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Condominium conversion regulations in British Columbia Seto, Debbie W. H. 1987

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CONDOMINIUM CONVERSION REGULATIONS IN BRITISH COLUMBIA By DEBBIE W. H. SETO B.A., The University of British Columbia, 1985 A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS in THE FACULTY OF GRADUATE STUDIES The School of Community and Regional Planning We accept this thesis as conforming to the required standard The University of British Columbia October 1987 © Debbie W. H. Seto, 1987 In presenting this thesis in partial fulfilment of the requirements for an advanced degree at the University of British Columbia, I agree that the Library shall make it freely available for reference and study. I further agree that permission for extensive copying of this thesis for scholarly purposes may be granted by the head of my department or by his or her representatives. It is understood that copying or publication of this thesis for financial gain shall not be allowed without my written permission. Department of Community & R e g i o n a l P l a n n i n g The University of British Columbia 1956 Main Mall Vancouver, Canada V6T 1Y3 D a t e October 15, 1987 ABSTRACT The thesis examines the condominium conversion regulations of thirteen municipalities in the Vancouver Metropolitan area to determine how effective they are in addressing the concerns underlying conversion policies. The study begins with a review of the Canadian housing literature over the past two decades in order to identify the nature of Canadian rental housing problems, how these problems are defined and analyzed; and what policy prescriptions are offered. As part of the review of municipal conversion regulations, the legal context and the extent of legislative power for implementing conversion controls by local governments are examined. The study also examines the concept of private property r i g h t s — a fundamental philosophical issue in the policy debate over conversion regulations. Although the literature provides no consensus on the underlying causes or the appropriate policy response, i t is clear that there are serious problems with Canada's urban rental housing sector. The problems include persistently low vacancy rates, declining private rental starts and the d i f f i c u l t y experienced by a considerable portion of low- and moderate income renters in affording private rental units. The province of British Columbia provides municipalities with broad discretionary powers to regulate conversions. In spite of the potential to devise comprehensive and innovative policy responses, existing municipal conversion regulations tend to be narrow in scope, inconsistently applied and many contain serious loopholes. A closer examination of recent conversion trends in the City of Vancouver provides evidence to show that conversions continue to take place and that Vancouver's conversion regulations are aimed primarily at ensuring compensation for displaced tenants, rather than effectively protecting the city's rental housing stock. The thesis concludes that i f municipalities are to maintain a diversity of choice in housing tenure, a re-evaluation of conversion policies at both the provincial and municipal levels is warranted. Conversion policies can be improved by combining several approaches such that the strength of one compensates for the weakness of another. Further research is needed in the areas of rental housing demolitions, deconversions, f i r e and other phenomenon which contribute to the depletion of the rental stock. If wise and informed policy decisions are to be made, the detailed accounting of annual rental housing starts and completions must include those units lost through conversions and other activities. - i v -TABLE OF CONTENTS ABSTRACT i i LIST OF TABLES v i LIST OF FIGURES . . . v i i ACKNOWLEDGMENTS v i i i 1. INTRODUCTION: THE CONDOMINIUM CONCEPT 1 1.2 The Condominium Conversion Phenomenon 3 2. RENTAL MARKET PROBLEMS IN THE 1970's and 1980's: A LITERATURE REVIEW 8 2.1 Competing Theories in Rental Housing Analysis 9 2.2 Urban Rental Housing Problems in Canada....21 2.3 Condominiums in Canada: A Bittersweet Experience 31 3. THE LEGAL BACKGROUND FOR LOCAL ACTION TO CONTROL CONDOMINIUM CONVERSIONS 41 3.1 Constitutional Context of Provincial Condominium Legislation 42 3.2 History of Condominium Legislation... 45 3.3 The Development of Canadian Legislation.... 47 3.4 British Columbia's Condominium Act 51 3.5 The Evolution of Condominium Conversion Legislation in B.C 52 3.6 Condominium Conversions in B.C. and The Residential Tenancy Act 59 -v-4. CURRENT APPROACHES TO CONVERSION CONTROL: A REVIEW OF 13 MUNICIPALITIES IN METROPOLI TAN VANCOUVER 61 4.1 Summary of Survey Findings 62 4.2 Approaches to Condominium Conversion Control 68 4.3 The City of Vancouver: An Assessment of Recent Conversion Trends 87 5. PUBLIC INTERVENTION IN THE CONVERSION MARKET 98 5.1 Condominium Regulations and Property Rights 99 5.2 The Policy Objectives of Condominium Conversion Regulations 103 5.3 Toward Comprehensive and Innovative Policies 107 5.4 Conclusion: Prospects for the Future 112 BIBLIOGRAPHY 118 APPENDIX A 125 APPENDIX B 138 - v i -LIST OF TABLES Table 1 National Average Apartment Vacancy Rates Census Metropolitan Areas: 1970-1986 23 Table 2 Dwelling Starts by Intended Market Metropolitan Vancouver: 1980-1987 (May) 25 Table 3 Renter Household by Income Quintile Canada: 1967, 1973, 1977, 1981 28 Table 4 The Gap Between Financial Recovery and Market Rents, Canada: 1970-1983 30 Table 5 Comparison of Median Housing Prices: Single Detached Versus Condominium, 1979-1983 37 Table 6 Original and Current Canadian Condominium Acts 50 Table 7(A) P r o f i l l e of Municipalities in the Vancouver CMA 64 Table 7(B) Profile of Municipalities in the Vancouver CMA: Average Apartment Rents and Rental Vancancy Rates 65 Table 8 Municipal Policies on Condominium Conversions: A Review of 13 Municipalities in the Vancouver CMA 67 Table 9 Rental Vacancy Rates: 1974-1986 District of Coquitlam, District of North Vancouver and City of North Vancouver 78 Table 10 Condominium Conversions Registered in the Metropolitan Vancouver Land Registry Office: 1971-1977 89 Table 11 Condominium Conversion in Vancouver: 1979-1987 (August) 91 Table 12 Condominium Conversions in Vancouver: Approvals, Rejections, Withdrawn and Closed Files as a Percentage of Total Applications: 1979 - 1987 (Aug.) 92 Table 13 Condominium Conversions in Vancouver: Annual Rental Starts and Conversions, 1979-1986 94 -VI1-LIST OF FIGURES Figure 1 Map of Study Area. . . ACKNOWLEDGEMENTS I am deeply grateful to Dr. David Hulchanski and Mr. William T. Lane for their enthusiasm, guidance and unfailing support throughout this research. The insightful comments made by Mr. Cameron Gray on the fi n a l draft are much appreciated. A special thanks is extended to Professor Brahm Wiesman for his continued encouragement throughout my studies at the Planning School. I wish also to acknowledge the assistance so generously given to me by Peggy McBride and Bonnie Schoenberger. To Mom, Dad and Stan, thanks for your love, patience and support. Finally, I wish to thank Canada Mortagage and Housing Corporation and B.C. Telephone Company for their financial assistance which made l i f e much easier during my graduate studies and the preparation of this thesis. -1-CHAPTER 1 INTRODOCTION: THE CONDOMINIUM CONCEPT "Condominium" is a latin word meaning joint-ownership or control. In British Columbia as in Australia, the condominium form of ownership is also referred to as "strata-title". Elsewhere, the terms "horizontal property", "horizontal real property" and "apartment ownership" are also used interchangeably with "condominium" (Rosenberg, 1969: 1-10). Notwithstanding the varying terminology, the essential elements of the condominium concept are: the division of property into units to be individually owned; the provision of common elements to be vested in joint ownership, and the existence of an administrative framework to enable the owners to manage the property (Rosenberg, 1969:6). A common misconception is that "condominium" simply refers to the physical structure, rather than to the legal form of ownership. The physical form of condominium development can include apartment buildings, row houses, office buildings, 'industrial warehouses and even bare land subdivisions. Almost any kind of real - 2 -estate can be s t r a t a - t i t l e d . Indeed, the most recent addi t ion to the s t r a t a family in Canada i s boat moorage, where the water i s subdivided into s t r a t a lo ts using the foreshore and p i l i n g s to designate boundaries (Pereboom, 1983:5-6). In Canada, as in other parts of the world, condominium tenure has also been appl ied to mixed use projects . Interest ing developments have been created from the combination of r e s i d e n t i a l , r e t a i l and o f f i c e uses in one bu i ld ing . Condominium status i s establ i shed by the r eg i s t r a t i on of a s t r a t a plan in the appropriate land t i t l e o f f i c e . Reg i s t rat ion creates a condominium or s t r a ta corporat ion. L ike a business or municipal corporat ion, the s t r a ta corporat ion has a lega l existence d i s t i n c t from the ind iv idua l s making up the corporat ion. It has a l l the r i ghts and l i a b i l i t i e s of a lega l ent i ty . These include, among other things, the r i ght to acquire, hold and dispose of rea l and other property. In a condominium project , the s t r a t a corporation manages the property in the in teres t of the un i t owners. This i s achieved through the s t r a t a - counc i l , with members e lected by and from among the un i t owners. The s t r a ta corporat ion i s governed by the Condominium Aot or the appl icab le p rov inc i a l s tatute of a -3-p a r t i c u l a r p r o v i n c e . The Condominium A c t p r o v i d e s a u t h o r i t y f o r t h e e s t a b l i s h m e n t , management and a d m i n i s t r a t i o n o f s t r a t a c o r p o r a t i o n s w i t h i n t h e p r o v i n c e . S t r a t a c o r p o r a t i o n s a l s o have by-laws which o u t l i n e t h e d u t i e s o f t h e u n i t owner and t h e s t r a t a c o u n c i l . Such by-laws a r e s p e c i f i c t o t h e p a r t i c u l a r p r o j e c t and a r e d e s i g n e d t o meet t h e s p e c i a l needs o f t h e u n i t owners. The by-laws o f t h e s t r a t a p r o j e c t cannot, however, preempt o r c o n t r a v e n e t h e r e q u i r e m e n t s o f t h e p r o v i n c e ' s Condominium A c t , as t h e A c t i s deemed paramount. In g e n e r a l , b o t h t h e Condominium A c t and t h e by-laws o f t h e s t r a t a c o r p o r a t i o n a r e aimed a t s a f e g u a r d i n g t h e enjoyment and i n t e r e s t s o f t h e u n i t owners i n a condominium. 1.2 The Condominium Conversion Phenomenon I n Canada, s i g n i f i c a n t i n t e r e s t i n t h e condominium form o f r e a l p r o p e r t y ownership d e v e l o p e d d u r i n g t h e e a r l y 1970's. Not o n l y a r e new condominiums b e i n g b u i l t b u t e x i s t i n g r e n t a l b u i l d i n g s a r e b e i n g c o n v e r t e d t o condominiums. Such c o n v e r s i o n s i n v o l v e a change i n t h e l e g a l form o f t e n u r e from s i n g l e ownership t o m u l t i p l e ownership. In N o r t h America, t h e most common p r a c t i c e i s f o r t h e l a n d l o r d t o s e l l t h e p r o p e r t y t o a d e v e l o p e r s p e c i a l i z i n g i n c o n v e r s i o n who t h e n s e l l s t h e i n d i v i d u a l u n i t s . -4-While conversions may increase the opportunity for home ownership, they can also result in the removal of units from the rental stock and the displacement of tenants. To minimize the negative impacts, conversion controls have been implemented by many Canadian municipalities. Each of the provinces has different enabling legislation and regulatory requirements. In some provinces, as is the case in British Columbia, condominium conversion controls vary from municipality to municipality based on different policy approaches. The province of British Columbia has had 15 years experience with condominium conversions. In view of the persistently low vacancy rates, the shortage of affordable rental housing in major metropolitan areas, and the substantial cost involved in building and subsidizing new rental housing, i t is important and timely to exam how effective conversion regulations are in achieving their objectives. The need to identify potential, d i f f i c u l t i e s and weaknesses within existing conversion controls is readily apparent. Regulations which are narrow in scope, inconsistently applied and contain loopholes are counter-productive to the achievement of the community and planning goals. The economic and social-demographic factors influencing the demand for condominium ownership and the - 5 -c o n v e r s i o n phenomenon have a l r e a d y been w e l l documented i n Canada and even more so i n the U n i t e d S t a te s (Hami l ton, 1978; S kabur sk i s , 1984; HUD, 1980). T h i s s tudy c o n t r i b u t e s t o the e x i s t