h a n d l i n g , and d i f f i c u l t i e s i n f i t t i n g p r e f a b r i c a t e d p a r t s . Despite a c o n t i n u a l flow of c o n s t r u c t i o n a c t i v i t i e s and time savings, f i n a l costs- were not lower nor was the q u a l i t y improved r e l a t i v e to that achieved by c o n v e n t i o n a l approaches to r e n o v a t i o n c o n s t r u c t i o n . (Housing R e h a b i l i a t i o n : Proceedings of the Canadian Conference on Housing R e h a b i l i t a t i o n : 1973, pp.51-42) . i i i . C o n s t r u c t i o n O r g a n i z a t i o n Renovation on a c o n t r a c t b a s i s , compared to a s p e c u l a t i v e b a s i s , d i f f e r i n s c a l e and management complexity. The c o n t r a c t renovator operates as a s m a l l s c a l e house-builder i n e v a l u a t i o n of labour and m a t e r i a l c o s t s and d e c i d i n g between a l t e r n a t i v e c o n s t r u c t i o n methods and products (Peter Barnard A s s o c i a t e s : 1973, p.53). The s p e c u l a t i v e renovator engages i n a more complex c o n s t r u c t i o n p r o c e s s . For the purpose of t h i s t h e s i s , more emphasis i s p l a c e d on the l a t e r type of r e n o v a t i o n f i r m . Since l i t t l e documented i n f o r m a t i o n e x i s t s r e l a t i n g to the o r g a n i z a t i o n of the c o n s t r u c t i o n process, I w i l l draw upon the 71 r e s u l t s of a recent study of the r e n o v a t i o n business i n Toronto (W.G. Anderson et a l . : 1980). The m a j o r i t y of r e n o v a t i o n firms have in-house c o n s t r u c t i o n arms employing few s t a f f . Owners of the f i r m o f t e n possess some s p e c i a l s k i l l such as c o n t r a c t i n g , a r c h i t e c t u r e or r e a l e s t a t e brokerage, and f u n c t i o n e s s e n t i a l l y as a g e n e r a l c o n t r a c t o r , ' i n s c h e d u l i n g t r a d e s and s u p e r v i s i n g c o n s t r u c t i o n progress. The owner(s) i n t e n s i v e c o n t a c t with c o n s t r u c t i o n through to completion i s an e s s e n t i a l element of a s u c c e s s f u l p r o j e c t . Few in-house s t a f f are employed, re-lying upon, subcontracted t r a d e s who are p r e f e r r a b l y f a m i l i a r i n r e n o v a t i o n work. As i n small s c a l e h o u s e - b u i l d i n g , o p e r a t i o n s c a r p e n t r y i s the most valued trade, p a r t i c u l a r y f i n i s h i n g or c r a f t c a r p e n t r y . S k i l l e d t rades accustomed to the c o m p l e x i t i e s of r e n o v a t i o n work are i n short supply. 3. Firm O r g a n i z a t i o n And Management As mentioned p r e v i o u s l y , i n t e n s i v e management c o n t r o l i s a c r i t i c a l element of the r e n o v a t i o n p r o c e s s . The r e n o v a t i o n i n d u s t r y i s a tough one. I t i s a hands-on i n d u s t r y , where o n - s i t e s u p e r v i s i o n , q u a l i t y c o n t r o l and d e c i s i o n making i s an everyday matter (Canadian B u i l d i n g : ( T o f t ) January/Febuary, 1982, p.19). By comparison to the s m a l l - s i z e d h o u s e - b u i l d e r , the management s k i l l s of the s p e c u l a t i v e renovator are extended 72 f u r t h e r , demanding e x p e r t i s e beyond on the spot day-to-day d e c i s i o n making, s i t e s u p e r v i s i o n and c o s t - e s t i m a t i n g , branching i n t o marketing, p u b l i c r e l a t i o n s and design s k i l l s (Downs: 1976, p.73). R e f l e c t i n g management s k i l l d i f f e r e n c e s , f i r m s t r u c t u r e and o r g a n i z a t i o n v a r i e s from the c o n t r a c t renovator to the s p e c u l a t i v e renovator. The c o n t r a c t renovator p a r a l l e l s the small housebuilder i n t h i s r e s p e c t . The c o n t r a c t renovator operates a small s c a l e f i r m employing no permanent s t a f f , and uses h i s home as-an o f f i c e . S i n c e - c o n t r a c t renovators o b t a i n work through p e r s o n a l r e f e r e n c e , they r a r e l y have a business telephone and a business l i s t i n g i n the yellow pages ( C l a r k : 1981, p.35). In c o n t r a s t , the s p e c u l a t i v e renovator operates a l a r g e r s c a l e d business with an o f f i c e employing permanent, a l b e i t minimum number of s t a f f . T h e i r aim i s to ensure c o n t i n u i t y of o p e r a t i o n s , maintain a steady flow of c o n s t r u c t i o n volume, r e t a i n r e l i a b l e s t a f f and c o n t r o l the q u a l i t y of the f i n a l product (W.G. Anderson et a l . : 1980, p.93). U n l i k e new housing d e v e l o p e r - b u i l d e r s , the s p e c u l a t i v e r e n o v a t i o n f i r m i s n e i t h e r v e r t i c a l l y nor h o r i z o n t a l l y i n t e g r a t e d . In a d d i t i o n , the renovated product i s geared s o l e l y to the r e s a l e ownership market. U n i t s are not produced and h e l d by the f i r m f o r r e n t a l purposes i n order to generate a constant source of income revenue. Firms are too small and s i m p l i f i e d i n o r g a n i z a t i o n to cope with d i v e r s e types of tenure products (W.G. Anderson et a l . : 1980, pp.97-98). As mentioned p r e v i o u s l y , the s p e c u l a t i v e renovator r e q u i r e s 73 a v a r i e t y of e x p e r t i s e to ensure f i r m s u r v i v a l : managerial, c o n s t r u c t i o n , d e s i g n , marketing and p u b l i c r e l a t i o n s e x p e r t i s e . Design a l t e r a t i o n s of a s t r u c t u r e based on working drawings are u s u a l l y performed by the renovator r a t h e r than by a r c h i t e c t u r a l s e r v i c e s . The renovator a l s o must r e l y on h i s i n t e r p r e t a t i o n of the t a r g e t market and product promotion s i n c e market r e s e a r c h and a d v e r t i s i n g s e r v i c e s are not used (W.G. Anderson et a l . : 1980, p.113). The renovator takes on more of these tasks i n an e f f o r t to be c o s t e f f e c t i v e . The renovator should i d e a l l y possess p u b l i c r e l a t i o n s , s k i l l s i n d e a l i n g with c o u n c i l s , boards of v a r i a n c e and c i t i z e n s groups; a l l p a r t of the process f r e q u e n t l y necessary to o b t a i n development a p p r o v a l . The study of the renovation business i n Toronto found that the development approval process was a s i g n i f i c a n t h u r d l e f o r f i r m s . G e n e r a l l y , zoning bylaws were e r e c t e d to f a c i l i t a t e the a p p l i c a t i o n of c o n s i s t e n t , uniform standards to new c o n s t r u c t i o n . T h e r e f o r e , the task of a p p l y i n g zoning r e g u l a t i o n s to the nuances of an o l d e r s t r u c t u r e , c o n s t r u c t e d on the b a s i s of b u i l d i n g standards of a past time, i s a d i f f i c u l t one. Given t h i s l a c k of c l a r i t y , o b t a i n i n g development app r o v a l i s u n c e r t a i n both i n the time taken to r e c e i v e a p p r o v a l and the whether app r o v a l f o r v a r i a n c e s to the zoning bylaw are granted. Consequently, the high r i s k a s s o c i a t e d with renovation i s f u r t h e r a m p l i f i e d . Should the c o n t i n u i t y of c o n s t r u c t i o n o p e r a t i o n s be i n t e r r u p t e d , problems c o u l d a r i s e c r e a t i n g d i f f i c u l t i e s i n m a i n t a i n i n g a steady flow and s c h e d u l i n g of r e l i a b l e subtrade labour experienced i n 74 r e n o v a t i o n work (W.G. Anderson et a l . : 1980, p.91-105). In summary, the r e s i d e n t i a l renovation c o n s t r u c t i o n s e c t o r i s i l l - d e f i n e d and p o o r l y organized as a r e p r e s e n t a t i v e body. U n l i k e i t s c o u n t e r p a r t i n new housing c o n s t r u c t i o n , the r e n o v a t i o n s e c t o r possess a f r a c t i o n of the r e p r e s e n t a t i v e , p u b l i c l y r e c o g n i z a b l e , o r g a n i z a t i o n s . 1 T h i s r e f l e c t s the stage of development and growth of the s e c t o r as whole. Despite the s m a l l s c a l e of the renovation f i r m , i t must possess a myriad of s k i l l s t y p i c a l l y expected of a l a r g e r s c a l e d f i r m , perhaps the nearest e q u i v a l e n t • i n new- housing c o n s t r u c t i o n being^ the medium s i z e d d e v e l o p e r - b u i l d e r . Renovation then i s a r i s k y venture, a f f o r d i n g few o p p o r t u n i t i e s f o r r e t u r n s to s c a l e to compensate f o r t h i s r i s k . 1 O r g a n i z a t i o n s r e p r e s e n t i n g new h o u s e - b u i l d i n g and land development f i r m s i n c l u d e the Urban Development I n s t i t u t e (UDI), the Home B u i l d i n g A s s o c i a t i o n of Canada (CHBAC), and the Canadian I n s t i t u t e f o r P r i v a t e Real E s t a t e Companies (CIPRO. 75 CHAPTER V. BARRIERS TO ENTRY INTO RESIDENTIAL RENOVATION ACTIVITIES T h i s chapter examines the b a r r i e r s to en t r y p r e v e n t i n g the t r a n s i t i o n of h o u s e - b u i l d i n g f i r m s i n t o r e n o v a t i o n o p e r a t i o n s and the expansion of c u r r e n t l y a c t i v e r e n o v a t i o n f i r m s . Future p r o s p e c t s toward maturation of the r e s i d e n t i a l r e n o v a t i o n s e c t o r are a l s o d i s c u s s e d . As was e s t a b l i s h e d i n Chapter 2, there w i l l be, i n the next two decades, a l a r g e r p o t e n t i a l f o r renovation of the housing stock, p r i m a r i l y due t o : • The ageing of the housing stock, • The expected d e c l i n e of new housing c o n s t r u c t i o n which w i l l compose a d e c l i n i n g percentage of the t o t a l housing s t o c k , as a r e s u l t of the d e c l i n i n g r a t e of p o p u l a t i o n growth, • Economic f a c t o r s which favor re-use and i n t e n s i f i c a t i o n of the housing stock as opposed to d e m o l i t i o n and replacement, • L i f e s t y l e f a c t o r s which p o i n t toward an a p p r e c i a t i o n of an urban l i f e s t y l e and o l d e r homes found w i t h i n urban l o c a t i o n s , combined with a n t i c i p a t e d s m a l l e r household s i z e l e a d i n g to c o n v e r s i o n of the e x i s t i n g housing stock, and • The r e c o g n i t i o n by the f e d e r a l housing agency (CMHC) tha t r e h a b i l i t a t i o n and renovation of the housing stock i s one way to meet f u t u r e housing demand. A study designed to assess the p o t e n t i a l market f o r r e n o v a t i o n s , a l t e r a t i o n s and co n v e r s i o n s i n Canada to the year 1990, found that twice the c u r r e n t r a t e of ren o v a t i o n c o n s t r u c t i o n c o u l d be s u s t a i n e d , accounting f o r $191 B