i n g l i t e r a t u r e by f o c u s i n g on condominium c o n v e r s i o n i s sue s i n the p r o v i n c e o f B r i t i s h Columbia. P o l i c y makers f a c e the c h a l l e n g e o f d e v i s i n g e f f e c t i v e condominium c o n v e r s i o n r e g u l a t i o n s which a re e q u i t a b l e t o t enan t s , i n v e s t o r s and p o t e n t i a l condominium owners a l i k e . To improve r e g u l a t i o n s i n t h e f u t u r e , we need a b e t t e r under s t and ing o f how the c u r r e n t r e g u l a t i o n s are p e r f o r m i n g and what improvements can be made. Th i s s tudy o f condominium c o n v e r s i o n i s d i v i d e d i n t o f o u r p a r t s . Chapter 2 beg ins w i th a g e n e r a l overv iew o f Canada ' s r e n t a l hous ing market. Two main bod ies o f l i t e r a t u r e a re examined t o g a i n i n s i g h t i n t o how r e n t a l hous ing problems are be ing d e f i n e d and ana l yzed , and what p o l i c y p r e s c r i p t i o n s a re o f f e r e d . The demographic, economic and p o l i t i c a l f o r c e s g i v i n g r i s e t o the s i g n i f i c a n t growth of condominiums i n the urban hous ing market and t h e c o n c u r r e n t i n c r e a s e i n conver s i on s over the pa s t decade are e x p l o r e d . Chapter 3 rev iews t h e c o n s t i t u t i o n a l con tex t o f condominium c o n v e r s i o n l e g i s l a t i o n i n Canada. T h i s i s f o l l o w e d by an overv iew o f p r o v i n c i a l e n a b l i n g s t a t u t e s , - 6 -with p a r t i c u l a r emphasis on B r i t i s h Columbia's Condominium Aot. The e v o l u t i o n of condominium c o n v e r s i o n l e g i s l a t i o n i n B.C. i s t r a c e d . As w e l l , the c u r r e n t l e g i s l a t i v e p r o v i s i o n s are examined t o determine the extent and nature of m u n i c i p a l a u t h o r i t y i n r e g u l a t i n g conversions. Chapter 4 reviews the condominium c o n v e r s i o n r e g u l a t i o n s of t h i r t e e n m u n i c i p a l i t i e s i n the M e t r o p o l i t a n Vancouver area. The study analyzes the l e g a l and p o l i c y i s s u e s r a i s e d by the v a r i o u s approaches t o c o n v e r s i o n c o n t r o l . An i n depth examination of r e c e n t c o n v e r s i o n trends i n the C i t y of Vancouver p r o v i d e s an i n d i c a t i o n of how, i n p r a c t i c e , r e g u l a t i o n s are performing. P r o p e r t y r i g h t s are i n c r e a s i n g l y p e r c e i v e d as being eroded by r e g u l a t i o n s such as condominium co n v e r s i o n c o n t r o l s because they r e s t r i c t an owner's freedom t o do as he p l e a s e s with the property. R e a c t i n g t o t h i s concern, p o l i c y makers o f t e n s e t t l e f o r c o n v e r s i o n r e g u l a t i o n s l e s s e f f e c t i v e and i n n o v a t i v e than the p u b l i c good demands. Chapter 5, t h e r e f o r e , examines the concept of p r o p e r t y r i g h t s . F i n a l l y , the p o l i c y g o a l s of c o n v e r s i o n r e g u l a t i o n s are analyzed, i n c l u d i n g an e v a l u a t i o n of the e f f e c t i v e n e s s of e x i s t i n g c o n t r o l s i n a c h i e v i n g the goals of c o n v e r s i o n r e g u l a t i o n . The study - 7 -concludes with a sample conversion policy which has the potential to address the concerns underlying conversion regulations and to balance more effectively the competing interest of tenants, developers, and purchasers. The last section provides some policy recommendations for the future. C H A P T E R 2 RENTAL MARKET PROBLEMS I N THE 1970'S AND 1980'S: A LITERATURE REVIEW The concerns associated with condominium conversion activities in Canada's major urban centers stem from their potential impact on rental housing markets. Notwithstanding the relatively high quality of housing enjoyed by many renters, the urban rental housing problem emerged as an increasingly important topic of public concern throughout the 1960's, the 1970's and into the 1980's (Selby, 1984:142). While Canadian housing markets do not a l l simultaneously face similar market conditions, there is widespread agreement among housing analysts that, almost without exception, persistently low rental vacancy rates, declining private sector rental starts (despite the low vacancy rates), and affordability problems for many tenants have plagued Canada's rental sector for at least the past two decades (Jones, 1983:3-9). These rental market problems, the distributional issues and the areas of conflict in the rental market are not peculiar to Canada,' but are of national concern in other advanced countries such as the -9-U.S., Britain and Australia (Harloe 1985; Paris, 1984). If, l e f t to i t s e l f , the residential rental market did operate ef f i c i e n t l y and equitably, there would be l i t t l e rationale for government intervention. An examination of the relevant housing literature and stati s t i c s indicate that since the mid-1970's there has been a dramatic decline in the the supply of new unsubsidized rental units. A reversal of this trend is not foreseeable. While there is a general consensus that the rental sector is not functioning properly, a lack of agreement exists on: the forces which have led to the decline in rental housing; whether the symptoms constitute market failure; and what policies are desirable and feasible in dealing with problems of the rental sector. 2.1 COMPETING THEORIES IN RENTAL HOUSING ANALYSIS An examination of the Canadian housing literature over the past ten to fifteen years reveals a broad range of theoretical perspectives on the challenges confronting the rental housing sector. Two schools of analytical thought tend to dominate current housing debates and policy discussions. One is rooted in the tradition of neo-classic welfare economics and the other in p o l i t i c a l economy. (Neo-classic welfare economics is also referred -10-to here as "conventional economics".) A number of distinguishing characteristics set neo-classic economists apart from other analysts. These are worthy of some elaboration as they are the underlying assumptions from which housing policy recommendations are formulated by such prominent Canadian economists as Lawrence Smith, George F a l l i s , Michael Goldberg and Frank Clayton. To begin with, conventional economists tend to look upon their endeavours as a science based on positive (objective) as oppose to normative modes of analysis (Fallis, 1985:117; Stanbury, 1985:Chapter 1). According to Lipsey, Sparks and Steiner, "Economics, like other sciences, is concerned with questions, statements and hypotheses that could conceivably be shown to be wrong by actual observation of the world" (Lipsey, Sparks, Steiner, 1979:20). This approach, which implies a process of deductive logic and empirical observations, is increasingly subject to widespread criticism (Kuttner, 1985:77; Thurow, 1983:6-4). In the area of housing research, for example, an arti c l e by Kuttner refers to Wassily Leontief, a nobel prize economist who became so despaired of his profession's lack of empirical research, that he ceased publishing in economic journals. A good empirist, Leontif examined articles published by The American -11-Economio Review between March 1977 to December 1981. He found, 54 percent of these articles were mathematical models without any data; another 22 percent drew s t a t i s t i c a l inferences from data generated for some other purpose; another 12 percent used analysis with no data; and only half of one percent of the articles used direct empirical analysis of data generated by the author (Kuttner, 1985:78). A clue to understanding the apparent lack of urgency in providing relevant and satisfactory empirical evidence necessary in academic and policy research can be found in an elementary economics text which states: It is not necessary to show the hypotheses to be either consistent or inconsistent with the facts tomorrow or the next day; i t is only necessary to imagine evidence that could show them to be wrong (Lipsey, Sparks, Steiner, 1979:20). A second often c r i t i c i s e d idiosyncracy of neo-classic economics is the heavy dependence on the numerous simplifying assumptions in i t s methodology, not a l l of which are made explicit. Indeed, more often than not, analytical work by neo-classic economists begin with a l i s t of highly questionable assumptions which typically include: 1. there must be no externalities; 2. there must be no public goods; 3. there must be no uncertainty; and 4. there must be no macro economic problems of inflation, unemployment, or growth (Fallis, 1985:124). -12-Olsen explains that "these crucial simplifying assumptions make i t possible to view the market for housing service as a competitive market in which a homogeneous good is sold" (Olsen, 1969:612). It is conceivable that such unrealistic assumptions may be useful in the construction of abstract economic models, but in the real world where complex social and p o l i t i c a l forces interplay, their relevance to public policy is limited. An examination of rental housing dynamics readily provides evidence whereby each of the assumptions listed above are too relevant to the analysis to simply be assumed away. For example, in an attempt to explain rental market problems, Jones notes that "other things being equal, landlords have a profit incentive to discriminate against tenants" (Jones, 1984:20). This suggests that the assumption of a perfectly competitive market, implying freedom of exit and entry by consumers and suppliers and of a market where there are no externalities, can be quickly discounted. In response to questions about their assumptions, economists maintain that their analytic framework can only be rejected i f an alternate theory of housing markets has greater explanatory power (Olsen, 1969:613). Although there is logic in Olsen's statement, the fact remains that there -13-is a very large gap between neo-classic economic theory and the reality of Canada's housing markets. This emphasizes the need for continued research, not theoretical complacency. Another characteristic associated with many neo-classic economists is their assertion that government intervention in the marketplace is justified only where i t is to "establish and enforce laws of contract, and to define property rights" (Fallis, 1985:124). Lawrence Smith, echos the view of many conventional economists in charging that housing policies such as rent control are counter-productive at best, and at worse, are apt to destroy the private sector's incentive and a b i l i t y to supply rental housing (Smith, 1983:70). This assertion i t s e l f is a normative statement, since no "sc i e n t i f i c " research can be identified to support the hypothesis that a laissez-faire rental market in Canada wi l l generate the optimal social state. As Thurow points out, the Japanese economy, which is one of the most successful among the advanced nations, is also one subjected to most government intervention, regulation and planning (Thurow, 1983:xv). Economist W.T. Stanbury (1985) agrees that the term government "intervention" for some, is an "emotionally loaded term implying that the absence of government actions in a market economy is the ideal -14-social arrangement. Therefore, any action by government amounts to "unnatural" intervention in what is held to be a smoothly functioning situation" (Stanbury, 1985:1-11). The preoccupation of conventional economists in preserving the private market leads naturally to policy prescriptions which inject cash subsidies to stimulate the market rather than those which circumvent or compete with i t . For example, shelter allowances which subsidize the income of households with housing affordability problems are favoured over the direct provision of housing by the public and non-profit sectors (Steel, 1985:viii). This i s in spite of acknowledgment by economists such as F a l l i s that, from a socio-political perspective, the public may be more willing to support government transfer programs where the money is spent directly on housing, transfers "in kind" rather than cash transfers (Fallis, 1985:138). Tobin has suggested paternalism as the major reason for society's willingness to subsidize the housing rather than the income of the poor. He noted that "such propensity to give assistance in kind rather than in cash i s most clearly evidenced by the p o l i t i c a l popularity of food stamps and housing subsidies" (Tobin, 1970:274, 275). As i s often the case with conventional economic analyses, F a l l i s (1985) uses mathematical models to show -15-theoretically how the general welfare of a given household can be improved more cheaply by using a lump-sum cash grant than using an in-kind subsidy. Without providing any empirical data to substantiate the hypothesis, however, F a l l i s asserts that his argument is "logically correct", but adds that: No general statement can be made about which system has lower costs. Therefore, [in kind] housing subsidies cannot be ruled out as instruments for income distribution. The literature has few general results, but does suggest that the burden of proof should be on those who wish to use housing subsidies as instrument of income distribution. Pending further theoretical and empirical work, there is not a strong case for the use of housing subsidies to redistribute income.... Of course, i t may be that no instrument improves things, and the the best of the best is no intervention (Fallis, 1985:126-132). To be sure, the claim to sc i e n t i f i c methods, the seeming elegance of economic models and the lack of an equally systematic alternative have ensured the long standing dominance of conventional economic theory in Canadian housing analysis. However, the continued adherence by neo-classical economists to a methodology which amounts to l i t t l e more than the "pure manipulation of assumption and inference, using mathematical logic" (Kuttner, 1985:74), and which does l i t t l e to empirically examine housing markets, is leading many housing analysts, politicians and citizens alike to reject policies rooted in neo-classic economics (Thurow, 1983; J. K. Galbraith, 1984; Applebaum & Gilderboom, 1986). -16-In more recent years, the large gap between neo-classic theory and the reality of the Canadian housing sector has prompted an increasing number of housing researchers to challenge the simplifying assumptions. A body of c r i t i c a l housing literature, authored by researchers from a variety of academic discipline (economics, p o l i t i c a l science, planning, geography, sociology), approaches housing theory from a much broader perspective and analytical framework. Relating this to Kuhn's concept of paradigm change, Galloway and Mahayni (1977) notes that "paradigm c r i s i s " occurs when an existing theory cannot satisfactorily explain or resolve real world phenomena. Following from this, attempts are made by competing schools to formulate alternative theories. Research in the "preparadigm" period (before the emergence of a competing theory) tends to be more diverse, possessing a more multi-dimensional character. This becomes possible where the f i e l d is not constrained by traditions, biases, and norms induced by the existence of a previous paradigm (Galloway, Mahayni, 1977:66). In recent years, researchers such as J. Patterson (1985), C. Paris (1984), J. D. Hulchanski (1982, 1984), and others have applied the methods of their dicipline to examine different aspects of the urban housing problem. -17-In the process, their muIti-disciplinary approach, though somewhat eclectic and often not very systematic, has contributed to the understanding of rental housing dynamics. By empirically observing and documenting actual trends and comparing the problems of different housing submarkets, p o l i t i c a l economic analyses tend to be more relevant to policy than those based on neo-classic economics. In the words of one former B.C. policy maker, " . . . i t is when you bring problems down from theory to reality, that the House i t s e l f perhaps can find some solution to the problems." (D. Barrett, Legislative Assembly of B.C., Debates. 1973:830). Notwithstanding the lack of a comprehensive theory, there is general agreement among p o l i t i c a l economists that a number of characteristics differentiate the housing market from the typical market commodity. These characteristics include both factors internal to the housing market such as heterogeneity, durability and fixed location of the housing stock, as well as macro-economic and socio-political conditions such as inflation, availability and cost of land as well as relations between landlords and tenants (Applebaum & Gilderbloom, 1986:166). Together, these internal and external factors mean that the housing market does not conform to -18-conventional economic assumptions about markets, or, more importantly, in a way that ensures adequate housing is available for those who need i t in a decent environment and at an affordable cost (Hartman, 1983:5). Even conventional economists are well aware of the market's ina b i l i t y to supply affordable housing to the nation's poor. Goldberg, for example, acknowledges that the situation may not be the "desirable state of affairs, but just that this is the way i t i s " (Goldberg, 1983:38). Similarly, in writing for the Commission of Inquiry into Residential Tenancies in 1984, economist F. Clayton notes that: It is important to recognise that there are some things that a market cannot do. The outstanding example is that the private rental market cannot solve the problem of affordability among low in-come renters... but the situation is not an instance of failure in the market and must not be treated as such... (Clayton, 1984:23). The broader issue is not whether the situation constitutes market failure or merely market "imperfections". Such differences are basically a matter of academic semantics. Rather, the real question which must be addressed by housing o f f i c i a l s and policy makers is whether the market should be the mechanism to determine, based on purely economic terms, who should or should not be supplied with housing, given that a l l persons have an equal need to be adequately housed. From empirical observations and comparative analyses made over -19-time in varying market conditions, p o l i t i c a l economists conclude that i t is the treatment of housing as a commodity rather than as a social good, and the housing industry's drive to maximize profits from every aspect of housing, which is the underlying cause of housing problems in western capitalist nations (Achtenberg & Marcuse, 1986: Chapter 1). As to the role of government in housing, p o l i t i c a l economists also hold very different viewpoints from conventional economists. Here, the government is to assume a direct role in using the financial and technical resources as well as the regulatory powers at i t s disposal to stabilize the cost of providing affordable housing and to provide housing where there is an unmet need. P o l i t i c a l economists suggest that housing reform can be achieved by removing the housing market from the profit-maximisation drive and replacing i t with a system in which housing is treated as a social good rather than a market commodity. Suggested vehicles for f a c i l i t a t i n g housing decommodification include the social production and ownership of housing, public financing of housing, social control of land and tax reform (Achtenberg & Marcuse, 1986:Chapter 1). It is clear that overly radical proposals, such as the complete decommodification of housing, are likely to -20-be too extreme to be given serious policy consideration. On the other hand, the current approach of subsidizing the private housing market, with its long history of proven inadequacies, is equally unacceptable. What is needed is a better balance between the flow of private and public investment. In arguing the case for social balance, Galbraith concludes that: Failure to keep public services in minimal relation to private production and use of goods is a cause of social disorder or impairs economic performance....By f a i l i n g to exploit the opportunity to expand public production, we are missing oppor-tunities for enjoyment which otherwise we might have (Galbraith, 1984:189). As a step towards achieving this balance in rental housing, governments must adopt a housing policy which recognizes that there are some needs which the private sector can meet and others which i t cannot meet. For those housing needs which the market cannot accommodate, non-market housing programs should be designed and implemented. These directly assist low and moderate income people (rather than investors) on a non-market basis. The current social housing programs are an example. This requires long term p o l i t i c a l committment. Housing policies and programs which are implemented in an ad hoc fashion, or only in times of c r i s i s or emergency, as has been the case in the past, are unlikely to have any lasting benefit. -21-2.2 URBAN RENTAL HOUSING PROBLEMS IN CANADA Though the theoretical debates may be d i f f i c u l t to follow, one thing remains certain. Canada's private rental market by i t s e l f cannot solve the housing problems of low-income renters. "There is no doubt that the problem exists —? that a sizable group of renter households have incomes insufficient for them to be able to afford adequate housing on the private rental market" (Clayton, 1984:23). Moreover, these problems are further exacerbated in a tight rental market where rental vacancy rates and rental starts are c r i t i c a l l y low. (i ) Vacancy Rates The major problems with Canada's rental housing sector are numerous and well documented. Perhaps the most familiar of these has been the persistently low levels of vacancy rates since the early 1970's. Table 1 provides a summary of CMHC's surveys of apartment vacancy rates for privately initiated rental buildings of six units or more in metropolitan areas. A vacancy rate of at least 3 percent is usually regarded by CMHC as the equilibrium level. Yet, the national vacancy rate has not surpassed 3 percent since the early 1970's. In Toronto, the April 1987 vacancy rate was 0.1 percent. Toronto's vacancy rate has rarely reached 1 percent over -22-T a b l e 1 National Average Apartment Vacancy Rates Census Metropolitan Areas Structures of Six Units and Over: 1970-1986 YEAR VACANCY RATE (%) YEAR VACANCY RATE (%) 1970 3.6 1978 3.2 1971 3.7 1979 2.9 1972 2.7 1980 2.2 1973 2. 1 1981 1.2 1974 1.2 1982 2. 1 1975 1.2 1983 2.7 1976 1.3 1984 2.2 1977 2.3 1985 1986 1.4 1.5 1977-1979: MURB and ARP units completed 1982-1983: Remaining MURB units and CRSP units completed Source: CMHC, Apartment Vancancy Survey, Ottawa, Various Years. -23-the past fifteen years, a trend which is common to many of Canada's major cit i e s . ( i i ) Rental Housing Starts According to conventional economic analysis, continually low vacancy rates in a rental housing market (i.e, high demand) should result in additions to supply (Clayton, 1984:16). Yet in urban centers where rental vacancy rates have been c r i t i c a l l y low, no significant new construction of private, unsubsidized rental housing has taken place. Few private rental housing units have been constructed since government rental assistance programs ended in early 1980's and the last of the assisted starts came on the market by the mid 1980's. Even as these subsidized rental units were being added to the market, however, a trend of steady decline in the level of rental starts can be observed. At the national level, private unassisted rental construction declined steadily throughout the 1970's, such that by 1980/81, private rental starts had fallen to 10% of total housing starts. This is in contrast to the late 1960 and early 1970's, when some 103,000 units of new rental housing units were constructed annually, accounting for 50 percent of total housing starts (Smith, 1983:60-63). -24-In Metropolitan Vancouver, private rental starts have fallen from 7,175 in 1981 to 309 in 1986 (see Table 2). Indeed, even when the rental vacancy rate for the Metropolitan Vancouver area increased from 0.9% in October 1986 to 2.4 in April 1987, CMHC was quick to point out that the increase in the vacancy rate "has definitely not increasesd as a result of supply" but rather, "to leakage into homeownership, stimulated by a good supply of ownership units and low interest rates" (CMHC, 1987:16). In addition to CMHC's observations, the sluggish economy and lower migration into B.C.'s lower mainland in more recent months also contributed to the temporary improvement in rental vacancy rates. CMHC projects that the seasonally adjusted vacancy rate w i l l drop to 1.5% in October 1987 (CMHC, 1987:16). One trend which is not reflected in Table 2 is that many of the "rental apartment" starts are registered as strata plans prior to occupancy. The number of units involved is unknown since CMHC categorizes housing starts by type of structure or intended use, not by legal tenure. There is, however, general agreement among municipal housing o f f i c i a l s and observers of the real estate market that a significant number of the rental apartments constructed since 1974 (when conversion controls were implemented) are strata-titled prior to -25-Table 2 Dwelling Starts by Intended Market Metropolitan Vancouver: 1980-1987 (May) Year Rental(1) Apt. Apt. Condominiums Co-op Total 1980 4851 275 309 5435 1981 7175 317 508 8000 1982 * 3249 565 780 5171 1983 * 2864 642 290 3868 1984 2787 677 790 4256 1985 1258 1585 681 3524 1986 309 3030 639 3978 1987(May) 357 1120 251 1728 * 1982 - Tenure Unknown: 577 Units 1983 - " : 67 Units (1) Rental Apartments include units which are str a t i f i e d prior to occupancy. The number of units involved is not determined by CMHC. Source: CMHC, B.C. Regional Office, (Helmut Pastrick) -26-occupancy. Owner/developers thus have the option of selling the rental units without municipal approval (Baxter, 1987; Pastrick, 1987). As present statistics do not differentiate between rental units which are registered as rentals and those which are condominiums, there is much uncertainty as to the potential impact on the rental market i f a significant number of units shifted from rental to ownership. In examining