i l l i o n i n 76 s i n g l e f a m i l y d w e l l i n g renovations and $49 B i l l i o n i n m u l t i f a m i l y d w e l l i n g s (CMHC: 1980c, p.39). Given the p o t e n t i a l r i s e i n r e s i d e n t i a l r e n o v a t i o n s i n the next two decades, concern has been expressed re g a r d i n g the r e s i d e n t i a l c o n s t r u c t i o n i n d u s t r y ' s a b i l i t y and w i l l i n g n e s s to t r a n s f e r and/or expand o p e r a t i o n s i n t o r e s i d e n t i a l r enovations ( H u l c h a n s k i : 1983, p.56). In a d d i t i o n , housing a n a l y s t s have questioned the p o s s i b i l i t y of r e a l l o c a t i n g the " i d l e r e s o u r c e s " of the d e c l i n i n g new housing c o n s t r u c t i o n i n d u s t r y i n t o r e n o v a t i o n a c t i v i t i e s (Tsang: 1979, p. 3).. A study commissioned by CMHC notes: A c r i t i c a l i n g r e d i e n t i n the success of the t r a n s i t i o n process w i l l c l e a r l y be the degree to which r e p a i r , r e h a b i l i t a t i o n and co n v e r s i o n a c t i v i t y can take the pl a c e of new c o n s t r u c t i o n . The p o t e n t i a l f o r r e h a b i l i t a t i o n , modernization and improvement w i l l t h e r e f o r e continue to grow and w i l l p r o v i d e a market f o r those firms i n the c o n s t r u c t i o n i n d u s t r y who may, by c h o i c e or n e c e s s i t y , have to r e d i r e c t t h e i r a c t i v i t i e s away from new c o n s t r u c t i o n (CMHC: 1980c, p.37). T h i s i s echoed by f i n a n c i a l i n s t i t u t i o n s , as Peter C a r t e r , spokesman f o r the Royal Bank of Canada at a HUDAC conference i n Manitoba (1979) commented: ...the h o u s e b u i l d i n g i n d u s t r y w i l l . . . h a v e to change d i r e c t i o n to some extent i n order to remain h e a l t h y . The new d i r e c t i o n w i l l i n v o l v e c o n c e n t r a t i n g at l e a s t p a r t of i t s e f f o r t s on re n o v a t i o n , r a t h e r than i n s u r i n g that new s t a r t s each year average at l e a s t 250,000 u n i t s as has been the case f o r the past three years ( C a r t e r , 1979). 77 In a d d i t i o n to government and f i n a n c i a l i n s t i t u t i o n s , a l e a d i n g i n d u s t r y trade magazine s t r o n g l y supports the need f o r the new housing c o n s t r u c t i o n i n d u s t r y to t r a n s f e r o p e r a t i o n s i n t o renovations a c t i v i t i e s . Renovation, r e s t o r a t i o n and r e t r o f i t t i n g are the new 'three R's' that f o r w a r d - t h i n k i n g urban developers are l e a r n i n g i n a b i g way these days. If you are e x c l u s i v e l y a new b u i l d i n g developer, i t ' s probably time to t h i n k about j o i n i n g the r e n o v a t o r s . I t doesn't seem to be a p a s s i n g fancy, but r a t h e r a new growth i n d u s t r y . . . a t a i l that may soon be wagging the whole development i n d u s t r y dog (Canadian B u i l d i n g : A p r i l , 1981, p.15). How has the development i n d u s t r y responded to the i n c r e a s e d demand for r e s i d e n t i a l r enovation work? Chapters 3 and 4 reviewed the past and present s t r u c t u r e and c h a r a c t e r i s t i c s of the r e s i d e n t i a l c o n s t r u c t i o n i n d u s t r y . The i n d u s t r y i s dominated by l a r g e d e v e l o p e r - b u i l d e r s who c o n c e n t r a t e on l a r g e s c a l e p r o d u c t i o n of new s i n g l e f a m i l y homes i n suburban l o c a t i o n s . P l e n t i f u l numbers of s m a l l - s i z e d h o u s e - b u i l d e r s a l s o s p e c i a l i z e i n the p r o d u c t i o n of s i n g l e f a m i l y d w e l l i n g s i n the suburbs. In c o n t r a s t , the r e n o v a t i o n i n d u s t r y i s "immature", or at i n f a n c y i n i t s development, being the l a r g e s t "cottage" i n d u s t r y i n Canada ( C l a r k : 1981, p.38). R e l a t i v e to the r e s i d e n t i a l c o n s t r u c t i o n i n d u s t r y , the r e n o v a t i o n sector i s i n s i g n i f i c a n t , and at a very small s c a l e , with no f i r m s assuming a dominant p o s i t i o n . Notwithstanding these o b s e r v a t i o n s , r e n o v a t i o n work has captured an i n c r e a s i n g share of t o t a l r e s i d e n t i a l c o n s t r u c t i o n investment while new housing c o n s t r u c t i o n has d e c l i n e d i n r e l a t i v e importance. 78 The i n d u s t r y has e x h i b i t e d a great d e a l of i n e r t i a i n s h i f t i n g o p e r a t i o n s i n t o r e n o v a t i o n a c t i v i t i e s , d e s p i t e mounting evidence i n d i c a t i n g i n c r e a s i n g r e s i d e n t i a l r e n o v a t i o n investment o p p o r t u n i t i e s i n the l i g h t of d i m i n i s h i n g demand f o r new housing. A survey i n i t i a t e d j o i n t l y by CMHC and HUDAC to determine the major problems of the i n d u s t r y , found that the m a j o r i t y of f i r m s surveyed acknowledged the growing importance of r e s i d e n t i a l r enovation but were not contemplating adjustment to such a c t i v i t i e s (CMHC/HUDAC: 1982, p.1-5). These f i n d i n g s were v e r i f i e d i n a s i m i l i a r i n d u s t r y survey i n Winnipeg undertaken by the I n s t i t u t e of Urban S t u d i e s . Respondents s t a t e d that r e n o v a t i o n s and r e p a i r s would continue to i n c r e a s e i t s share of the market (Newman and Clatworthy: 1982, p.74). The study determined that the i n d u s t r y was u n w i l l i n g to a d j u s t to long term trends such as d e c l i n i n g demand f o r new c o n s t r u c t i o n and i n c r e a s i n g demand f o r renovation c o n s t r u c t i o n . Medium and l a r g e - s i z e d firms e x h i b i t e d the g r e a t e s t degree of i n e r t i a (Newman and Clatworthy: 1982, p.78-79). Alan Greenberg, past chairman of the Toronto Home B u i l d e r s ' A s s o c i a t i o n Renovation C o u n c i l notes: The problem i s at t h i s time, that there i s a need f o r good, competent general c o n t r a c t o r s to be a b l e to go out and f i l l that need... the problem i s that there aren't enough of them ( B u i l d i n g Toward 2001, Proceedings: 1981, p.27). 79 Documented evidence i s not a v a i l a b l e o u t l i n i n g the reasons for i n d u s t r y r e l u c t a n c e to become i n v o l v e d i n r e n o v a t i o n o p e r a t i o n s . However one may s p e c u l a t e that i t i s due to three reasons: (a) The F e d e r a l Government has h i s t o r i c a l l y promoted and maintained a h i g h l e v e l of new r e s i d e n t i a l c o n s t r u c t i o n a c t i v i t y (CMHC: 1980c, p.37). T h i s has o c c u r r e d both because of e l e c t o r a l pressure f o r high q u a l i t y housing and pressure to s t i m u l a t e and s t a b i l i z e the economy through new housing s t a r t s . C o r r e s p o n d i n g l y , government to t h i s p o i n t , has promoted the "handyman", small s c a l e s e c t o r of the r e n o v a t i o n s e c t o r through p o l i c i e s and programs geared .. to the r e h a b i l i t a t i o n of s i n g l e f a m i l y homes, .Q (b) Given t h i s focus on new housing c o n s t r u c t i o n , the h o u s e - b u i l d i n g s e c t o r has p r e f e r r e d the p r e d i c t a b i l i t y of f a m i l i a r modes of o p e r a t i o n . The s e c t o r , p a r t i c u l a r l y l a r g e and medium-sized f i r m s , cannot s h i f t o p e r a t i o n s e a s i l y because of c u r r e n t l a n d h o l d i n g s and other c a p i t a l investments i n new housing c o n s t r u c t i o n . Accustomed to c y c l i c a l f l u c t u a t i o n s , they may expect a r e t u r n to p r e - r e c e s s i o n a r y l e v e l s of housing demand (Newman and Clatworthy: 1982, p.79). — (c) The most c o n v i n c i n g argument suppo r t i n g i n d u s t r y 80 r e l u c t a n c e to become i n v o l v e d i n renovation a c t i v i t i e s has to do with the nature of renovation work i t s e l f . In my i n f o r m a l i n t e r v i e w of ten medium-sized h o u s e b u i l d i n g f i r m s a c t i v e i n the g r e a t e r Vancouver area, a l l responded with concern to the "unknowns" and " u n c e r t a i n t i e s " of r e n o v a t i o n work. They claimed that t h i s was the p r i n c i p l e reason f o r t h e i r i n a c t i v i t y i n i t . At the same time as such concerns were expressed however, acknowledgement of the " f a n t a s t i c p o t e n t i a l " of f u t u r e residentd-a-1 renovation work was unanimously v o i c e d by respondents. A. FIRMS WHO POSSESS THE ABILITY TO ADJUST TO RESIDENTIAL  RENOVATION ACTIVITIES Based on the above noted f a c t o r s , there i s a need f o r an a g g r e s s i v e , mature r e n o v a t i o n c o n s t r u c t i o n s e c t o r to ensure improvement and a d a p t a t i o n of the ageing housing stock to the changing housing demand. The i n d u s t r y must adapt to the i n c r e a s e d pace and s c a l e of r e n o v a t i o n work expected to the year 2001. T h i s hinges on the a b i l i t y and w i l l i n g n e s s of the house-b u i l d i n g s e c t o r to t r a n s f e r o p e r a t i o n s i n t o renovation a c t i v i t i e s , and the a b i l i t y and w i l l i n g n e s s of the c u r r e n t r e n o v a t i o n i n d u s t r y to expand and i n c r e a s e the pace of i t s o p e r a t i o n s . The f i r m s w i t h i n the h o u s i n g - b u i l d i n g s e c t o r that c o u l d , p o t e n t i a l l y t r a n s f e r o p e r a t i o n s i n t o renovation c o n s t r u c t i o n 81 include the s m a l l , medium and l a r g e - s i z e d h o u s e - b u i l d e r s . To i d e n t i f y the b a r r i e r s these f i r m s face s h i f t i n g o p e r a t i o n s , a comparison w i l l be made between the approaches, problems and s k i l l s of the d i f f e r e n t s i z e d f i r m s : 1) the s m a l l - s i z e d house-b u i l d e r ; 2) the medium-sized h o u s e - b u i l d e r ; and the s p e c u l a t i v e renovation f i r m 3) the l a r g e s i z e d house-builder and 4) the s m a l l - s i z e d c o n t r a c t renovator. D i s c u s s i o n w i l l then turn to an i d e n t i f i c a t i o n of the b a r r i e r s to expansion of the c o n t r a c t renovation f i r m . T h i s chapter draws together and e l a b o r a t e s on observations made- in. cha.ptex 4-. 1. B a r r i e r s To Entry For The S m a l l - s i z e Firms A comparison between the s m a l l - s i z e d h o u s e - b u i l d e r and the c o n t r a c t renovator r e v e a l s many s i m i l a r i t i e s i n management and f i r m o r g a n i z a t i o n , s c a l e economies and approach to b u i l d i n g approval procedures. D i f f e r e n c e s l i e i n management and c o n s t r u c t i o n s k i l l s and the method of o p e r a t i o n : the s m a l l - s i z e d house-builder operates on a s p e c u l a t i v e b a s i s ; the renovator operates on a c o n t r a c t b a s i s . Due to the nature of renovation work, i t i s d i f f i c u l t to guarantee a smooth flow of c o n s t r u c t i o n and s c h e d u l i n g of labor and m a t e r i a l s h a n d l i n g , In a d d i t i o n , the extent of r e n o v a t i o n work v a r i e s from c o n t r a c t to c o n t r a c t . In c o n t r a s t , h o u s e - b u i l d i n g o p e r a t i o n s face few of these d i f f i c u l t i e s due to the r e l a t i v e ease of c o n s t r u c t i n g a standard product: the s i n g l e f a m i l y home. These d i f f e r e n c e s are a b a r r i e r to e n t r y i n t o the r e n o v a t i o n c o n s t r u c t i o n business i f the house-builder does not possess the necessary managerial or 82 c o n s t r u c t i o n s k i l l s or the w i l l i n g n e s s to t r a n s f e r o p e r a t i o n s . Many of the e x i s t i n g pool of c o n t r a c t renovators do not possess these s k i l l s . One author, in h i s e v a l u a t i o n of the NIP and RRAP experience notes, An ongoing hazard i s the r e l i a n c e on a l a r g e number of small c o n t r a c t o r s . . . T h e absence of a r e h a b i l i t a t i o n i n d u s t r y w i l l no doubt plague f u t u r e p r o j e c t s as w e l l . O v e r c a l l i n g f o r e x t r a s , m i s l e a d i n g c o n t r a c t s , s u p p l i e r c r e d i t , non-payment of s u b c o n t r a c t o r s , l a c k of c o n t i n u i t y on the job, d i s s o l u t i o n of small p a r t n e r s h i p s are a l l p a r t of the d a i l y r o u t i n e (Lowden: 1973, p.140). D i f f e r e n c e s i n f i n a n c i n g requirements however, may serve as an i n c e n t i v e r a t h e r than a b a r r i e r to house-builder t r a n s i t i o n . Rather than r i s k i n g h i s own borrowed c a p i t a l , the c o n t r a c t renovator i s p a i d f o r s e r v i c e s by the homeowner. By overcoming the s k i l l b a r r i e r s , s m a l l - s i z e d h o u s e b u i l d e r s can r e a d i l y t r a n s f e r o p e r a t i o n s i n t o small s c a l e renovation a c t i v i t i e s because of t h e i r inherent low overhead, o r g a n i z a t i o n a l s i m p l i c i t y and h i g h f l e x i b i l i t y of o p e r a t i o n s . 2. B a r r i e r s To Entry A f f e c t i n g Medium-Sized Firms A comparison between the medium-sized house-builder and the s p e c u l a t i v e renovator can be made because they possess s i m i l a r i t i e s i n s c a l e of p r o d u c t i o n and f i r m o r g a n i z a t i o n . I t i s assumed because of such s i m i l a r i t i e s , t h a t the medium-sized house-builder c o u l d t r a n s f e r i n t o s p e c u l a t i v e r e n o v a t i o n a c t i v i t i e s i f i t appeared reasonably p r o f i t a b l e to do so. Chapter 3 noted that the medium-sized f i r m i n 1980 composed only 83 8.1 percent of a l l f i r m s a c t i v e i n r e s i d e n t i a l c o n s t r u c t i o n , c a p t u r i n g 11.6 percent of investment. T h e r e f o r e , the p o t e n t i a l source of s p e c u l a t i v e - r e n o v a t i o n expansion through the entry of medium-sized new h o u s e - b u i l d i n g firms i s l i m i t e d . B a r r i e r s to entry by medium-sized b u i l d e r s i n t o renovation c o n s t r u c t i o n are due to the u n c e r t a i n t i e s or "unknowns" inherent in r e n o v a t i o n a c t i v i t i e s . Such u n c e r t a i n t i e s are t r a n s l a t e d i n t o d i f f i c u l t i e s i n o b t a i n i n g a continuous source of f i n a n c i n g at r a t e s comparable to new c o n s t r u c t i o n , an u n p r e d i c t a b l e zoning and b u i l d i n g by-law a p p r o v a l process, g r e a t e r demands on management e x p e r t i s e and e n t r e p r e n e u r i a l s k i l l , and i n e f f i c i e n c i e s c r e a t e d by a p o t e n t i a l l y problem-ridden c o n s t r u c t i o n p r o c e s s . Of a l l of these b a r r i e r s , f i n a n c i n g and the u n c e r t a i n r e g u l a t o r y process c o n s t i t u t e the g r e a t e s t h u r d l e s to overcome. In c o n t r a s t to the p o t e n t i a l entry of the s m a l l - s i z e d h o u s e - b u i l d e r i n t o r e n o v a t i o n c o n s t r u c t i o n , the medium-sized f i r m faces a gre a t e r degree of r i s k and u n c e r t a i n t y . In a d d i t i o n , renovation o p e r a t i o n s of a s p e c u l a t i v e nature i n c r e a s e both i n s c a l e and management complexity r e l a t i v e to c o n t r a c t r e n o v a t i o n work (Peter Barnard A s s o c i a t e s : 1973, p.53). T h e r e f o r e , there are major d i s i n c e n t i v e s a c t i n g to i n h i b i t the medium-sized h o u s e - b u i l d i n g f i r m ' s s h i f t to renovation a c t i v i t i e s . 84 3. B a r r i e r s To Entry A f f e c t i n g L a r g e - s i z e d Firms Renovation c o n s t r u c t i o n i s best s u i t e d to s m a l l and medium s c a l e d o p e r a t i o n s . Large s c a l e o p e r a t i o n s are not a p p r o p r i a t e f o r a number of reasons. F i r s t l y , s e v e r a l advantages of the l a r g e d e v e l o p e r - b u i l d e r do not come i n t o p l a y i n renovation c o n s t r u c t i o n , namely volume p r o d u c t i o n , use of l a r g e land i n v e n t o r i e s and economies of s c a l e i n the r e p e t i t i v e c o n s t r u c t i o n of a standard product. Secondly, the l a r g e - s i z e d d e v e l o p e r - b u i l d e r ' s complex c o r p o r a t e s t r u c t u r e - through v e r t i c a l and h o r i z o n t a l i n t e g r a t i o n - are i n a p p r o p r i a t e f o r r e n o v a t i o n c o n s t r u c t i o n . However, the advanced e n t r e p r e n e u r i a l and managerial s k i l l s of the l a r g e d e v e l o p e r - b u i l d e r c o u l d be of use i n r e n o v a t i o n c o n s t r u c t i o n , s i n c e t h i s i s one of the many q u a l i t i e s i n short supply i n t h i s a c t i v i t y . Because of the dissonance between l a r g e s c a l e house-b u i l d i n g and r e s i d e n t i a l r e n o v a t i o n o p e r a t i o n s , l a r g e - s i z e d f i r m s do not possess the a b i l i t y to t r a n s f e r a c t i v i t i e s i n t o r e n o v a t i o n c o n s t r u c t i o n s u c c e s s f u l l y . 4. B a r r i e r s To Expansion A f f e c t i n g Contract Renovation  Firms As mentioned p r e v i o u s l y , the medium-sized f i r m i s the l a r g e s t one that can adapt to the problems and o p p o r t u n i t i e s a s s o c i a t e d with r e n o v a t i o n . T h i s source of expansion i s l i m i t e d , by v i r t u e of the few medium-sized f i r m s i n e x i s t e n c e . T h e r e f o r e , a p o t e n t i a l source of expansion to a d j u s t to the i n c r e a s i n g s c a l e and pace of r e n o v a t i o n work i s the pool of 85 renovation c o n t r a c t o r s . However, there are s i g n i f i c a n t b a r r i e r s which r e s t r i c t c o n t r a c t r e novators. They have reached a management t h r e s h o l d where the expansion of t h e i r o p e r a t i o n s i n v o l v e s the assumption of i n c r e a s i n g degrees of r i s k . The most s i g n i f i c a n t d e t e r r e n t i s access to c a p i t a l and assumption of f i n a n c i a l r i s k because the advantage of homeowner f i n a n c i n g on a c o n t r a c t b a s i s would no longer be a v a i l a b l e . A l s o , the owner would be r e q u i r e d to develop management and e n t r e p r e n e u r i a l s k i l l s , s u i t e d to s p e c u l a t i v e r e n o v a t i o n a c t i v i t i e s . Greater increments of management and c a p i t a l o u t l a y s are demanded i n the establishment of an o f f i c e and s t a f f . The p r i n c i p l e advantages of the c o n t r a c t renovator: small s c a l e , low overhead and f l e x i b i l i t y of o p e r a t i o n s , cannot be used i n s p e c u l a t i v e r e n o v a t i o n . For these reasons, many c o n t r a c t renovators p r e f e r to r e t a i n t h e i r present s c a l e of o p e r a t i o n s . I t i s d i f f i c u l t to estimate the numbers of small f i r m s who would be a t t r a c t e d by p o t e n t i a l l y g r e a t e r r e t u r n s on investment, along with the assumption of g r e a t e r r i s k s . B. SYNOPSIS B r i e f l y , the b a r r i e r s to e n t r y i n t o r e s i d e n t i a l renovation c o n s t r u c t i o n - corresponding to each f i r m s i z e - v i a e i t h e r f i r m t r a n s i t i o n from the h o u s e - b u i l d i n g s e c t o r and/or expansion of c o n t r a c t r e n o v a t i o n firms are o u t l i n e d below. B a r r i e r s to entry a f f e c t i n g the s m a l l - s i z e d h o u s e - b u i l d i n g f i r m : ~ 86 • Greater demands on managerial c a p a c i t i e s ; • D i f f e r i n g c o n s t r u c t i o n techniques and s k i l l s i n the sch e d u l i n g and use of la b o r and m a t e r i a l s ; • D i f f e r e n t mode of o p e r a t i o n s ; on a c o n t r a c t r a t h e r than a s p e c u l a t i v e b a s i s . B a r r i e r s to en t r y a f f e c t i n g the medium-sized h o u s e - b u i l d i n g • D i f f i c u l t y i n o b t a i n i n g f i n a n c i n g at comparable r a t e s to new c o n s t r u c t i o n ; • Greater demands on management e x p e r t i s e and e n t r e p r e n e u r i a l s k i l l s ; • A p o t e n t i a l l y problem-ridden and u n c e r t a i n c o n s t r u c t i o n process where few or no economies of s c a l e can be taken advantage o f ; • A more complicated, time consuming and u n c e r t a i n development approval p r o c e s s . S i g n i f i c a n t b a r r i e r s to en t r y a f f e c t the l a r g e developer-h o u s e - b u i l d i n g f i r m . E s s e n t i a l l y , l a r g e s c a l e o p e r a t i o n s are un s u i t e d to the requirements of renovation c o n s t r u c t i o n . B a r r i e r s to expansion l i m i t i n g the c o n t r a c t renovation f i r m ' s s h i f t i n t o s p e c u l a t i v e renovation a c t i v i t i e s i n c l u d e : • The requirement to o b t a i n i n t e r i m and completion c a p i t a l from l e n d i n g i n s t i t u t i o n s ; • Greater demands on management e x p e r t i s e and e n t r e p r e n e u r i a l s k i l l s which are not t y p i c a l l y r e q u i r e d in c o n t r a c t r e n o v a t i o n ; • S i g n i f i c a n t l y g r e a t e r c a p i t a l o u t l a y s r e q u i r e d i n the establishment of an o f f i c e and s t a f f . In summary, the