the federal rental supply programs of the 1970's and 1980's, for example, Selby notes that many of the units produced were registered as condominiums which means they are not guaranteed to remain in the rental market (Selby, 1985:182). Similarly, A. McAfee of the Vancouver Planning Department, questions "how long [government assisted] units w i l l remain rental once various taxation incentives are reduced" (McAfee, cited in Dowler, 1983:45). With 122 791, 195 000, and 21 000 units produced through the ARP, MURB and CRSP programs respectively in Canada over the past decade and a half (Hulchanski, 1982:17; Dowler, 1983:44; CMHC, 1984:24), a significant shift of rental units to ownership wi l l have a detrimental effect on the already tight rental housing markets. -27-Most neo-classical economists are singling out over-regulation and increased uncertainty as the primary causes of rental problems (Clayton, 1984; Smith, 1977). In contrast, Harloe (1985), in his comparative study of rental housing markets in the United States and Europe, concluded that: The decline in private rented housing is not confined, as some allege, to countries with 'anti-landlord' policies such as s t r i c t rent controls. While such policies have of course had their impact the reasons for decline are more complex and deep rooted and in some respects pre-date the f i r s t imposition of controls. Moreover decline has continued and even accelerated when controls have been eased or l i f t e d altogether (Harloe, 1985:293). Harloe's observations can be extended to the Canadian experience where the average national rental vacancy rates dropped dramatically from 3.7% in 1971 to 1.2 in 1974. This was before rent controls were adopted by most provinces in 1975 as part of Canada's wage and price control program. B.C. was the exception, as rent control was implemented earlier in 1974. Nevertheless, an argument can be made that the factors which contribute to the decline of the rental housing sector are, as Harloe points out, much more complex than some analysts may suggest. In B.C., for example, rent regulation has been dismantled since 1983, home ownership programs have also been allowed to expire, and subsidized public and non-profit housing supply has not increased. Yet, -28-neither the level of rental housing starts nor the rental vacancy rate has seen any significant improvement. In contrast, they have continued to remain at their present c r i t i c a l l y low levels. A primary reason for the failure of the private rental supply sector to respond is that the rental market suffers from becoming increasingly dominated by households who cannot afford to become home owners. The renter population in 1967 was divided almost equally between each of the income quintiles (with the exception being the highest income quintile). By 1982, however, the number of higher income tenants (those with incomes in the fourth and f i f t h quintiles) has declined while the number of lower income tenants (those with incomes in the f i r s t and second quintiles) has increased (See Table 3). Sternlieb and Hughes (1980) also attribute the weakness of the U.S. rental market in part to the systematic "cream skimming" of relatively affluent male headed households from the rental market to home ownership. Furthermore, the persistent gap which exists between market rent and financial recovery rent in Canada (see Table 4), is suggested by many observers to be linked to the relatively low incomes earned by a sizeable number of renters (Jones, 1983:9). -29-Table 3 Renter Household By Income Quintile Canada, 1967, 1973, 1977, 1981 Income Quintile 1967 1973 1977 1981 Change 1967-81 Lowest Quintile 20. 4 26. 6 29. 1 31. 1 + 10. 7 Second Quintile 23. 9 24. 7 25. 9 26. 0 + 2. 1 Middle Quintile 22. 2 22. 6 20. 4 20. 3 - 1. 9 Fourth Quintile 19. 2 16. 1 14. 8 13. 6 - 5. 6 Highest Quintile 14. 3 10. 0 9. 8 9. 0 - 5. 3 Total 100. , 0 100. . 0 100. 0 100. 0 Source: Statistics Canada (1983) Household F a c i l i t i e s  by Income and Other Characteristics. Ottawa, Catalogue 13-567. -30-Table 4 The Gap Between Financial Recovery And Market; Rents Canada, 1970-1983 Monthly Payment Average Priced Average Nominal Size of Year NHA Apartment * Monthly Rent ** Gap 1970 $ 96. 20 $116. 00 -17. 1 1971 92. 00 120. 00 -23. 3 1972 97. 70 122. 00 -19. 9 1973 110. 90 127. 20 -12. 8 1974 124. 30 138. 00 - 9. 9 1975 174. 80 153. 70 13. 7 1976 198. 80 175. 00 13. 7 1977 223. 90 190. 40 17. 6 1978 235. 80 204. 00 15. 6 1979 268. 40 224. 80 19. 4 1980 358. 50 248. 00 44. 6 1981 528. 90 272. 90 93. 8 1982 506. 70 310. 00 63. 5 1983 473. 30 337. 90 40. 1 * Includes construction, land and soft costs minus 25% equity. ** Includes u t i l i t i e s . Source: Clayton Research Associates Limited (1984) Rental Housing Under Rent Control and  Decontrol Scenarios. 1985-1991. Toronto: Canadian Home Builders' Association, Appendix A, Table A-26. -31-( i i i ) Problems of Affordability Despite the persistent gap between market rent and financial recovery rent, many low- and moderate-income households cannot afford accommodation in the private rental sector. In Canada and the U.S., i t is generally accepted that an expenditure on housing in access of 25 to 30 per cent of household income means that the household cannot afford other essentials. Using this measure, CMHC estimated that as of 1980, approximately 18% of a l l renter households were in the "core housing need" category (CMHC, 1983:41). This is equivalent to approximately 520,000 tenant households who were unable to exercise effective demand for adequate and suitable housing at 30 per cent or less of their income. The use of the "core housing need" approach, which accounts for only low-income households that spend more than 30% of household income on rent, avoids the problem of households with adequate income, but who choose to spend a higher portion of their income on rent. 2.3 CONDOMINIUMS IN CANADA: A BITTERSWEET EXPERIENCE Since its 1966 introduction into the Canadian housing market, condominium tenure has become a significant force in the larger urban housing markets. By the early 1970's, i t became increasingly clear that -32-c o n d o m i n i u m s h a d t h e " p o t e n t i a l t o b e a v i a b l e h o u s i n g o p t i o n f o r n o n - c a p t i v e r e n t e r h o u s e h o l d s , a s w e l l a s a n a p p e a l i n g a l t e r n a t i v e f o r e x i s t i n g home o w n e r s . P r i o r t o t h e w i d e s p r e a d p u b l i c a c c e p t a n c e o f t h e c o n d o m i n i u m f o r m o f o w n e r s h i p , r e n t i n g was t h e o n l y t e n u r e o p t i o n f o r many h o u s e h o l d s a t v a r y i n g s t a g e s o f t h e l i f e c y c l e . F o r t h o s e who w e r e y o u n g a n d u p w a r d l y m o b i l e , r e n t a l h o u s i n g was t h e s t e p p i n g s t o n e t o t h e d e t a c h e d s i n g l e f a m i l y h o u s e . F o r t h e l o w e r i n c o m e h o u s e h o l d s , r e n t a l h o u s i n g was t h e o n l y a l t e r n a t i v e t o s t i g m a t i s e d p u b l i c h o u s i n g . S t i l l f o r o t h e r s who c o u l d a f f o r d t h e p u r c h a s e o f a t r a d i t i o n a l s i n g l e f a m i l y h o u s e , r e n t i n g was a d i s c r e t i o n a r y t e n u r e a n d l i f e s t y l e c h o i c e . The 1984 N a t i o n a l C o n d o m i n i u m S t u d y c o n d u c t e d b y S k a b u r s k i s C o n s u l t a n t s f o r CMHC f o u n d t h a t t h e c o n d o m i n i u m m a r k e t i n C a n a d a h a s d e v e l o p e d t w o d i s t i n c t s u b m a r k e t s . The f i r s t i s c o m p o s e d o f y o u n g e r h o u s e h o l d s who b u y c o n d o m i n i u m s b e c a u s e t h e y c a n n o t y e t a f f o r d s i n g l e d e t a c h e d h o u s e s . T h e s e h o u s e h o l d s t e n d t o b e r e n t e r s b e f o r e m o v i n g t o t h e i r c o n d o m i n i u m s . The s e c o n d i s c o m p o s e d o f o l d e r a n d s m a l l e r , " e m p t y n e s t " h o u s e h o l d s t h a t p r e v i o u s l y l i v e d i n s i n g l e f a m i l y d e t a c h e d h o u s i n g a n d who moved i n t o a c o n d o m i n i u m t o g a i n m o r e s e c u r i t y a n d f r e e d o m f r o m m a i n t e n a c e a n d u p k e e p ( S k a b u r s k i s , 1 9 8 4 : 4 ) . -33-The introduction of condominiums into the Canadian housing market in the late 1960's and its subsequent growth in acceptance by the public and mortagage lenders throughout the 1970's proved most timely for both condominium developers and potential purchasers. Beginning in the mid 1960's, a series of government programs were introduced to encourage home ownership among supposedly low, but in reality, moderate income households. Following minor measures between 1965 and 1969 designed to ease the financing of housing, the federal government initiated the Assisted Home-Ownership Program (AHOP) in 1970. It was implemented on an experimental basis in 1970-71 and gained o f f i c i a l program status in the 1973 amendment to the National Housing Act. AHOP offered geared-to-income loans at 2% to households who were otherwise unable to afford home ownership but whose income rendered them ineligible for public housing. AHOP was just the beginning, however, of a whole alphabet soup of home ownership programs introduced by the provincial and federal governments over the two decades between 1964 and 1984. These programs generally shifted the demand for owner occupied housing forward in time by encouraging people to become home owners earlier than they otherwise would have. Among the federal programs were: the 1972 tax exemption of capital gains -34-on principal dwelling; the 1974-85 Registered Home-Ownership Saving Plan (RHOSP); the 1982 Canada Home ownership Stimulation Plan (CHOSP); the 1982 Canada Mortgage Renewal Plan; and the 1984 Mortgage Rate Protection Plan (MRPP). While this l i s t of programs is far from complete, i t does give some indication as to the scope of government assistance in the home ownership sector throughout the past ten to fifteen years. According to Dowler's study of housing related tax expenditures, the combination of direct government spending programs and tax exemption programs, $5.8 b i l l i o n was allocated to home ownership programs in 1980 alone (Dowler, 1983:110). In addition to the emphasis on home ownership, several now familiar demographic trends have contributed to the demand for condominiums. Along with several other countries, Canada has been experiencing fundamental changes in its population and social structure (Miron, 1983:1). For one, the number of new households has been growing at a rapid rate over the last decade: 19% during 1971-1976, 16% during 1976-81. The coming of age by the baby-boom generation is the main element fuelling the rapid increase in household formation, which at an average annual growth rate of 3.7% during the 1970's, is almost three times faster than the nation's population -35-growth. But while the number of households has been increasing in Canada, the average household size has been shrinking. In 1961, when the postwar baby boom had just reached i t ' s peak, there was an average of 4.0 persons per household. By 1981, the average had dropped to 2.9 persons per household (Statistics Canada, Cat. No. 13-567). The increase in smaller households has been the result of a number of trends including an increase in the number of single person households, declining f i r s t marriage rates, rising divorce rates and declining remarriage rates. Less well documented, but also widely noted, has been the emergence of alternative lifestyles including cohabitation, gay marriage, and lone and communal parenting (Miron, 1983:1). In addition, there has been an increase in the percentage of persons over 55 years of age. Not only are those born in the early years of the baby boom era now reaching near elderly age, but they are generally in better health due to the much improved health care system. To this end, increasing number of one and two person, "empty-nest" households have contributed significantly to the overall decrease in household size. Changing social trends in recent years include a new li f e s t y l e with more leisure time, a preference for low maintenance dwellings with amenities, and a demand for -36-urban residential locations (Cassasza, 1982:8). In sum, these changing social, demographic and cultural forces have made condominiums a desirable housing option. In B.C., the f i r s t strata plan was registered in 1968. While i n i t i a l development of condominiums was slow, the pace rapidly increased to the point where, by November 1977, there were 2,340 strata plans with 46,411 units registered in the province (Hamilton, 1978:8). Indeed, observers of the real estate market point to the 1973 real estate boom as the turning point for the widespread acceptance of condominiums in the housing market. "At that time [1973], the owner-occupied units emerged as an alternative to the then high real estate prices of single family dwellings, both as a form of accommodation and as a stepping stone to a single family dwelling. The condominium market, as well as the general residential real estate market, went