s m a l l - s i z e d h o u s e - b u i l d i n g f i r m has- the g r e a t e s t c a p a c i t y f o r e n t e r i n g i n t o r e n o v a t i o n a c t i v i t i e s 87 r e l a t i v e to a l l other s i z e c l a s s e s of h o u s e - b u i l d i n g f i r m s . Given the w i l l i n g n e s s of such f i r m s to enter i n t o renovation c o n s t r u c t i o n , such t r a n s i t i o n i s p o s s i b l e . As the market f o r new housing d e c l i n e s , f u r t h e r t r a n s i t i o n of s m a l l - s i z e d house-b u i l d i n g f i r m s i n t o renovation c o n s t r u c t i o n i s a n t i c i p a t e d . I t i s assumed then that these firms w i l l a d j u s t to the i n c r e a s e d pace expected f o r renovation c o n s t r u c t i o n , and w i l l s p e c i a l i z e i n the renovation of s i n g l e f a m i l y homes. The pace of small s c a l e renovations c o u l d a l s o i n c r e a s e i n an e f f i c i e n t manner through the use. of franchises.. For example, i n O n t a r i o a " M i s t e r Renovator L t d . " was i n c o r p o r a t e d i n 1980 with the aim: To become to the r e n o v a t i o n i n d u s t r y what Macdonald's i s to the f a s t food business (Canadian B u i l d i n g : A p r i l 1981, p.35). The p o t e n t i a l e x i s t s then f o r one " b i g name" to stand out i n the pool of c o n t r a c t o r r e n o v a t o r s , aimed at m a i n t a i n i n g a degree of r e l i a b i l i t y , s t a b i l i t y and c e r t a i n t y of product. S c a l e economies c o u l d occur through c o l l e c t i v e e f f o r t s to a d v e r t i s e , f o l l o w standard o p e r a t i o n s manuals and adhere to standard accounting procedures. Which f i r m s can assume the i n c r e a s e d pace and s c a l e of r e n o v a t i o n work r e q u i r e d i n the renovation of m u l t i f a m i l y c o n s t r u c t i o n and c o n v e r s i o n of s i n g l e f a m i l y homes i n t o m u l t i -u n i t d w e l l i n g s ? There i s probably i n s u f f i c i e n t compensation f o r small c o n t r a c t renovation f i r m s to expand t h e i r present form of o p e r a t i o n s , p a r t i c u l a r l y so when the market f o r small s c a l e r e n o v a t i o n s i s burgeoning. Only those firms p o s s e s s i n g the 88 e n t r e p r e n e u r i a l s k i l l and w i l l i n g n e s s to assume grea t e r r i s k s (along with the o p p o r t u n i t i e s f o r p o t e n t i a l l y g r e a t e r p r o f i t ) w i l l expand, i n c r e a s i n g t h e i r s c a l e of o p e r a t i o n s . Few firms are expected to do so i n the short run. I t i s expected then that only "medium-sized h o u s e - b u i l d i n g f i r m s w i l l adapt to the demands of s p e c u l a t i v e , l a r g e r s c a l e r e s i d e n t i a l renovation a c t i v i t i e s . S i g n i f i c a n t b a r r i e r s to ent r y hinder such t r a n s i t i o n , making medium-sized h o u s e - b u i l d i n g f i r m s wary of the unknowns and u n c e r t a i n t i e s which r i d d l e r e n o v a t i o n c o n s t r u c t i o n . At present, the p o t e n t i a l r e a l i z a t i o n of p r o f i t s are p e r c e i v e d by such firms as i n s u f f i c i e n t compensation f o r r i s k . C aution i s expressed d e s p i t e the f a c t t h at many see renovation c o n s t r u c t i o n as a growing market with " f a n t a s t i c " p o t e n t i a l . C. CONCLUSION T h i s chapter has found that small and medium-sized new h o u s e b u i l d i n g firms possess the a b i l i t y to t r a n s f e r i n t o r e s i d e n t i a l r enovation a c t i v i t i e s . D espite being able to adapt to the demands of r e s i d e n t i a l r e n o v a t i o n , many of these f i r m s are u n w i l l i n g to do so. The s m a l l - s i z e d f i r m i s faced with the prospect of g r e a t e r demands on managerial c a p a c i t i e s , and use of d i f f e r e n t c o n s t r u c t i o n s k i l l s and techniques. Medium-sized f i r m s are faced with another set of o b s t a c l e s i n h i b i t i n g t r a n s i t i o n i n c l u d i n g f i n a n c i n g , the r e g u l a t o r y process 1, g r e a t e r demands on management e x p e r t i s e and e n t r e p r e n e u r i a l s k i l l s and 89 the u n c e r t a i n c o n s t r u c t i o n process. These f a c t o r s a c t as b a r r i e r s to entry and are p a r t i c u l a r l y s i g n i f i c a n t f o r the medium-sized f i r m . P roposals f o r the nature and scope of government and i n s t i t u t i o n a l a c t i o n s to overcome these b a r r i e r s are d i s c u s s e d i n the f o l l o w i n g , c o n c l u d i n g chapter. 90 CHAPTER VI. CONCLUSIONS SUMMARY Th i s t h e s i s has e s t a b l i s h e d that to the year 2001, an i n c r e a s i n g p r o p o r t i o n of t o t a l expenditure i n housing c o n s t r u c t i o n w i l l be i n renovation a c t i v i t i e s due t o : • The ageing housing stock and the expected d e c l i n e i n new housing c o n s t r u c t i o n ; 54.6 percent of the housing stock i s now over 20 years of age, i n c r e a s i n g to 63.1 percent i n the year 2000. • Demographic trends l a r g e l y shaped by the middle ageing o£ the baby boom and' t h e i r p r o j e c t e d housing-demand. • Economic f a c t o r s such as u n c e r t a i n mortgage i n t e r e s t r a t e s which prompt home owners to improve t h e i r homes ra t h e r than trade-up t o a more expensive home; c o s t s of new c o n s t r u c t i o n as opposed to making use of an e x i s t i n g s t r u c t u r e , c o s t of commuting from suburban l o c a t i o n s . • L i f e s t y l e f a c t o r s which favor an a p p r e c i a t i o n of an urban l i f e s t y l e and o l d e r homes found w i t h i n an urban l o c a t i o n . • The s h i f t i n housing p o l i c y and programs encourageing r e h a b i l i t a t i o n and re n o v a t i o n of e x i s t i n g housing as a v i a b l e way to meet f u t u r e housing needs and demands. Making more e f f i c i e n t use of the housing stock and i t s r e l a t e d i n f r a s t r u c t u r e w i l l depend on the r o l e of the r e s i d e n t i a l c o n s t r u c t i o n i n d u s t r y . In a d j u s t i n g t o the changing housing market the i n d u s t r y w i l l need to t r a n s f e r some p o r t i o n of i t s o p e r a t i o n s from new r e s i d e n t i a l c o n s t r u c t i o n a c t i v i t i e s i n t o r e s i d e n t i a l r e n o v a t i o n a c t i v i t i e s . T h i s t h e s i s examined both the a b i l i t y and w i l l i n g n e s s of the i n d u s t r y t o make these adjustments; i t d i d not examine the p o s s i b i l i t i e s of new fi r m s 91 e n t e r i n g the r e n o v a t i o n s e c t o r . A review of the s t r u c t u r e of the c u r r e n t r e s i d e n t i a l c o n s t r u c t i o n i n d u s t r y r e v e a l e d that i t s a c t i v i t i e s are c o n c e n t r a t e d i n new housing c o n s t r u c t i o n . Although s m a l l - s i z e d f i r m s compose 80-90 percent of the i n d u s t r y , l a r g e - s i z e d f i r m s capture almost t w o - t h i r d s of a l l c o n s t r u c t i o n investment. I t was a l s o found t h a t the i n d u s t r y i s making some adjustment to r e s i d e n t i a l r e n o v a t i o n , although at a small s c a l e . In the l i g h t of the i n c r e a s e d pace and s c a l e of r e s i d e n t i a l r e n o v a t i o n a c t i v i t y expected i n the f u t u r e , the i n d u s t r y w i l l need to make a more s i g n i f i c a n t adjustment. A review of the c h a r a c t e r i s t i c s of the new r e s i d e n t i a l i n d u s t r y showed t h a t small and medium-sized f i r m s possess the a b i l i t y to adapt to r e s i d e n t i a l r enovation o p p o r t u n i t i e s because t h e i r s c a l e , f l e x i b i l i t y and approach to c o n s t r u c t i o n o p e r a t i o n s i s compatible with the techniques necessary f o r r e s i d e n t i a l r e n o v a t i o n c o n s t r u c t i o n . L a r g e - s i z e d f i r m s do not possess a s i m i l a r a b i l i t y to t r a n s f e r to r e s i d e n t i a l r e n o v a t i o n c o n s t r u c t i o n because the advantages inherent i n l a r g e s c a l e o p e r a t i o n s cannot be u t i l i z e d i n c l u d i n g volume p r o d u c t i o n , use of l a r g e land t r a c t s and economies of s c a l e i n the r e p e t i t i v e c o n s t r u c t i o n of a standard product. L a r g e - s i z e d firms who choose to t r a n s f e r to renovation a c t i v i t i e s would be f o r c e d to down-size o p e r a t i o n s to the s c a l e of a medium-sized f i r m . The t h e s i s observes t h a t small and medium-sized' f i r m s w i t h i n the h o u s e - b u i l d i n g s e c t o r are most s u i t e d to become i n v o l v e d i n 92 r e s i d e n t i a l renovation a c t i v i t i e s and ad j u s t to changing demand c o n d i t i o n s . These changing c o n d i t i o n s w i l l have a major impact on i n d u s t r y s t r u c t u r e and w i l l p a r t i c u l a r l y a f f e c t l a r g e - s i z e d f i r m s . Not only w i l l l a r g e - s i z e d f i r m s f i n d t h e i r t a r g e t market the c o n s t r u c t i o n of suburban, s i n g l e f a m i l y housing d i m i n i s h i n g , they w i l l a l s o be unable to take advantage of the burgeoning market f o r r e s i d e n t i a l r e n o v a t i o n work. In examining the w i l l i n g n e s s of the i n d u s t r y to a d j u s t , i t was found that that the i n d u s t r y has a great d e a l of i n e r t i a . Reasons f o r t h i s i n c l u d e : • Preference f o r the f a m i l i a r i t y and p r e d i c t a b i l i t y of c u r r e n t o p e r a t i o n s i n new housing c o n s t r u c t i o n . • Promotion by the f e d e r a l government of the "handy-man", small s c a l e s e c t o r of the reno v a t i o n i n d u s t r y through such programs as the Canadian Home Renovation Program and the Canadian Home I n s u l a t i o n Program. • The u n c e r t a i n t i e s and a d d i t i o n a l e f f o r t r e q u i r e d i n renovation work i n v o l v i n g a unique set of problem-s o l v i n g d e c i s i o n s (e.g. s i n c e each renovation p r o j e c t i s unique there i s l e s s c o n t i n u i t y of work w i t h i n a u n i t and from u n i t to u n i t , i t i s d i f f i c u l t to p r e d i c t c o s t s or type of work r e q u i r e d before c o n s t r u c t i o n a c t u a l l y begins, renewal of e x i s t i n g s u r f a c e s to present day b u i l d i n g code standards o f t e n r e q u i r e s more work than the a p p l i c a t i o n of new s u r f a c e s ) . The s p e c i f i c b a r r i e r s that i n h i b i t i n d u s t r y adjustment