through a "soft" period during 1974 and 1975, but rebounded during the later 1970's (Real Estate Board of Greater Vancouver, 1983:23). The success of condominiums in Canadian urban housing markets has not, however, taken place without negative consequences for the rental sector. While i t is clear that the sudden and rapid decline of the private rental sector after 1973 cannot be solely attributed to the acceptance of condominiums as a desirable ownership option, there is substantial evidence suggesting that -37-condominiums have contributed to some significant degree to the problems of the rental housing sector. Inflation, the rising cost of new construction, rising interest rates, and increasing land and energy-costs have generally made the purchase of traditional single detached housing unaffordable to many who wish to take advantage of the investment opportunities and the security of tenure provided by home ownership. For many households, therefore, the price differential of condominiums relative to single detached units in a given housing market (see Table 5), has rendered condominiums the only practical possibility for acquiring home ownership. The opportunity provided by condominiums to households who are financially capable of purchasing a unit means that the rental sector is being l e f t with the responsibility of housing those least able to afford housing appropriate to their needs—the nation's low income households. As Roistacher (1980) notes, "The rent lag, which reduces the incentive to build or operate rental housing, is a reflection of the limited rent-paying capacity of renter households, who are increasingly likely to be elderly, minority, or female-headed households with low incomes" (Roistacher, 1980:7). -38-Table 5 Comparison of Median Housing Prices Single Detached Vs. Condominium 1979-1986 Van. East Condo as % of SFD Van. West Condo as % of SFD 1979 SFD Condo $ 55, 30, 312 588 55% $ 100, 47, 875 900 47% 1980 SFD Condo 69, 40, 500 250 58% 144, 65, 500 325 45% 1981 SFD Condo 136, 77, 000 875 57% 249, 132, 225 750 53% 1982 SFD Condo 98, 58, 825 425 59% 171, 116, 250 875 68% 1983 SFD Condo 99, 28, 500 475 58% 186, 107, 250 400 57% 1984 SFD Condo 101, 52, 375 520 52% 192, 109, 187 250 57% 1985 SFD Condo 102, 52, 875 625 51% 189, 114, 750 250 60% 1986 SFD Condo 104, 54, 500 125 52% 218, 120, 187 375 55% Source: Real Estate Board of Greater Vancouver, Real Estate Trends in Metropolitan Vancouver. (1979-1986) -39-Since the 1970's, rising operating costs accompanied by lagging rents have made the private rental market's task of generating sufficient cash flow and a profitable return on rental investments extremely d i f f i c u l t . Numerous tax benefits enjoyed by rental investors a l l but. disappeared with the restructuring of the tax system in 1972 (Smith, 1983:60). Owners of many rental properties then found themselves in the middle of a cost-rent squeeze. From the point of view of housing consumers, the changes to the tax system which imposed a tax on a l l capital gains except a principal residence significantly increased the relative attractiveness of home ownership. From the perspective of rental investors, however, much of the incentive for selecting rental housing over other potential investments disappeared. The capital tax exemptions accorded to self-owned condominiums and single family dwellings effectively "creamed" the rental market of its higher income tenants. Rents, therefore, could not go up without further driving wealthier tenants into home ownership. A l l of the largest development corporations l e f t the residential rental sector altogether in favour of more profitable commercial and industrial development. Others remained in multiple unit -40-residential development but concentrated on producing new condominiums and converting existing rental buildings to condominium units for sale to prospective home owners (Ricketts, 1976:S5). More often than not, a group of investors would purchase an existing building from the owner giving the latter a profit. The condominium developers can afford to give the profit because i t is true in condominium conversions that the sum of the parts is greater than the original whole (Lane, 1975:632). That is, given the poor economics of rental investment, the individual selling price for each unit as a condominium when added together, would come to more than the selling price for the total building as a rental investment. Thus began the condominium conversion boom. -41-C H A P T E E 3 T H E L E G A L B A C K G R O U N D F O R L O C A L A C T I O N T O C O N T R O L C O N D O M I N I U M C O N V E R S I O N S Problems with the rental housing sector have triggered a variety of government responses. Comprehensive landlord tenant legislation, rent control and condominium conversion control are but a few examples of the regulatory measures which have been implemented in the last two decades aimed at preserving the existing rental stock and protecting tenants. While most involved would agree that provisions aimed at maintaining a socially and economically healthy community are desirable and necessary ingredients, regulations such as those governing condominium conversions have significant impacts, both intended and unintended, on tenants, prospective condominium purchasers, rental owners/ investors, and the community at large. Consequently, these regulations are of interest not only to lawyers and community planners, but also to a sizable portion of the general public. - 4 2 -The provinces have different regulatory requirements. In some jurisdictions such as B.C., these vary from municipality to municipality. This chapter begins by reviewing the constitutional context of condominium legislation, followed by an overview of condominium statutes in Canada. Particular attention is given to the Condominium Aot of British Colubia, which replaced the Strata-Titles Act, as i t is the enabling legislation for the control of condominium conversions by municipalities. The historical evolution of condominium conversion regulations in B.C. is also examined to gain insight into the socio-political and housing conditions which led to the enactment of this legislation. 3.1 CONSTITUTIONAL CONTEXT OF PROVINCIAL CONDOMINIUM LEGISLATION The Constitution Aot. 1867 (formerly the British North American Act 1867), divides legislative power in Canada between the provinces (Section 92) and the federal Parliament (Section 91). In general, the provincial legislatures have jurisdiction over local matters, such as education, property, and c i v i l rights. The federal government has jurisdiction over matters of national concern, for example, banking, trade and commerce, national defence, postal services, etc. -43-Particularly noteworthy in the discussion of land use and development control is the authority granted to the provinces by section 92 of the Constitution Act, 1867: 92(5) The Management and Sale of the Public Lands belonging to the Province and the Timber and Wood thereon; 92(8) Municipal Institutions in the Province; 92(13) Property and C i v i l Rights in the Province; 92(15) The imposition of punishment by fine, penalty or inprisonment for the enforcing any law of the Province made in relation to any matter coming within any of the Classes of Subject enumerated in this section; 92(16) Generally a l l matters of a merely local or private nature in the Province. Together, these powers granted by the Constitution Act. give the provinces nearly limitless authority to regulate land use within their boundaries. This same authority, when delegated by the provinces to municipalities provides the legal basis for most municipal land use planning activities. As a creation of the province [Section 92(8)], however, a municipality can only exercise those powers delegated to i t by the provincial legislature. The responsibilities and powers of B.C. municipalities are defined in their incorporating statutes ( i f any) and the Municipal Act, which applies to a l l municipalities except Vancouver. The Vancouver Charter. (SBC 1953, C.55), is -44-th e main statute applying to Vancouver. The legal right of the Vancouver Council to make by-laws and to delegate the powers of discretion in zoning matters come from the Charter, in particular, from Sections 565 and 565A. The authority controlling land use in a municipality is the municipal council. The Vancouver Charter gives the council power, among other things, to create o f f i c i a l community plans (S. 562), enact zoning bylaws (S. 565) and to establish building regulations (S. 306). The Municipal Act provides the other municipalities with similar powers. In unorganised areas, the Municipal Act also provides the regional board with comparable powers to undertake land use planning and control. It should be noted that the Municipal Act, the Van c ouve r Ch art e r. and the Condominium Act of B.C., are a l l Acts of Parliament. These, and other such Acts are the enabling legislation by which the provincial government delegates its law making powers to various subsidiary bodies and agencies within the province. The distinction which can be made, however, between the Condominium Act and the other two statutes is that the former is legislation applying to a l l municipalities in the province but limited to a particular subject, while the Municipal Act and the Vancouver Charter are "local" -45-or "private" Acts. Local Acts apply only to specific municipalities and cover matters peculiar to these areas. These local Acts in turn are of two varieties. The Vancouver Charter, for example, provides for the general municipal government of individual municipalities which do not come under the general municipal act of the province. In some instances, the individual city "charters" were enacted before there was a general municipal act or when there were not enough cit i e s to justify general legislation (Crawford, 1954:48). The authority of municipalities in the province to regulate condominium conversions is derived from the Condominium Act. This authority is complete, and does not require additional power from other legislative acts before such authority is exercised. 3 . 2 H I S T O H Y O F C O N D O M I N I U M L E G I S L A T I O N There is nothing novel about the condominium concept. Babylonian documents going as far back as 2000 B.C. show evidence that there was provision for separate ownership of different levels in a structure (Rosenberg, 1976:4). The word condominium originated in Roman Law. Translated from Latin, i t implies a form of co-ownership or control (Rosenberg, 1969:Chapter 1). While reference to condominiums as a property owning arrangement is found -46-in Roman records, more common application of the condominium concept did not occur until the Middle Ages, when space shortages within the walled cities meant that for many a condominium was the only possible way of obtaining t i t l e to real property. In Germany, as far back as the 12th century, ownership of floors, even rooms, was vested in different persons (Habitat, n.d.:2). It was no(t until the enactment of the Code Napoleon in 1804, which represents the most significant step toward a modern version of condominium law, that condominiums became more common in France. Article 664 of the code provided for individual ownership of a building, or part of i t , on land which did not belong to him. The Article dealt with such concerns as maintenance and repairs, though i t did not provide extensive regulation for the wide range of complex relationships involved in condominium living. Nevertheless, i t s very inclusion in the law meant the concept of divided ownership would, by virtue of the Code's authority and influence, ensure it s consideration in many parts of the world (Habitat, n.d. :2). Significant advancements in modern condominium legislation were made during the post-war years. High land costs and pressing ownership demands resulted in c r i t i c a l housing situations after World War I. Similar -47-housing conditions continued after World War II. With reduced construction output, high living costs and exceptionally high demand for housing, an active condominium market developed in many European ci t i e s . In the Western Hemisphere, Brazil was the f i r s t , in 1928, to adopt condominium legislation. Here too, the development of the legislation had much to do with very rapid urban growth. Puerto Rico passed enabling legislation in 1951. The high demand for commercial, industrial and agricultural land meant that land for housing was scarce. Rapid population growth created a strong demand and need for condominium ownership. The Act of Puerto Rico is of particular importance since i t is the legislation on which much of the early American statutes were modelled, including the Federal Housing Authority's Model Act which, in turn, was used as a model for some of the Canadian Statutes (Skaburskis, 1984:4). 3 . 3 T H E D E V E L O P M E N T O F C A N A D I A N L E G I S L A T I O N Although the condominium concept has had a long history elsewhere in the world, i t is relatively new in Canada. The f i r s t condominium statutes were adopted by the British Columbia and Alberta legislatures in 1966. By November of 1968, four more provinces had passed condominium statutes—Saskatchewan, Manitoba, Ontario and -48-Nova Scotia and B i l l s had been introduced in the l e g i s l a t u r e s of Quebec and the Yukon T e r r i t o r y (Rosenberg, 1969, Chapter 1:4). The origins of the enabling acts in each province are diverse, in s p i t e the f a c t they were introduced soon af t e r one another. Modelled after the Strata T i t l e s Act of New South Wales, the o r i g i n a l B r i t i s h Columbia, Alberta and Saskatchewan condominium acts were very simi l a r . Ontario's and Manitoba's l e g i s l a t i o n are very similar, but they are quite d i f f e r e n t from those of other provinces. In some respects, they resemble American l e g i s l a t i o n , and in others they contained provisions that were quite unique. The Nova Scotia Act i s in many respects s i m i l a r to the American F.H.A. Model Act (Rosenberg, 1969, Chapter 1:5). Varying origins notwithstanding, a l l the Acts outlined a process whereby the l e g i s l a t i o n may be put into e f f e c t by the r e g i s t r a t i o n of s p e c i f i e d documents; a l l provided for the d i v i s i o n of property into i n d i v i d u a l parts that are owned in fee simple and other parts (usually the balance) that are owned in common, and a l l enabled the automatic formation of the condominium corporation or society upon r e g i s t r a t i o n of the s t r a t a plan (Rosenberg, 1969:1-5). -49-However, even with enabling legislation in place, the i n i t i a l development of condominiums was slow. There were many reasons for this, not the least of which was that the concept, being so new to North America, is a d i f f i c u l t one to appreciate and understand. Also, between the years 1967 and 1968, Canada experienced an extreme shortage of mortgage financing. Since the lending institutions were able to be selective, they preferred to take securities they were familiar with and had l i t t l e reason to venture into this new and untried housing arrangement (Rosenberg, 1969:1-6). Today, two decades after the f i r s t condominium act was introduced in Canada, the concept has gained immense public acceptance. In time, as each province reviewed the opportunities and problems associated with condominiums, important amendments were made to their legislation. Consequently, the differences between the various provincial statutes have greatly diminished. The provincial acts now have much in common, having borrowed the best features from each other. The original and current C a n a d i a n condominium acts are summarized in Table 6 (Skaburskis, 1984:5), -50-Table 6 Original and Current Canadian Condominium Acts Province Original Act Current Act British The Strata Titles Act Condominium Act Columbia S. B.C. 1966, c. 46 R.S.B.C, 1979, c. 61 Alberta The Condominium The Condominium Property Act Property Act S.A., 1966, c-19 R.S. A., 1980, c-22 Saskatchewan The Condominium Act Condominium S.S., 1968, C.14 Property Act R.S.S. 1978 c-26 Manitoba Condominium Act Condominium Act S.M. , 1968, c.10 R.S.M., 1970, c. 170 Ontario The Condominium Act Condominium Act S.O., 1967, c.12 R.S.O., 1980, c. 84 Quebec An Act Respecting Co- C i v i l Code, Ownership of Immoveables Tit l e II ch. 3, S.Q., 1969, c. 76 S. 1, Para, 441-442 New Brunswick Condominium Property Act Condominium S.N.B., 1969, c. 4 Property R. S.N.B. , 1973, c-16 Nova Scotia Condominium Property Act Condominium S.N.S., 1968, c.4 Property Act, S.N.S., 1970-71, Ch. 12 Prince Edward Condominium Act Condominium Act Island S.P.E.I., 1977, c.6 S.P.E.I. 1977, — • o N ewf ound1and The Condominium Act C . D Condominium Act R.S. Nfld., 1970, c.57 1970, c. 57 Territories Condominium Ordinance Condominium 1969 (3rd), Ordinance c-12 (R.O.Y.T.) c. 2 (O.N.W.T.) Source: A. Skaburskis & Associates, National Condominium Market Study Working Paper 2., 1984, p.5. -51-3 . 4 BRITISH COLUMBIA'S CONDOMINIUM ACT The Strata Titles Aet. (chapter 46 of the Statutes of British Columbia), came into effect on September 1st, 1966. Although extensive legislation was available elsewhere in North America, B.C. modelled its statute after the Strata-Titles Act of New South Wales, Australia. It is said that the so l i c i t o r engaged by the B.C. Government to draft the legislation in 1965 happened to be vacationing in Australia and while there, picked up a copy of the New South Wales Act and brought i t back to Canada. With some minor changes, the then Ministry of Housing introduced the Act which was essentially a copy of the Australian legislation (Fanaken, 1984:viii). For many years thereafter, B.C.'s legislation was referred to as the Strata-Titles Act while elsewhere in North America the legislation was referred to as "condominium". The B.C. legislation was renamed the Condominium Aot in May, 1980 in accordance with the government's desire to simplify the language of a l l statutes. The language, presentation and style of the legislation changed. However, the contents of the Act s t i l l refer to the entities created by the registration of condominium projects as strata corporations. The current Condominium Act of B.C. is essentially a mixture - 5 2 -of the Australian Act with Canadian and American improvements (Fanaken, 1984:viii). In general, B.C.'s Condominium Act provides the framework for the creation of strata lots, the management of the strata corporation by its council and the responsibility of owner-developers to disclose relevant facts in marketing the development. Rather than providing a detailed description of the Act, the remainder of this chapter is focused on the sections pertaining to condominium conversions. 3.5 THE EVOLUTION OF CONDOMINIUM CONVERSION LEGISLATION IN B.C. During 1973, B.C. had c r i t i c a l l y low rental vacancy rates (0.4% in Vancouver and 0.3% in Victoria) and rapidly rising prices for owner-occupied housing. At the same time, the federal government ended major subsidy programs for rental housing investment. These and related conditions created housing market conditions in which existing rental housing was being converted to condominiums at a rapid and unprecedented rate. A story in the Vancouver Sun in June 1973 reported: With the present fever among developers and apartment block owners to convert, and based on requests for information on con-versions coming into the city, he [Alderman Setty Pendakur] estimated up to 4000 of these [rental apartment units] would be -53-converted in the near future unless the city intervened (Vancouver Sun. June 28, 1973). This and other newspaper articles of the time documented the considerable public controversy which had arisen—with graphic depictions of senior citizens being asked to buy suites, some of whom had lived in their units for more than 20 years—or face eviction (Vancouver Sun. May 30, June 6, 1973). The f i r s t significant acknowledgement of the conversion issue in the provincial legislature was made in February, 1973. Allen Williams, the Member of the Legislative Assembly (MLA) for the constituency of West Vancouver and Howe Sound, raised the issue of the conversion of an apartment building in West Vancouver known as Esquimalt Towers. He pointed out that the tenants, mostly elderly retired citizens were advised in October 1972 that the building had changed ownership. The events which followed were summarized by Williams: On February 12 of this year [1973] the tenants of the building received a letter advising that they had to purchase their suites. The very next day sales agents for the owners visited each of the tenants with their sale sheets at the ready and were prepared to s i t down and discuss the basis upon which purchases could be made....On February 17, five days after the f i r s t letter, each of the tenants received a formal notice to vacate. They are now l e f t without any opportunity except to buy or find other accommodation (Williams, Legislative Assembly of British Columbia, Debates 1973:711). - 5 4 -Williams then went on to explain that in a market where the vacancy rate is less than one half of one percent, displaced tenants are unlikely to find alternative accommodation of equal quality or at equal rent. In a letter written by an elderly citizen living in the building, the MLA was told: "some of the elderly tenants, in sheer desperation at the thought of losing what they thought was security, are considering purchasing their suites. At ages of 70 and 80, who wants a mortgage of $25,000 or more at 9 3/4 percent payable over 30 years? That's the deal that's being offered..." (Williams, Legislative Assemby of B.C., Debates. 1973:711) Several suggestions were made by Mr. Williams as to how the government can provide some r e l i e f for the situation described. These included prohibiting conversions for 12 months so that government can investigate the matter; amending the Landlord and Tenant  Act (now Residential Tenancy Act), to ensure that rental increases can be properly reviewed and requiring at least 6 months notice in cases where conversion is permitted. No committment, however, was made by the Legislature at this meeting to take any action. Four days later, Mr. Williams continued to press for government action. This time, he informed the Premier that there was "not one, -55-not two, not three, but four apartment buildings in West Vancouver [alone] facing similar circumstances as Esquimalt Towers" (Williams, Legislative Assembly of B.C., Debates. 1973:828). At this time, a very eloquent speech was made by the Premier of the Province, Dave Barrett. While acknowleging that there have been "unfortunate abuses of the Strata Titles Act," the Premier expressed concern over the implication of government interference on private property rights and on private capital. Selections from Barrett's speech is presented below as i t provides a good example of the p o l i t i c a l philosophy which generally dominates land use and development controls in the Province. What you are talking about, Mr. Member, is free enterprise. Let's make that clear... The social consequences of that kind of free enterprise are the punishment of people, because they have been confronted under the law with that choice — "buy or get out." You are suggesting that the government perhaps has a responsibility to interfere with private rights to protect the loss of rights of other people.... But i f we brought in a b i l l to say, "You can't do with your property, even though i t ' s your private property...What would be the response? What would be the response in the media? "The heavy hand of state socialism is curtailing investment and the construction of housing. The heavy hand of state socialism is going to interfere..." (Barrett, Legislative Assembly of B.C., Debates. 1973:830). - 5 6 -Having made his position known, Mr. Barrett then suggested that one method to deal with condominium conversions is to enact legislation that would zone any apartment complex, before i t was built, into either being a rental accommodation or st r a t a - t i t l e accommodation. Through zoning laws, he suggested, a developer would be required to give a covenant stating that a rental building w i l l remain rental. The Premier concluded by saying that he did not have the answer, and again questioned whether the state had the right to interfere with private capital flow by demanding that zoning be established on the basis described above. It is one thing to pose the problem within our economic system; i t is another thing to pose the solution. Once you assault the myths of North America that the private -\ dollar has a priority right over social values, then you get into the crunch (Barrett, Legislative Assembly of B.C., Debates. 1973:831). These concerns notwithstanding, the Legislature was again urged to take immediate action to deal with condominium conversions on March 2, 1973. An apartment building in Victoria, largely occupied by older, fixed income tenants, was being converted and the situation, as told by one MLA, was not unlike that of Esquimalt Towers. This time, the Attorney General, Mr. McDonald, announced that his department was ready to take concrete action toward enacting legislation by amending both the Landlord and Tenant Aot and the Strata Titles Act. These amendments would be aimed at ensuring adequate notice and moving expense be accorded to tenants in buildings proposed for conversion and to give municipalities some control over conversions. The concerned members of the House were also assured that legislation would be passed "reasonably soon" warning also: We might bear in mind, whether in terms of expediting b i l l s or whether in terms of making i t clear to these people that the government is, ready to proceed in terms of protecting tenants in these conversion situations, i f there is any way in which retroactive legislation would be f a i r — bearing in mind that we're now making a ministerial statement that we're concerned about i t — they, from this point on, should be careful that they protect the rights of those tenants in the meantime (MacDonald, Legislative Assembly of B.C., Debates. 