to r e s i d e n t i a l renovation a c t i v i t i e s of both s p e c u l a t i v e and c o n t r a c t renovation firms were found to be: 1. Zoning and b u i l d i n g codes are geared to new r e s i d e n t i a l c o n s t r u c t i o n making t h e i r a p p l i c a t i o n to r e s i d e n t i a l r e n o v a t i o n c o n s t r u c t i o n complicated, u n c e r t a i n and time consuming; 1.. D i f f i c u l t i e s i n o b t a i n i n g f i n a n c i n g at comparable 93 r a t e s and terms as those a v a i l a b l e f o r new c o n s t r u c t i o n ; f i n a n c i a l i n s t i t u t i o n s p e r c e i v e r e s i d e n t i a l renovation p r o j e c t s as of higher r i s k than new housing p r o j e c t s . T h i s b a r r i e r s p e c i f i c a l l y i n h i b i t s s p e c u l a t i v e renovation p r o j e c t s , 3. There i s a requirement f o r gr e a t e r and a wider range of management, e n t r e p r e n e u r i a l and  c o n s t r u c t ion s k i l l s i n renovation c o n s t r u c t i o n compared to new c o n s t r u c t i o n , 4. There are l i m i t e d o p p o r t u n i t i e s to make use of s c a l e economies A l s o , because each renovation p r o j e c t i s unique, the c o n s t r u c t i o n process i s more u n p r e d i c t a b l e and u n c e r t a i n compared to new housing p r o j e c t s . The f o l l o w i n g p r o p o s a l s are intended to de a l with these b a r r i e r s thereby f a c i l i t a t i n g the adjustment of the r e s i d e n t i a l c o n s t r u c t i o n i n d u s t r y to r e s i d e n t i a l r enovation a c t i v i t i e s , which w i l l i n tu r n f a c i l i t a t e the maintenance and r e j u v e n a t i o n of the e x i s t i n g housing stock and r e l a t e d i n f r a s t r u c t u r e . PROPOSALS The i n t e n t of the f o l l o w i n g i s to propose ways that f e d e r a l , p r o v i n c i a l and mun i c i p a l governments, f i n a n c i a l i n s t i t u t i o n s , the Canadian Home B u i l d e r s ' A s s o c i a t i o n of Canada, and the Urban Development I n s t i t u t e c o u l d change c u r r e n t approaches and a t t i t u d e s to respond more e f f e c t i v e l y and e f f i c i e n t l y to the i n c r e a s i n g t r e n d to such c o n s t r u c t i o n , thereby f a c i l i t a t i n g i n d u s t r y adjustment. A number of q u a l i f i c a t i o n s should be made at t h i s p o i n t . F i r s t l y , these p r o p o s a l s i n t e n d to encourage renovation p r o j e c t s that are ec o n o m i c a l l y v i a b l e ; where the s t r u c t u r e s are sound and where there i s a market demand f o r the renovated u n i t at a 94 p a r t i c u l a r l o c a t i o n . T h i s q u a l i f i c a t i o n however, does not apply when housing i s valued not as a commodity but as a s o c i a l good; where housing i s preserved f o r i t s h e r i t a g e m e r i t s rather than for i t s economic v i a b i l i t y . In other words, i t i s beyond the scope of t h i s t h e s i s to d e a l with the renovation of s t r u c t u r e s which are not economically f e a s i b l e , r e q u i r i n g some form of government sub s i d y . To preserve housing with h e r i t a g e a t t r i b u t e s i n v o l v e s an e n t i r e l y d i f f e r e n t set of p r o p o s a l s than those suggested here. Secondly, these p r o p o s a l s are intended to f a c i l i t a t e the- processes of r e s i d e n t i a l r e n o v a t i o n . They do not int e n d t o promote re n o v a t i o n a c t i v i t i e s merely f o r the sake of r e n o v a t i o n , but because of the b e n e f i t s p r e v i o u s l y s t a t e d ; f a c i l i t a t i n g i n d u s t r y involvement i n r e s i d e n t i a l r e n o v a t i o n a c t i v i t y which w i l l i n turn encourage the more e f f i c i e n t use of the housing s t o c k . T h i r d l y , these p r o p o s a l s assume that the i n d u s t r y i s a d a p t i v e and able to make adjustments to changing market c o n d i t i o n s . In essense, the p r o p o s a l s c a l l f o r a change i n the p e r c e p t i o n of i n s t i t u t i o n s towards r e c o g n i t i o n of the i n c r e a s i n g importance of r e s i d e n t i a l r e n o v a t i o n c o n s t r u c t i o n r e l a t i v e t o new housing c o n s t r u c t i o n and to a d j u s t t h e i r c u r r e n t methods of o p e r a t i o n a c c o r d i n g l y . 95 A. THE REGULATORY PROCESS 1. PROBLEM A c r i t i c a l b a r r i e r h i n d e r i n g r e s i d e n t i a l renovation a c t i v i t y , i n c o n t r a c t and s p e c u l a t i v e renovation ventures, i s the complicated, time consuming, and u n c e r t a i n zoning and b u i l d i n g code approval p r o c e s s . Planning r e g u l a t i o n s that deal with r e s i d e n t i a l development are p r i m a r i l y geared to new c o n s t r u c t i o n . They set r e s t r i c t i o n s which do not address e x i s t i n g r e s i d e n t i a l c h a r a c t e r i s t i c s and are o f t e n c o n t r a d i c t o r y and s u b j e c t to wide and changing i n t e r p r e t a t i o n s . B u i l d i n g setbacks are s p e c i f i e d that do not r e l a t e to the e x i s t i n g house l o c a t i o n on the l o t , or f l o o r space r a t i o s (FSR) are too s t r i n g e n t l y r e g u l a t e d i n the context of p e r m i t t e d bulk and height of b u i l d i n g s . For example, in most mu n i c i p a l zoning by-laws there are b u i l d i n g envelope l i m i t a t i o n s determined by height and setback r e s t r i c t i o n s , yet the FSR i s o f t e n l e s s than i s allowed under these s p e c i f i c a t i o n s . T h i s i s p a r t i c u l a r l y important f o r renovation work where small f l o o r spaces such as dormers, bay windows and e n c l o s e d porches c o u l d be added without by-law v a r i a n c e s i f the FSR r e s t r i c t i o n was removed (Canadian B u i l d i n g : ( T o f t ) June, 1982, p. 25). B u i l d i n g codes c r e a t e a s i m i l a r problem as they are geared to new c o n s t r u c t i o n and are o f t e n a p p l i e d i n a p r e s c r i p t i v e , r i g i d manner. For example, a renovator o f t e n experiences d i f f i c u l t y i n upgrading an e x i s t i n g s t r u c t u r e to meet c u r r e n t f i r e s a f e t y standards. T y p i c a l l y , only one method to upgrade 96 f i r e s a f e t y i s permitted i n the B u i l d i n g Code; a method that may be d i f f i c u l t to adapt to an o l d e r b u i l d i n g . A l t e r n a t i v e methods to achieve a s i m i l a r standard of f i r e s a f e t y are p r o h i b i t e d . The r e g u l a t o r y system t h e r e f o r e a c t s as a d i s i n c e n t i v e f o r c o n v e r s i o n , r e t r o f i t t i n g and r e n o v a t i o n of e x i s t i n g u n i t s . The N a t i o n a l B u i l d i n g Code p r o v i d e s no p o l i c y g u i d e l i n e s a d v i s i n g p r o v i n c e s or m u n i c i p a l i t i e s on how to adapt codes and standards of p u b l i c s a f e t y to e x i s t i n g b u i l d i n g s . Most m u n i c i p a l i t i e s adopt the N a t i o n a l B u i l d i n g Code along with p r o v i n c i a l requirements as w e l l as s e c t i o n s to d e a l with t h e i r p a r t i c u l a r problems. Some m u n i c i p a l i t i e s are beginning to face the problem of adapting t h e i r codes to renovation c o n s t r u c t i o n and r e q u i r e g u i d e l i n e s and a l t e r n a t i v e approaches to deal with the problem (Hulchanski: 1982, p. 87). 2. PROPOSAL Ac t i o n s are needed to make the m u n i c i p a l r e g u l a t o r y process more e f f e c t i v e i n d e a l i n g with r e s i d e n t i a l r e n o v a t i o n s : making the process f l e x i b l e , s i m p l i f i e d and p o t e n t i a l l y l e s s time consuming, reducing the need f o r v a r i a n c e a p p r o v a l . R e v i s i o n s i n the r e g u l a t o r y framework should not r e l a x p u b l i c s a f e t y standards i n a p p l i c a t i o n to e x i s t i n g s t r u c t u r e s , but rather o f f e r a l t e r n a t i v e measures to achieve these standards. In g e n e r a l , the d i f f i c u l t i e s i n adapting the e x i s t i n g system of r e g u l a t i o n to renovation c o n s t r u c t i o n are known. L i t t l e work has been i n i t i a t e d to i d e n t i f y the s p e c i f i c i s s u e s 97 and formulate s u i t a b l e a l t e r n a t i v e s . A major research e f f o r t is' needed as advocated by H u l c h a n s k i . I t should f o l l o w three s t e p s : 1. I d e n t i f y the s p e c i f i c ways i n which the e x i s t i n g r e g u l a t o r y framework c o n s t r a i n s or p r o h i b i t s p o t e n t i a l l y d e s i r a b l e forms of r e s i d e n t i a l l a n d use i n t e n s i f i c a t i o n / c o n s e r v a t i o n ; 2. Develop new standards and model bylaws designed to permit and encourage r e s i d e n t i a l i n t e n s i f i c a t i o n / c o n s e r v a t i o n ; and 3. C l o s e l y monitor the success and impacts of the cases where new standards have been implemented (1 982, p. 7-3) . As suggested by the Toronto Home B u i l d e r s ' A s s o c i a t i o n Renovation C o u n c i l i n t h e i r review of the C i t y of Toronto's zoning and b u i l d i n g codes, new standards and bylaws are needed, ...which w i l l not d r a m a t i c a l l y change e x i s t i n g d e n s i t y standards; r e l a t e s bulk and l o c a t i o n of b u i l d i n g s as much as p o s s i b l e to the nature and s i z e of the p r o p e r t y and i t s r e l a t i o n s h i p to i t s neighbors; and o f f e r s an easy to use r e f e r e n c e system which allows b u i l t form standards which can be e a s i l y and q u i c k l y determined (Canadian B u i l d i n g : ( T o f t ) July/August 1983, p. 36). In a d d i t i o n , such a system should allow r e n o v a t i o n of e x i s t i n g s t r u c t u r e s as a l e g a l r i g h t , without the need f o r v a r i a n c e a p p r o v a l ( Canadian B u i l d i n g : ( T o f t ) June, 1983, p. 28). Achievement of a s i m p l e r , more f l e x i b l e and c e r t a i n r e g u l a t o r y system w i l l take p l a c e slowly, having a gradual e f f e c t on r e s i d e n t i a l r e n o v a t i o n c o n s t r u c t i o n over time. N e v e r t h e l e s s , m u n i c i p a l i t i e s should begin to revamp t h e i r codes 98 in accordance with the housing requirements of the present and f u t u r e . 99 B. FINANCING 1 . PROBLEM A key b a r r i e r a s s o c i a t e d with s p e c u l a t i v e r e s i d e n t i a l r e n o v a t i o n a c t i v i t i e s i s o b t a i n i n g f i n a n c i n g at s i m i l a r i n t e r e s t r a t e s and c o n d i t i o n s as new c o n s t r u c t i o n . Although s e c u r i n g c r e d i t does not appear to be a problem, r a t e s at which c r e d i t i s extended are; o f t e n i n the form of demand loans s e v e r a l percentage p o i n t s above prime. T h i s r e f l e c t s f i n a n c i a l i n s t i t u t i o n s p e r c e p t i o n of the r i s k i n r e s i d e n t i a l renovation c o n s t r u c t i o n . Because the market for r e s i d e n t i a l r enovation c o n s t r u c t i o n i s growing, i t i s the c o n t e n t i o n of t h i s t h e s i s that f i n a n c i a l i n s t i t u t i o n s possess an outmoded view of the r i s k i n e s s of r e s i d e n t i a l r e n o v a t i o n p r o j e c t s . 2. PROPOSAL A f i n a n c i n g scheme i s r e q u i r e d which would promote a change i n p e r c e p t i o n of f i n a n c i a l i n s t i t u t i o n s towards investment i n the r e s i d e n t i a l renovation market and provide c a p i t a l f o r those p r o j e c t s which o f f e r the g r e a t e s t p o t e n t i a l f o r r e t u r n on investment. A f i n a n c i n g scheme proposed by Clayton Research A s s o c i a t e s i n the recent Study of R e s i d e n t i a l I n t e n s i f i c a t i o n and Rental  Housing Conservation (1983) commissioned by the O n t a r i o M i n i s t r y of M u n i c i p a l A f f a i r s and Housing, presents a promising approach. T h e i r scheme would be: e s t a b l i s h e d by mortgage insurance f i r m s . 100 whereby an a d d i t i o n a l premium, for example, 1/2 of 1 percent would be charged to an a p p l i c a n t r e q u i r i n g both i n t e r i m and completion loans f o r renovation purposes (Clayton Research A s s o c i a t e s in K l e i n & Sears et a l : 1983, p. 132-3) . Under t h i s scheme, p r i v a t e f i n a n c i n g would continue to provide c a p i t a l f o r renovation a c t i v i t y while mortgage i n s u r e r s , through a mortgage insurance package, would cover the r i s k f a c t o r . Since the i n i t i a l r i s k i s h i g h , a r e s e r v e fund s u p p l i e d by the f e d e r a l government would be r e q u i r e d to f i n a n c e d e f a u l t s . The Mortgage Insurance Company o f Canada e s t i m a t e s that the value of d e f a u l t s would exceed the aggregate v a l u e of premiums u n t i l approximately the end of the f i f t h year ( C l a y t o n Research A s s o c i a t e s i n K l e i n & Sears et a l . : 1983, p. 133). Therefore, a f e d e r a l reinsurance scheme would be needed f o r the i n i t i a l f i v e year p e r i o d u n t i l the reserve c o u l d be s e l f - s u s t a i n i n g . T h i s proposal would, i n v o l v e the o u t l a y of p r i v a t e c a p i t a l in s u p p l y i n g c r e d i t f o r both c o n s t r u c t i o n e x p e n d i t u r e s and insurance. I t would remain the f u n c t i o n of f i n a n c i a l i n s t i t u t i o n s -to fund p r o j e c t s which meet t h e i r c r i t e r i a of market f e a s i b i l i t y . Government involvement would be l i m i t e d to p r o v i s i o n of a reserve fund, f o r mortgage i n s u r a n c e f o r the i n i t i a l f i v e year p e r i o d . 101 C. MANAGERIAL, ENTERPRENEURIAL AND CONSTRUCTION SKILLS 1. PROBLEM The t h i r d b a r r i e r d e t e r r i n g involvement i n r e s i d e n t i a l r e novation c o n s t r u c t i o n are the broad range and more i n t e n s i v e use of managerial, e n t r e p r e n e u r i a l and c o n s t r u c t i o n s k i l l s r e q u i r e d i n reno v a t i o n compared to new c o n s t r u c t i o n . These vary with the type of reno v a t i o n work undertaken. A p r o j e c t undertaken by a c o n t r a c t renovator r e q u i r e s c o n s t r u c t i o n and managerial s k i l l s that can- de a l with the- complexity and u n p r e d i c t a b i l i t y of the renovation c o n s t r u c t i o n p r o c e s s . P r o j e c t s undertaken by s p e c u l a t i v e renovators r e q u i r e a wider range of s k i l l s i n c l u d i n g c o n s t r u c t i o n , managerial and e n t r e p r e n e u r i a l s k i l l s demanding e x p e r t i s e i n f i n a n c i n g , marketing, p u b l i c r e l a t i o n s , i n t e r p r e t a t i o n of b u i l d i n g and zoning codes and desig n . 2. PROPOSAL T r a i n i n g programs and i n f o r m a t i o n d i s s e m i n a t i o n programs are needed f o r two reasons: 1. To adapt new h o u s e b u i l d e r ' s s k i l l s (of those who choose to t r a n s f e r to re n o v a t i o n c o n s t r u c t i o n ) and renovator's s k i l l s t o the requirements of renov a t i o n c o n s t r u c t i o n , a d d r e s s i n g the problem mentioned e a r l i e r i n t h i s t h e s i s : The renovation i n d u s t r y s u f f e r s from a poor r e p u t a t i o n . Consumer and Corporate A f f a i r s c i t e r e s i d e n t i a l r e n o v a t i o n as the number two complaint a f t e r . c a r r e p a i r s . (Canadian B u i l d i n g : ( T o f t ) A p r i l 1981, p. 26). 1 02 2. To make the process of m a i n t a i n i n g and r e j u v e n a t i n g the e x i s t i n g housing stock more e f f e c t i v e and e f f i c i e n t . Such programs would i n v o l v e the e f f o r t s and e n e r g i e s of such i n s t i t u t i o n s as p r o v i n c i a l governments, the Canadian Homebuilders A s s o c i a t i o n (CHA) and the Urban Development I n s t i t u t e (UDI). CHA d e f i n e s i t s r o l e , among other t h i n g s , to o f f e r seminars and n e w s l e t t e r s to keep members informed of housing market c o n d i t i o n s and o p p o r t u n i t i e s and to l i a s e with government on i s s u e s of concern to the i n d u s t r y (HomeWord: April/May, 1983, p. 15). UDI d e f i n e s i t s r o l e i n a s i m i l a r way. P r o v i n c i a l governments, i n t h e i r r o l e to promote educati o n , aim among other t h i n g s , to provide c o n s t r u c t i o n t r a i n i n g programs at the community c o l l e g e l e v e l to ensure that l a b o r and subtrade s k i l l s meet the requirements of the i n d u s t r y . The f o l l o w i n g p r o p o s a l s show how the above i n s t i t u t i o n s , i n t h e i r s e l f - a s s i g n e d r o l e s and methods of o p e r a t i o n , can respond more e f f e c t i v e l y and e f f i c i e n t l y to the i n c r e a s i n g market f o r r e s i d e n t i a l r e n o v a t i o n c o n s t r u c t i o n . 1. CHA and UDI c o u l d p l a y an e s s e n t i a l p a r t i n adapting member's s k i l l s and a b i l i t i e s to cope with r e s i d e n t i a l r e n o v a t i o n c o n s t r u c t i o n . They c o u l d a l s o make members aware of the o p p o r t u n i t i e s c r e a t e d by the growing r e s i d e n t i a l r e n o v a t i o n market. Through the use of workshops, seminars, n e w s l e t t e r s and manuals, both CHA and UDI c o u l d inform members of s p e c i f i c a spects and p i t f a l l s of the r e s i d e n t i a l r e n o v a t i o n c o n s t r u c t i o n 1 03 process i n c l u d i n g : a. F i n a n c i n g b. Marketing and p u b l i c r e l a t i o n s c. I n t e r p r e t a t i o n of b u i l d i n g and zoning codes d. Cost e s t i m a t i o n e. E s t i m a t i o n of the t a r g e t market i n a p a r t i c u l a r l o c a t i o n f . S p e c i a l s t r u c t u r a l problems a s s o c i a t e d with renovation such as a s s e s s i n g p h y s i c a l c o n d i t i o n of a b u i l d i n g and e s t i m a t i n g the extent of renovation r e q u i r e d , ranging from cosmetic renovation to t o t a l or gut r e n o v a t i o n g. Design: how to make the best use of p r o f e s s i o n a l a s s i s t a n c e h. Managerial s k i l l s r e l a t e d t o : • c o n t r o l l i n g c o s t s of c o n s t r u c t i o n • m a i n t a i n i n g schedules • m a i n t a i n i n g q u a l i t y c o n t r o l though constant o n - s i t e s u p e r v i s i o n and d e c i s i o n making • developing an e f f e c t i v e workforce that i s s k i l l e d i n i t s approach to s o l v i n g c o n s t r u c t i o n problems; i n c l u d i n g s t r u c t u r a l , d e t a i l , m a t e r i a l and c r a f t knowledge • the achievement of s c a l e economies through the simultaneous renovation of s e v e r a l u n i t s of a s i m i l a r type at one time These programs should be geared s p e c i f i c a l l y to the s k i l l requireme nts of the c o n t r a c t or s p e c u l a t i v e renovator. 2. CHA and UDI should lobby p r o v i n c i a l governments to p r o v i d e funding to community c o l l e g e s to mount or expand r e s i d e n t i a l renovation c o n s t r u c t i o n t r a i n i n g courses as p a r t of labor and subtrade education programs. Such courses would equip tradesmen with 1 04 b e t t e r s t r u c t u r a l , d e t a i l , m a t e r i a l and c r a f t knowledge and o n - s i t e d e c i s i o n making a b i l i t y s p e c i f i c a l l y r e q u i r e d i n r e s i d e n t i a l r e n o v a t i o n c o n s t r u c t i o n . Courses c o u l d be modelled a f t e r the CMHC course " T r a i n i n g i n R e h a b i l i t a t i o n S k i l l s " o r i g i n a l l y designed to t r a i n RRAP personnel and b u i l d i n g i n s p e c t o r s . CONCLUSIONS Recommendations proposed i n t h i s chapter i n c l u d e : • The development of new standards and model zoning and b u i l d i n g by-laws that aim to permit and encourage r e s i d e n t i a l renovation c o n s t r u c t i o n , making the r e g u l a t o r y process f l e x i b l e , s i m p l i f i e d and p o t e n t i a l l y l e s s time consuming, reducing the need f o r v a r i a n c e a p p r o v a l . • The for m u l a t i o n of a f i n a n c i n g scheme to make the l e n d i n g process f o r r e s i d e n t i a l r e n o v a t i o n c o n s t r u c t i o n more e f f e c t i v e and e f f i c i e n t ; or, i n other words, more responsive to changes i n the housing market t h a t make r e s i d e n t i a l r e novation a promising investment o p p o r t u n i t y . • The development of t r a i n i n g and i n f o r m a t i o n d i s s e m i n a t i o n programs designed to adapt renovator's and h o u s e - b u i l d e r ' s s k i l l s (of those who choose to t r a n s f e r i n t o r e s i d e n t i a l renovation) to the p a r t i c u l a r requirements of r e s i d e n t i a l r e n o v a t i o n c o n s t r u c t i o n . I t i s i n these areas t h a t government and i n s t i t u t i o n a l a c t i o n s are needed to f a c i l i t a t e and encourage the adjustment by the housing c o n s t r u c t i o n s e c t o r to r e s i d e n t i a l r e n o v a t i o n a c t i v i t i e s . Should these recommendations be implemented, the process of m a i n t a i n i n g and r e j u v e n a t i n g the e x i s t i n g housing stock, t o match f u t u r e demand and need f o r housing, w i l l be made more e f f e c t i v e and e f f i c i e n t . 