1973:956). B i l l 124, introduced on March 20, 1973 to amend the Strata-Titles Act, was given a l l three readings by April 12. The Landlord and Tenancy Act was also amended. The amendment to the Strata-Titles Act provided the following authority: 1 Upon the conversion into strata lots of a previously occupied building, or of a building in respect of which no building permit was issued on the basis that the building was to be included in a strata plan, the approving authority may, notwithstanding any other Act, approve the strata plan, or refuse to approve i t , or approve i t subject to such terms and conditions as the approving authority considers appropriate, and its decision is f i n a l (Strata-Titles Act, S.B.C. -58-1974, ch. 89, Section 5(1)). This gave municipalities extensive control over conversion proposals, so much so that they could completely halt a l l conversions i f they wished. Amendments to the Landlord and Tenant Act, which received third reading on April 17, provided for four months notice and moving expenses for displaced tenants. A detailed examination of Section 9 of the Condominium Act, which is the current legislation pertaining to condominium conversions follows. With a few changes in the wording, the present Section 9(1) is basically the equivalent of Section 5(1) of the Strata-Titles Act, giving municipalities the authority to decide whether to allow conversion of previously occupied buildings. Section 9(4) provides that the "approving authority" in a municipality is the municipal council. Section 9(1) is very broad. Section 9(2) narrows the conditions of approval by requiring that no approval be granted unless the building "substantially complies" with the applicable by-laws of the municipality. Section 9(3) sets forth the matters which must be considered by the approving authority in deciding whether to approve the conversion. These include: -59-(a) the priority of rental accommodation over privately owned housing in the area; (b) the proposals of the owner developer for the relocation of persons occupying the building; (c) the l i f e expectancy of the building; and (d) projected major increases in maintenance costs due to the condition of the building. In addition, i t may consider any other matters that, in its opinion, are relevant. While these provisions allow a f a i r l y extensive review of conversion proposals by a municipal council, how each municipality decides to exercise the authority granted to i t w i l l ultimately determine the success with which the issue is handled. It should be noted that "success" in this context does not necessarily mean an absolute prohibition of condominium conversion, rather, i t implies a solution which allows a reasonable regulatory response—one that achieves municipal policy objectives while respecting the position of apartment owners and tenants. 3.6 CONDOMINIUM CONVERSIONS I N B.C. AND THE RESIDENTIAL TENANCY ACT In cases where conversion has been approved, the owner wi l l often want the tenants to vacate in order to market the units. Section 29(6) of the Residential  Tenancy Act requires not less than 2 months notice of - 6 0 -termination. Whereas the Act previously required not less than 119 days notice, a 1984 amendment effectively reduced this requirement by one half. Moreover, landlords were no longer required to pay the relocation expense of tenants evicted as a result of conversion. The 1984 amendment also made i t possible for landlords to obtain vacant possession of the residential premises for the purpose of performing renovation. This last provision has been used by landlords to evict tenants on the guise of doing renovation in order to reduce the numbers of tenants and hence the numbers who may oppose the conversion. CHAPTER 4 CURRENT APPROACHES TO CONVERSION CONTROL: A REVIEW OF THIRTEEN MUNICIPALITES IN METROPOLITAN VANCOUVER If l e f t unregulated, or i f regulations are not enforced or are ineffective, the problems resulting from condominium conversions w i l l continue. In enacting regulations to remedy the problem, the chance of success would be greatly enhanced by identifying the best of a range of legal options available for implementing a desired policy. "Ignorance of the law is largely to blame for the failure of public administration to ask 'Were a l l legal options considered?' 'Was every opportunity f u l l y explored?' " (Lane, 1985:i). Ultimately, however, the relevant question is not simply, "Is i t legal?", but "Is i t a good policy?" This chapter begins with an overview of current condominium conversion regulations implemented by thirteen municipalities in the Greater Vancouver area. -62-This is followed by a detailed examination of the various regulatory approaches now being used. A review of recent conversion trends in the City of Vancouver in the final section provides some indication as to how the conversion regulations are performing. 4 . 1 S U M M A R Y O F S U R V E Y F I N D I N G S Thirteen municipalities were selected for the survey of conversion regulations (see F i g . l ) . These municipalites provide a representative cross section of housing, socio-economic and demographic characteristics found in Canadian metropolitan areas. Table 7(a) and 7(b) provide a brief s t a t i s t i c a l profile of the thirteen municipalities. Information regarding conversion regulations was obtained by personal v i s i t s and telephone inquiries. Where available, copies of municipal literature on conversion regulations and procedures were obtained and are included in Appendix A. With the exception of the District of Coquitlam where conversion regulations have been adopted by Council in the form of a resolution, giving them the force of law, other municipalities have only declared conversion regulations as policies. These policies do not have the force of law and constitute only a procedural guideline -64-Table 7 (A) P r o f i l e of Mun i c ipa l i t i e s in Vancouver CMA Selected Charac ter i s t i c s 1981 Rental as P o p u l a t i o n Median(l) % of t o t a l ( 2 ) M u n i c i p a l i t y (1986 e s t . ) Income Housing Stock Burnaby 143, 000 $ 18 538 45% Coquitlam 68, 000 20 267 30% D e l t a 78, 000 22 322 15% New Westminster 39, 500 15 605 63% C i t y of North Van. 35, 500 16 523 65% D i s t . Of North Van. 68, 000 22 928 21% P o r t Coquitlam 30, 000 20 862 21% P o r t Moody 16, 000 20 657 34% Richmond 106, 000 20 152 27% Surrey 170, 000 18 511 30% Vancouver 420, 000 14 239 55% West Vancouver 37, 000 25 082 28% White Rock 14, 500 14 569 40% (1) Median Income of Male 15 Year or Over With Income. (2) T o t a l Housing Stock i n c l u d e a l l p r i v a t e l y occupied d w e l l i n g (mobile homes i n c l u d e d ) . Source: P o p u l a t i o n F i g u r e s - GVRD Others - S t a t i s t i c s Canada, Cat. No. E-568, 1981 -65-Table 7 (B) Profile of Municipalities in Vancouver CMA Average Apartment Bents and Rental Vacancy Rates Rental Vacancy Average Rate Apt. Rent(l) M u n i c i p a l i t y Oct. '86 Apr. '87 Apr. '87 Burnaby 1. 0 % 2. 3 % $ 457.00 C o q u i t l a m 0. 6 0. 8 431.00 D e l t a 0. 4 0. 7 397.00 New Westminster 0. 5 2. 6 385.00 C i t y o f N o r t h Van. 0. 4 2. 1 455.00 D i s t . o f N o r t h Van. 0. 5 1. 2 526.00 P o r t C o q u i t l a m 1. 1 2. 8 383.00 P o r t Moody 1. , 1 2. , 8 383.00 Richmond 1. 3 3. 0 500.00 S u r r e y 1. 9 3. 5 398.00 Vancouver 1. 0 2. 3 457.00 West Vancouver 0. 2 0. 3 590.00 White Rock 0. 6 1. 0 397.00 Metro Vancouver 0. 9 2. 3 443. 0 (1) Average Rent f o r one bedroom apartment whether u n i t v a c a n t o r n o t Source: CMHC, R e n t a l Vacancy Survey Report. Apr. 1987 Vancouver O f f i c e . -66-for the public and a frame of reference within which Council assesses conversion applications. An outline of the findings of the survey is provided in Table 8. Of the thirteen municipalities, two (Burnaby and New Westminster) have a moratorium on conversions. The remaining eleven areas permit conversions on a conditional basis. A l l eleven require that the building substantially complies with applicable city by-laws. Six municipalities require no further conditions other than those of the Condominium Act be met. Five municipalities have devised their own guidelines. The District of Coquitlam, District of North Vancouver and the City of North Vancouver wi l l not consider conversions where the vacancy rate, as determined by CMHC's bi-annual survey of vacancy rates for each muncipality, is below a pre-established percentage (2% for Coquitlam and 3% for the District and the City of North Vancouver). Tenant Consent for conversion is required by the municipalities of Coquitlam, Vancouver and White Rock. The degree of support needed before an application is considered varies substantially: 60% in Coquitlam, 66% in Vancouver and 100% in White Rock. Relocation assistance is ex p l i c i t l y Table 8 M u n i c i p a l P o l i c i e s on Condominium Conversions A Review of 13 M u n i c i p a l i t i e s i n the Vancouver CMA M u n i c i p a l i t y C o n v e r s i o n i Allowed Condominium Act Vacancy Rate Tenant Consent R e l o c a t i o n A s s i s t a n c e Burnaby Moratorium - 1980 Coquitlam Yes Yes 2% 60% — D e l t a Yes Yes — — — New Westminster Moratorium - 1974 North Van. C i t y Yes Yes 3% — * * North Van. D i s t . Yes Yes 3% + + Port Coquitlam Yes Yes — — — Port Moody Yes Yes — — — Richmond Yes Yes — — Surrey Yes Yes — — — Vancouver Yes Yes — 66% * * West Van. Yes Yes -- — — White Rock Yes Yes — 100% 100% ++ S o c i a l Planning, Department w i l l request f o r w r i t t e n response by tenants. ** Statement r e q u i r e d from developer on the p r o p o s a l s f o r r e l o c a t i n g d i s p l a c e d t e n a n t s . - 6 8 -required only by the municipality of White Rock, although several other jurisdictions, for example, Vancouver and the District and the City of North Vancouver, wi l l give favourable consideration to owners that provide for the needs of tenants residing in the building. 4.2 APPROACHES TO CONDOMINIUM CONVERSION CONTROL In theory, given the wide discretionary powers provided to municipalities by the Condominium Act, there is almost no limit to the range of approaches which can be devised to regulate conversions. An examination of the literature on conversions in other jurisdictions and the survey of the thirteen municipalities indicate that several common elements to most conversion regulations can be identified. These provisions, which are commonly used in jurisdictions across Canada and the U.S., and which have different purposes, are discussed below. (i) The Moratorium A condominium conversion moratorium has the effect of prohibiting conversions, usually during a specified time period. With the amendment of the B.C. Strata-Title  Aot in 1973, temporary moratoria were imposed in many -69-jurisdictions to allow city o f f i c i a l s an opportunity to enact appropriate and permanent regulations. In this context, the moratorium is a useful, probably necessary tool in temporarily prohibiting conversions. Indeed, the mere public discussion of possible future restrictions is a catalyst for developers to convert more buildings as quickly as possible. "If no moratorium is passed during the study period, there may be few available rental buildings l e f t by the time the permanent regulations take effect" (Longhini and Lauber, 1979:7). While the moratorium is usually applied as a temporary measure to control conversions, the municipalities of Burnaby and New Westminster have imposed a permanent moratorium on conversions. Burnaby's moratorium has been in effect since 1980 and in New Westminster, since 1974. In a municipality such as New Westminster where rental apartments comprise 40% of the total housing stock, and the median income of the residents is among the lowest in Metropolitan Vancouver, with some 18% of the population being senior citizens, the imposition of such a restrictive measure can be rationalized. The same, however, cannot be said for Burnaby where the reason to permanently prohibit conversions is less clear. -70-In the U.S., extended moratoria on conversions have occasionally been declared invalid by the court. Generally, a moratorium may be ruled invalid i f the local governing body does not have adequate reasons to justify the moratorium's existence. For example, following the expiration of its original conversion moratorium, Washington D.C. adopted a series of short-term moratoria. On about the third round, the Washington, D.C. Superior Court struct down one of these emergency enactments on the ground that there were no independent legislative findings to support each of the successive moratoria (Casazza, 1982:17). Lawrenson (1983) also questioned the use of the moratorium as a long-term conversion policy on the ground that i t may be a violation of the duty of the approving authority to consider and decide, set forth in Section 9 (3) of the Condominium Act. He rationalized that the moratorium in this situation is arguably the same as advising would-be applicants that i f they apply, their applications will be considered, but wi l l in a l l probability be refused. He concludes, however, that while there is nothing objectionable about municipalities having a "policy", they must not "shut their ears to an application" (Lawrenson, 1983:5.06). -71-( i i ) Substantial Compliance