105 AREAS OF FURTHER RESEARCH 1 . An important area of f u t u r e r e s e a r c h i s to i d e n t i f y the f i n a n c i a l r i s k of s p e c u l a t i v e r e n o v a t i o n a c t i v i t i e s . I t would be necessary to determine whether f i n a n c i a l i n s t i t u t i o n s possess an outmoded view of the r i s k i n e s s of renovation a c t i v i t i e s i n the l i g h t of i t s growing investment p o t e n t i a l . 2. A c r i t i c a l a-rea of i n v e s t i g a t i o n i s to assess the impact of zoning and b u i l d i n g codes on r e s i d e n t i a l r e n o v a t i o n p r o j e c t s and to suggest p r o p o s a l s f o r how t h i s r e g u l a t o r y process c o u l d f a c i l i t a t e such p r o j e c t s more e f f e c t i v e l y and e f f i c i e n t l y . 3. Another important r e s e a r c h t o p i c would be to examine the p l a n n i n g i m p l i c a t i o n s of l a r g e s c a l e r e n o v a t i o n or r e h a b i l i t a t i o n of low-moderate income housing. Research should address how r e n t s can be maintained at a f f o r d a b l e l e v e l s a f t e r r e n o v a t i o n and what methods can be used to prevent g e n t r i f i c a t i o n by middle-upper income groups. 106 POSTSCRIPT Subsequent to t h i s t h e s i s being prepared i n d r a f t form f o l l o w i n g announcement was made in Canadian B u i l d i n g Magazine Backed by the O n t a r i o government ( M i n i s t r y of M u n i c i p a l A f f a i r s and Housing), the mortgage Insurance Company of Canada (MICC) w i l l p r o v i d e renovators with mortgage f i n a n c i n g at p r e v a i l i n g i n t e r e s t r a t e s . . . The new program, i n a d d i t i o n t o p r o v i d i n g f i n a n c i n g , w i l l set up a t r a i n i n g and in f o r m a t i o n t r a i n i n g program... (May, 1984: p. 7). 1 07 BIBLIOGRAPHY Baker, J . (1974). "The Canadian Conference on Housing R e h a b i l i t a t i o n " , Housing and People, Volume 5(1), pp. 1-12. Barker, E. (1971).)U A Report on the R e h a b i l i t a t i o n of Older Houses i n a Lower Income, Inner C i t y D i s t r i c t , Winnipeg: I n s t i t u t e of Urban S t u d i e s , U. of Winnipeg. Barker, G. Penney, J . and Secombe, W. (1973). H i g h r i s e and  Super P r o f i t s , K i t c h e n e r : Dumont Press Graphix. B e l l , R. (1977). "How to Recycle Real E s t a t e S u c c e s s f u l l y " Real E s t a t e Review, Volume 6, Winter, pp. 25-30. B r i g g s , T. (1982). "Urban Developers Need New Outlook", Canadian. B u i l d i n g , A p r i l , pp. 43-44. Brown, P. (1981). The Demographic Futur e : Impacts on the Demand f o r Housing i n Canada, 1981-2001, Ottawa: CMHC. Bryan, J . (1970). "The Rocky Road to Low Income R e h a b i l i t a t i o n f o r the P r i v a t e I n v e s t o r " , J o u r n a l of Housing, Number 27, February, pp. 76-89. B u i l d i n g Toward 2001: Proceedings, (1981). Toronto: November 1-4. Canadian A s s o c i a t i o n of Housing and Renewal O f f i c i a l s (1979). "More Mileage Out of the Rehab D o l l a r " , Impact. Canadian A s s o c i a t i o n of Housing Renewal O f f i c i a l s and CMHC, (1981). Report on the R e s i d e n t i a l R e h a b i l i t a t i o n  A s s i s t a n c e Program, Ottawa. Canadian B u i l d i n g Congress, 2nd., (1979) R e h a b i l i t a t i o n of B u i l d i n g s : Second Canadian B u i l d i n g Congress: Preceedings, Toronto. Canadian Business Magazine. (1980). Volume 53, A p r i l , pp. 111-114. Canadian Economic S e r v i c e s L t d . (1975). Survey of Hou s e b u i l d e r s , prepared f o r Housing and Urban Development A s s o c i a t i o n of Canada and CMHC, Ottawa. Canadian Real E s t a t e A s s o c i a t i o n . (1977). Volume 7(11), November, p. 4. C a r l s o n , D.B. (1978). R e v i t a l i z i n g North American Neighborhoods: A Comparison of Canadian and U.S. Programs  fo r Neighborhood P r e s e r v a t i o n and Housing R e h a b i l i t a t i o n , 108 Washington, D.C.: Urban I n s t i t u t e . C a r t e r , P. (1979). Housing Over the Next Decade, Paper Presented to the Housing and Urban Development A s s o c i a t i o n of Manitoba Conference, Winnipeg, 13 February. Chamberlain, S. (1972). Aspects of Developer Behavior i n the  Land Development Process, Toronto: Centre f o r Urban and Commmunity S t u d i e s , U. of Toronto. Charney, M. (1971). The Adequacy and Production of Low Income  Housing, Ottawa: CMHC Task Force on Low Income Housing. Chung, J . (1976). C y c l i c a l I n s t a b i l i t y i n R e s i d e n t i a l  C o n s t r u c t i o n , Ottawa: Economic C o u n c i l of Canada. C l a r k , J . (1981). An Examination of the C h a r a c t e r i s t i c s of R e h a b i l i t a t i o n C o n t r a c t o r s : P i l o t Study f o r Ottawa, Ottawa: CMHC. Clayton Research A s s o c i a t e s . (1981). Housing C o n s t r u c t i o n i n Canada: A S e r i e s of Three S t u d i e s , Toronto: Housing and Urban Development A s s o c i a t i o n of Canada. CMHC, (1969). F e d e r a l Task Force on Housing and Urban Development: Canadian Housing P o l i c y 1945-1968, Ottawa. CMHC, (1974). New From Ol d : A P i l o t Study of Housing R e h a b i l i t a t i o n and Neighborhood Change, Ottawa. CMHC. CMHC, (1978). P r o j e c t i n g Long Term Housing Requirements and A s s e s s i n g Current Housing Needs: the Canadian Experience, Ottawa. CMHC (1980a). Annual Report, Ottawa. CMHC, (1980b). Current Trends and P o l i c i e s i n the F i e l d of  Housing, B u i l d i n g and Planning, Ottawa. CMHC, (1980c). The Long Term Outlook f o r Housing i n Canada and  i t s I m p l i c a t i o n f o r the R e s i d e n t i a l C o n s t r u c t i o n Industry, Ottawa. CMHC, (1981). R e s i d e n t i a l R e h a b i l i t a t i o n A s s i s t a n c e Program: Standards f o r the R e h a b i l i t a t i o n of R e s i d e n t i a l B u i l d i n g s , Ottawa. CMHC, (1981). I n s p e c t i o n G u i d e l i n e s : RRAP, Ottawa. CMHC (1981). Annual Report, Ottawa. CMHC/HUDAC, (1982). The R e s i d e n t i a l C o n s t r u c t i o n Industry Problems and E x p e c t a t i o n s , Ottawa: CMHC, Market F o r e c a s t s and A n a l y s i s D i v i s i o n . 1 09 CMHC, (1982). New L i f e f o r an Old House, Ottawa. CMHC, (1983). T r a i n i n g i n Housing R e h a b i l i t a t i o n S k i l l s : Course J_, Ottawa. D i v i c , A. (1981). P o p u l a t i o n , Households and Housing Requirements P r o j e c t i o n s f o r Canada, the Provinces and the  Census M e t r o p o l i t a n Areas 1976-2001, Ottawa: CMHC. Downs, A. (1976). " I n v e s t i n g i n Housing R e h a b i l i t a t i o n Can be S u c c e s s f u l " , Real E s t a t e Review, Volume 6, Summer pp. 66-73. Dumouchel, J.R. (1978). European Housing R e h a b i l i t a t i o n  E x p e r i e n c e : A Summary and A n a l y s i s , Washington, D.C: N a t i o n a l A s s o c i a t i o n of Housing and Redevelopment O f f i c i a l s . Economic C o u n c i l of Canada. (1974). Toward More S t a b l e Growth  i n C o n s t r u c t i o n : Report of the Study on C y l i c a l I n s t a b i l i t y  i n C o n s t r u c t i o n , Ottawa. Ehrmann, M. (1978). Making L o c a l R e h a b i l i t a t i o n Work: P u b l i c / P r i v a t e R e l a t i o n s h i p s , Washington, D .C: N a t i o n a l A s s o c i a t i o n of Housing and Redevelopment O f f i c i a l s . E i c h l e r , E.P. and Kaplan, M. (1967). The Community B u i l d e r s , B erkeley: U n i v e r s i t y of C a l i f o r n i a P r e s s . E i c h l e r , Ned (1982). The Merchant B u i l d e r s . Cambridge, Mass.: MIT P r e s s . Farrow, J.E.L. (1981). Firm C l o s u r e s i n the R e s i d e n t i a l C o n s t r u c t i o n Industry, Prepared by C u r r i e , Coopers and Lybrand L t d . f o r CMHC, Ottawa. F i n a n c i a l Post. August 27, 1983, p. 29; June 25, 1983, p. 26; June 11, 1983, p.25; February 18, 1983, p.B8; November 6, 1982, p. B3; May 8, 1982, p.30; A p r i l 24, 1982, pp. 20,27; A p r i l 17, 1982, pp. 1,2; December 5, 1981, pp. S6-7; J u l y 24, 1981, p. S l 5 ; September 5, 1981, p. 5; J u l y 15, 1981, pp. S7,8; October 28, 1978, p. B1. J u l y 25, 1981, pp.57-58. F r e n n e t t e , S. (1978). "The E v o l u t i o n of the Wh i t e p a i n t i n g Phenomenon i n Canadian Urban Centres", unpublished Master's T h e s i s , U. of Waterloo. Globe & M a i l . March 18, 1983, pp. R2,R4; February 18, 1983, p. B8; September 21, 1982, p-. B9; September 16, 1982, p. B9; September 3, 1982, p. B2; November 26, 1977, p. B13. G l u s k i n , ! . (1977). C a d i l l a c F a i r v i e w C o r p o r a t i o n L i m i t e d : A 1 10 Corporate Background Report, Royal Commission on Corporate C o n c e n t r a t i o n , Study No. 3, Ottawa: The Commission. Goldberg, M. (1974). " R e s i d e n t i a l Developer Behavior: Some E m p i r i c a l F i n d i n g s " , Land Economics, Volume 50. Graver, F. (1981). P i l o t Study of P h y s i c a l House C o n d i t i o n and  R e h a b i l i t a t i o n Need: Major Report, Ottawa: CMHC. G r e b l e r , B. (1973). Large Scale Housing and Real E s t a t e Firms, New York: Praeger P u b l i s h e r s . Greenspan, D. (Chairman) (1978) Down to E a r t h : Task Force on  the Supply & P r i c e of S e r v i c e d R e s i d e n t i a l Land; Volume  Two: S y n t h e s i s & Summary of T e c h n i c a l Research. H a b i t a t , (1974). " R e h a b i l i t a t i o n - R e s t a u r a t i o n " , Volume 17 (4 and 5), Ottawa, pp. 1-52. Harvey, J . (1980). F l e x i b i l i t y f o r Canadian Housing: a  C r i t i q u e , Ottawa: CMHC. Herzog, J . (1963). The Dynamics of Large-Scale H o u s e b u i l d i n g , Research Report No. 22, B e r k e l e y : Centre f o r Real E s t a t e and Urban Economics, U. of C a l i f o r n i a . Housing i n the S e v e n t i e s Working Papers 2: N a t i o n a l Housing P o l i c y Review^ (1976) Washington D.C.; U.S. Department of Housing and Urban Development. Housing O n t a r i o . Volume 26/Number 1, January/February 1982; S p e c i a l E d i t i o n , October 12, 1981; Volume 24/Number 4, June 1, 1980. Housing R e h a b i l i t a t i o n : Proceedings of the Canadian Conference  on Housing R e h a b i l i t a t i o n , (1973). Montreal: The Canadian C o u n c i l on S o c i a l Development. H u l b e r t , R. (1983). "Recession Should Reshape Canadian B u i l d i n g I n d u s t r y " , Canadian B u i l d i n g , November/December, p. 13. Hul c h a n s k i , D. (1982). Making B e t t e r Use of the E x i s t i n g Housing Stock, O n t a r i o : M i n i s t r y of M u n i c i p a l A f f a i r s and Housing. I n s i g h t , (1982). October/November/December, pp. 1-2. I r v i n g R. S i l v e r A s s o c i a t e s (1981). P i l o t Study: Demographic  Impacts i n Canadian Housing Markets, F i n a l Report, Ottawa: CMHC. Jacobs, R. (1983). "Ripe f o r the P i c k i n g " , Canadian B u i l d i n g . June, pp. 17-23. •111 Kalman, H. (1979). The S e n s i b l e R e h a b i l i t a t i o n of Older Houses, CMHC: Ottawa. Keyes, B.A. and Caskie, D.M. (1975). The S t r u c t u r e and Operation of the C o n s t r u c t i o n Industry i n Canada., Ottawa: Economic C o u n c i l of Canada. K l e i n and Sears, (1983). Study of R e s i d e n t i a l I n t e n s i f i c a t i o n  and Rental Housing Conversion, p a r t 3: R e s i d e n t i a l  I n t e n s i f i c a t i o n and Future Housing Needs: Volume 5: The  Supply Process, prepared f o r the O n t a r i o M i n i s t r y of M u n i c i p a l A f f a i r s and Housing and the A s s o c i a t i o n of M u n i c i p a l i t i e s of O n t a r i o . Levatino,A.M. (1979). The R e h a b i l i t a t i o n P r o f e s s i o n , Washington: D.C: N a t i o n a l A s s o c i a t i o n of Housing and •Redevelopment O f f i c i a l s . Levenson, R. (1979). F l e x i b i l i t y f o r Canadian Housing: a State  of the A r t Review, CMHC: Ottawa. L i s t o k i n , D. (ed.) (1983). Housing R e h a b i l i t a t i o n : Economic,  S o c i a l and P o l i c y P e r s p e c t i v e s , New J e r s e y : Center f o r Urban P o l i c y Research. L i s t o k i n , D. and S t e r n l i e b , G. (1976). " R e h a b i l i t a t i o n Versus Redevelopment: C o s t - B e n e f i t A n a l y s i s " i n Housing i n the  Sev e n t i e s Working Papers 2: N a t i o n a l Housing P o l i c y Review, Washington, D .C: U.S. Department of Housing and Urban Development, Longwoods Research Group (1981). The Longwood Report and Housing: P u b l i c A t t i t u d e s and P e r c e p t i o n s of Housing i n  On t a r i o , O n t a r i o M i n i s t r y of Housing. Lowden, J . (1973). "A Case Study of Community Rehab.: The Strathcona Rehab. P r o j e c t " , Plan Canada, Volume 13, Number 2, pp. 136-140. Lur z , W. and Jacobs, R. (1982). "Lean and Mean", Canadian  B u i l d i n g , November/December, pp.19-25. M a i s e l , S. (1953). H o u s e b u i l d i n g i n T r a n s i t i o n , Berkeley: U n i v e r s i t y of C a l i f o r n i a P r e s s . Marino, D.R. (1979). The Planne r s ' s Role i n F a c i l i t a t i n g  P r i v a t e Sector Reinvestment, Chicago: APA, Planning A d v i s o r y S e r v i c e , Report No. 340. Markusen, J . and Scheffman, D.T, (1977). S p e c u l a t i o n and Monopoly i n Urban Development: A n a l y t i c a l Foundations with  Evidence f o r Toronto, Toronto: O n t a r i o Economic C o u n c i l Research S t u d i e s , 10, U. of Toronto Press. 1 1 2 Markusen, J.R. and Scheffman, D.T. (1976). Urban Land Development: S p e c u l a t i o n and Market S t r u c t u r e , Toronto: O n t a r i o Economic C o u n c i l . McKee, C. (ed.) (1977). Innovative S t r a t e g i e s f o r the Renewal  of Older Neighborhoods, Winnipeg: I n s t i t u t e of Urban S t u d i e s , U. of Winnipeg. McKee, C. e t . a l . (1979). Housing: Inner C i t y Type Older  Areas, Winnipeg: I n s t i t u t e of Urban S t u d i e s , U. of Winnipeg. Mercer, J . and P h i l l i p s , D. (1976). " R e s i d e n t i a l R e h a b i l i t a t i o n i n Vancouver", Housing and People, Volume 7(4), pp. 22-27. Miron, J . (1982). The Two Person Household: Formation and Housing Demand.,- Research Paper No. 131, Centre f o r Urban and Community S t u d i e s , U. of Toronto. Morrison, P.S. (1978). Expenditures on Housing Maintenance and  Rep a i r s : Some Recent E v i d e n c e t Toronto: Centre f o r Urban and Community S t u d i e s , Research Paper No. 102, U. of Toronto. Newman, L.H. (1982). "A Matter of Managing an Inner C i t y Resource: Using E x s i s t i n g B u i l d i n g i n Inner C i t y Areas to Provide Low Income Housing " (1982). unpublished M.A. t h e s i s , U. of Waterloo. Newman, L.H. and Clatworthy, S.J. (1982). S t r u c t u r a l Change  in the Housing Industry, Winnipeg: I n s t i t u t e of Urban S t u d i e s , U. of Winnipeg. Oldham, S. (1983). "Older i s B e t t e r " , Canadian B u i l d i n g , May, pp.41-43. O n t a r i o M i n i s t r y of Housing (1980a). R e h a b i l i t a t i o n and Zoning  Review, P r o j e c t P lanning Branch. Toronto: Queen's P r i n t e r . O n t a r i o M i n i s t r y of M u n i c i p a l A f f a i r s and Housing, (1980). Economic Impacts of Renovation i n O n t a r i o : Background  Report to " B u i l d i n g Toward 2001", Prepared by Clay t o n Research A s s o c i a t e s . Peter Barnard A s s o c i a t e s , (1973). I n t r o d u c t i o n to the  R e h a b i l i t a t i o n Process, Ottawa: CMHC. Pomeranz, W. (1980). "How to T e l l i f Low-Income Housing Rehabs Make Sense", Real E s t a t e Review, Volume 9, Number 4, Winter, pp. 87-90. P r i c e , E.V. (1970). "The H o u s e b u i l d i n g Industry i n 1 1 3 M e t r o p o l i t a n Vancouver", unpublished M.B.A. t h e s i s , U.B.C.. Rakhra, A.S. and A.H. Wilson (1980). "The Market f o r R e h a b i l i t a t i o n i n Canada", The Canadian A r c h i t e c t , A p r i l , Volume 58, pp. 14-15. Real E s t a t e Development Annual. (1975). Toronto: Maclean-Hunter L t d . Report of the P r e s i d e n t ' s Committee on Urban Housing, (1968). A Decent Home, Washington: D.C. R i p l e y , J . (Ed.) (1979). " E d i t o r i a l : Home Marketing i n the 80's: Inward and Downward", Canadian B u i l d i n , September, p. 1 . R i p l e y , J . (Ed.) (1979). " E d i t o r i a l : C o nservation of B u i l d i n g s - C a p i t a l i s m i n Stone", Canadian B u i l d i n , A p r i l , p.1. Robinson, M.J. (1972). "Urban R e h a b i l i t a t i o n : Are the P r o f i t s Worth the R i s k ? " House and Home, November, pp. 68-72. Rudin, J.R. (1978). The Changing S t r u c t u r e of the Land Development Industry i n the Toronto Area, Toronto: Centre f o r Urban and Community S t u d i e s , U. of Toronto. Ryan, R. (1976). " P o t e n t i a l There f o r Late Year Surge and Upswing i n t o 1978", Canadian B u i l d e r , December, pp. 24-25. Scanada C o n s u l t a n t s , (1979). The P o t e n t i a l Market f o r R e s i d e n t i a l Renovation i n Canada: A P i l o t Study f o r H a l i f a x , Ottawa: CMHC, P o l i c y E v a l u a t i o n D i v i s i o n . Spurr,P. (1971). P r e l i m i n a r y Land Study: Main Report, Ottawa: CMHC. T e r r y , C.J. (1980). The Housing Sector as a To o l f o r Economic  Management: An Overview, Ottawa: CMHC. T o f t , M. (1981). "A Game of S k i l l and Chance", Canadian  B u i l d i n g . November/December, p. 19-26. T o f t , M. (1981). " R e s i d e n t i a l Renovators F i n d R e s p e c t a b i l i t y , But Not Without Growing Pains", Canadian B u i l d i n g . A p r i l , pp. 24-26. T o f t , M. (1982). "By-law T r i p s up Renovators, H i t s P u b l i c i n Pocket", Canadian B u i l d i n g . June, pp. 25-26. T o f t , M. (1982). "No Need to B u i l d New?", Canadian B u i l d i n g . November/December, p. 41. T o f t , M. (1982). "Renovation: Where Risks are High", Canadian 1 1 4 B u i l d i n g . January/February, pp. 19-24. T o f t , M. (1983). " T a c k l i n g Outdated Zoning By-laws", Canadian  B u i l d i n g . July/August, pp. 35-37. T o f t , M. (1983). " S i t e l i n e s : A uction Used to S e l l Slow Moving Real E s t a t e ; Vancouver Shapes Pl a n " , Canadian B u i l d i n g . October, p. 56. T o f t , M. (1983). "Heritage Aids Conversions", Canadian  B u i l d i n g . January/February, pp. 41-46. Tsang, E. (1979). R e s i d e n t i a l R e h a b i l i t a t i o n i n Canada - T e c h n i c a l Paper, Ottawa: CMHC. U.S. Department of Housing and Urban Research (1979). Urban  I n f i l l : O p p o r t u n i t i e s and C o n s t r a i n t s , Branch of P o l i c y Development and Research Working Paper, Chicago, 111.. Vancouver C i t y Planning Department. (1980). " I n t r o d u c t i o n , LIP, NIP, RRAP, Q u a r t e r l y Review, October pp. 1-11. Vancouver C i t y P l anning Department. (1983). " K i t s i l a n o : Change in the Conversion Areas", Q u a r t e r l y Review, October, pp. 6-7. Vancouver. (1973). The Layman's Home Improvement Guide:  S e c t i o n 1, Permits, Codes and C i t y H a l l ; S e c t i o n 2,  M a t e r i a l s , Q u a n t i t i e s and Cost; S e c t i o n 3, The Cost of  Borrowing to Purchase or Renovate a Home. Prepared by The Urban Design Centre: Vancouver. Vancouver. (1983). Urban Development Conference: Proceedings, Urban Development C o u n c i l , September 21-23. Vancouver. (1980). Strathcona S t o r y , Strathcona Property Owners and Tenants A s s o c i a t i o n . W.G. Anderson, Planning and Research i n a s s o c i a t i o n with L.M. K l e i n , A r c h i t e c t s , A .J. Vermeulen Q u a n t i t y Surveyors, Cl a y t o n Research A s s o c i a t e s L t d . (1980). R e s i d e n t i a l  R e h a b i l i t a t i o n and Conversion Process and Issu e s : Interim  Report: the Business of Housing Renovations i n the C i t y of  Toronto, prepared f o r the M i n i s t r y of Housing Community Renewal Branch, Government of O n t a r i o , Toronto: O n t a r i o M i n i s t r y of Housing. W i l l s o n , K. (1980). Housing Rehab i n Canada: a Review of P o l i c y Goals and Program Design. Toronto: Centre f o r Urban and Community S t u d i e s , U. of Toronto. Y a r d l e y , J.R. (1972). The Impact of Housing Code Enforcement Upon House Operating Firm Decision-Making, unpublished M.A. t h e s i s , U.B.C. 115 (1983). "The Role of HUDAC", HomeWord, April/May, p. 15. (1981). "Schooling Urban Developers i n the New "Three R's"". Canadian B u i l d i n g , A p r i l , pp. 14-17; 35. 

Cite

Citation Scheme:

        

Citations by CSL (citeproc-js)

Usage Statistics

Share

Embed

Customize your widget with the following options, then copy and paste the code below into the HTML of your page to embed this item in your website.
                        
                            <div id="ubcOpenCollectionsWidgetDisplay">
                            <script id="ubcOpenCollectionsWidget"
                            src="{[{embed.src}]}"
                            data-item="{[{embed.item}]}"
                            data-collection="{[{embed.collection}]}"
                            data-metadata="{[{embed.showMetadata}]}"
                            data-width="{[{embed.width}]}"
                            async >
                            </script>
                            </div>
                        
                    
IIIF logo Our image viewer uses the IIIF 2.0 standard. To load this item in other compatible viewers, use this url:
http://iiif.library.ubc.ca/presentation/dsp.831.1-0096493/manifest

Comment

Related Items