with City Bylaws A l l municipalities, with the exception of those where a moratorium is placed on conversions, are required by the Condominium Act to ensure that buildings to be converted substantially comply with applicable city by-laws. Since a building converted w i l l , for the most part, no longer be occupied by tenants, such a requirement can only be rationalized as a form of consumer, (as oppose to tenant) protection. It is often the case that the structures proposed for conversion do not comply with the latest by-laws, but are nevertheless legally non-conforming. Section 970(3) of the B.C. Municipal Act provides for the exemption of existing structures and land uses from subsequently enacted land use regulations. In the United States, such non-conforming use provisions are commonly included in zoning ordinances because of the hardship and doubtful constitutionality of requiring the immediate discontinuance of non-conforming use (Illseley, 1979:241). A review of the various municipal conversion guidelines indicates that compliance requirements most often pertain to such matters as: - 7 2 -1) o f f s t r e e t p a r k i n g and l o a d i n g r e q u i r e m e n t s ; 2) s a f e t y , f i r e h a z a r d and s a n i t a r y c o n d i t i o n s ; 3) minimum d w e l l i n g u n i t and room s i z e s ; and 4) s o u n d p r o o f i n g b e t w e e n d w e l l i n g u n i t s — w a l l s , c e i l i n g s and f l o o r s . B e c a u s e m o d i f y i n g e x i s t i n g s t r u c t u r e s t o c o m p l y w i t h s t r i c t e r s t a n d a r d s c a n be v e r y e x p e n s i v e , s u c h r e q u i r e m e n t s c a n s e v e r e l y impede c o n v e r s i o n e f f o r t s . As a r e s u l t , t h e r e h a v e b e e n many c h a l l e n g e s i n o t h e r j u r i s d i c t i o n s t o t h e v a l i d i t y o f t h i s r e q u i r e m e n t . T h e s e f o c u s on t h e s i m i l a r i t y b e t w e e n a p a r t m e n t s and c o n v e r t e d c o n d o m i n i u m s . A c c o r d i n g t o t h i s a r g u m e n t , t h e o n l y d i f f e r e n c e b e t w e e n t h e a p a r t m e n t b u i l d i n g b e f o r e and a f t e r c o n v e r s i o n i s t h e t y p e o f o w n e r s h i p . T h e r e f o r e , s i n c e v a l i d n o n - c o n f o r m i n g s t a t u s i s g e n e r a l l y h e l d t o " r u n w i t h t h e l a n d " , a mere s a l e o f a n o n c o n f o r m i n g s t r u c t u r e d o e s n o t t e r m i n a t e i t s v a l i d n o n c o n f o r m i n g s t a t u s and r e n d e r i t s u b j e c t t o t h e m o s t r e c e n t l a n d u s e r e q u i r e m e n t s . P e r t a i n i n g t o n o n - c o n f o r m i n g u s e s , S 9 7 0 ( 7 ) o f B.C.'s M u n i c i p a l A c t s t a t e s : F o r t h e p u r p o s e o f t h i s s e c t i o n , a c h a n g e o f o w n e r s , t e n a n t s o r o c c u p a n t s o f a n y l a n d , o r o f a b u i l d i n g o r s t r u c t u r e , d o e s n o t , b y r e a s o n o n l y o f t h e c h a n g e , a f f e c t t h e u s e o f t h e l a n d o r b u i l d i n g o r s t r u c t u r e . A s e c o n d c h a l l e n g e t o t h e c o m p l i a n c e r e q u i r e m e n t h a s b e e n made f r o m t h e p o i n t o f v i e w t h a t m a n d a t o r y u p g r a d i n g -73-of a building upon conversion represents a double standard. Why are the owners of a condominium unit entitled to greater safety precautions than tenants? If the very same tenant who occupied the apartment purchases the same apartment as a unit in a condo project, is this change in his legal status (not in his use) a justification for requiring that the building be upgraded? (Rosenberg, 1976:18) The paucity of significant l i t i g a t i o n in Canada on the issue of differential treatment between rental apartments and converted condominiums warrants the examination of the American experience where a comparatively greater amount of li t i g a t i o n has taken place. The requirement of the owner/developer to upgrade the structure upon conversion has been challenged on several grounds: 1. on the nonconforming use provisions; 2. on the constitutional and statutory authority of municipalities to regulate property on the basis of land ownership rather than land use; and 3. on the constitutionality of compliance requirements based on equal protection guarantee of both the state and federal constitutions (Illseley, 1979:244). The c r i t i c a l assumption upon which a l l these challenges are made is that only the form of tenure, not use, changes upon conversion. Although the shortage of reliable regional data does not allow any firm conclusions to be made for Canada, available studies from -74-the U.S. appear to indicate that the differences between apartment buildings before and after conversion are not significant and do not affect land use (HUD, 1975). What is not reflected in the empirical data on conversion is the possibility that conversion makes nonconforming structures more permanent. Conversion can increase the l i f e of a nonconforming apartment building for at least two reasons: (1) the condominium owner's "pride of ownership" and concern over resale value may lead to improved maintenance; and (2) once the building is converted to condominiums i t becomes more d i f f i c u l t to terminate the building's nonconforming status (Illsley, 1979:247). While a comprehensive discussion of the various legal challenges to the non-compliance requirement is beyond the scope of this paper, in California where the substantial compliance requirement has been challenged, the courts have been generally supportive of ordinances which further a municipality's policy of improving the area's housing standard, provided that policy makers act reasonably (see i.e. San Diego County v. McClurken, 1951, cited in Illseley, 1979:245). In addition, denying valid nonconforming status to a converted condominium does not involve the major hardship that usually justifies -75-nonconforming use provisions. The developer who is required to bring his/her building up to standard is merely denied the most profitable return on the investment. The fact that a zoning bylaw reduces the value of land or prevents the most profitable use of land has never been a sufficient reason for invalidating a zoning by-law unless the by-law has been applied arbitrarily, in bad faith, or amounts to a "taking" without compensation (Bosserman, Callies, Banta, 1972:328),. In terms of the extent to which the building must comply with relevant by-laws and building codes, the Condominium Act of B.C. only requires that there be "sustantial compliance". This provides room for interpretation by municipal o f f i c i a l s as to what meets the test of "substantial compliance" (Baxter, 1987). In many instances where conversion applicants have been able to meet the City of Vancouver's tenant consent requirement, but were constrained by the complianance requirement, the city has approved the applications where undue hardship can be demonstrated. -76-( i i i ) R e n t a l V a n c a n c y R a t e R e q u i r e m e n t Condominium conversion controls, like rent control provisions, are designed to cope with the problems engendered by a tight housing market. As a policy, three of the thirteen municipalities (the District of Coquitlam, the District North Vancouver and the City of North Vancouver) do not consider conversion proposals when the rental vacancy rate f a l l s below a certain figure. The District of Coquitlam has, however, waived the rental vacancy requirement where there is sufficient (60%) tenant support for the conversion or where the developer can get a l l the tenants to sign a lease agreement for three years less one day. Such an agreement allows the tenant to stay until the lease expires, or terminate the lease at any time by giving thirty days' notice. The City and the District of North Vancouver do not offer this alternative. Both the City and the District of North Vancouver require that there be a 3% vacancy rate, as determined in the bi-annual CMHC vacancy rate survey, before the council w i l l consider proposals for conversion. In the District of Coquitlam, the minimum vacancy rate is set at 2%. While there is no solid empirical grounds for -77-selecting a particular vacancy rate level, i f the cut-off figure is f a i r l y high, this requirement can act as a total ban on conversions. The City of North Vancouver, for example, has not had a rental vacancy rate above 3% since 1974 (see Table 9), when conversion controls were f i r s t implemented in the City. The use of the rental vacancy rate approach to regulate conversion activities is a direct attempt at addressing the concern over the loss of existing rental housing stock—restricting conversions when there is a bona fide supply problem. In spite of this, proponents of the free market have argued that the rental vacancy requirement is unjustified since "the conversion of rental units to ownership does not increase or decrease the amount of housing accommodation available for occupants" (Rosenberg, 1976:19). Furthermore, to the extent that converted units are rented, they remain in the rental stock (Eilbott, 1985:389). Such rationales, however, appear overly simplistic and lack pursuasion. The conversion of rental housing to condominium does not reduce the total number of units available within the overall housing market. What i t does do, however, is shift some of the units from rental -78-T a b l e 9 R e n t a l V a c a n c y R a t e s : 1974 - 1987 ( A p r i l ) D i s t r i c t o f C o q u i t l a m , D i s t r i c t o f N o r t h V a n c o u v e r a n d C i t y o f N o r t h V a n c o u v e r North Van. City North Van. Dist. Coquitlam Year Apr. Oct. Apr. Oct. Apr. Oct, 1974 0. 3 0. 2 — — 0. 4 0.0 1975 0. 1 0. 2 — — 0. 3 0. 3 1976 0. 5 0. 7 — — 0. 3 2.2 1977 2.2 0. 5 — — 5. 4 5.9 1978 0. 5 0. 8 — — 4. 8 2.9 1979 0. 7 0. 0 — — 1. 9 0. 6 1980 0.0 0. 0 — — 0. 2 0. 8 1981 0.0 0. 1 0.0 0. 1 0. 2 0. 2 1982 0. 9 2. 1 1.2 1.4 3. 4 2.6 1983 1.7 0. 0 0. 7 0. 6 3. 2 3.6 1984 1.2 1. 8 0. 9 1.2 2. 6 4. 4 1985 2.6 2. 3 3.0 2.0 3. 6 2.8 1986 0. 1 0. 4 0. 7 0. 5 1. 7 1. 1 1987(Apr.) 2. 1 N/A 1.2 N/A 2. 8 N/A Note: North Van. Dist and North Van. City rental vacancy rates were combined until 1981. rental vacancy rates for Coquitlam include Port Coquitlam and Port Moody. Source: CMHC, Rental Vacancy Survey Report. Various Years, Vancouver Office. - 7 9 -tenure to ownership. With very l i t t l e new supply of unsubsidized rental housing being produced in most metropolitan centers in Canada, the reduction of rental housing through conversions results in problems of affordability, availability and adequacy. In pressing for B.C's original legislation to regulate conversions, the chain of rental housing problems created by conversions was described by one Member of Legislature: If these tenants are forced out of the apartment because they cannot buy, then they too form part of the ever-increasing market demand for rental accommodation. They make i t increasingly d i f f i c u l t for other people to acquire rental accommodation. If these people have money and can pay high rents, then they're in the position to go out into the market and force up the rents on other apartment accommodation... (Williams, Legislative Assembly of B.C., Debates • 1973:711). Where a rental building is strata-titled and sold, the rental of units thereafter is often restricted or discouraged. Skaburskis & Associates (1984) note that "one obvious concern to many owners is the possibility that their project may become tenant-occupied. Some provinces restrict the rights of a developer to rent units (and require disclosure of this fact to potential buyers)" (Skaburskis & Associates, 1984, Working Paper 2:5). The B.C. Condominium Act provides strata corporations with the authority to, by by-law, restrict the number of residential units to be leased (S.30(l)). -80-The use of the rental vacancy rate as a signal for permitting or prohibiting conversions has limitations. In a large city such as Vancouver where there are several distinct housing submarkets, the use of an aggregate rental vacancy rate may be misleading. For example, in April 1987 the vacancy rate for the City was 2.3 per cent. Yet, in two of the city's more affluent west side neighborhoods (Kitsilano and Kerrisdale), where conversions have been significant in recent years, the vacancy rate in both was only 0.9% (CMHC, 1987:7). Hence, while the overall average rental vacancy figure of a large city may be sufficiently high to permit conversions, i t is conceivable that the rental housing market in a particular d i s t r i c t where a conversion is proposed is not consistent with the conditions reflected by an aggregate figure. In addition, i t is the rental apartments which are both structurally sound and located in desirable neighborhoods that are most often the prime targets of developers looking for conversion investments (Lane, 1975:11). An examination of the location of condominium conversions within the City of Vancouver, reveals a -81-pattern of activities concentrated disproportionately in the city's affluent west side (see Appendix B). To permit conversions based on the City's average rental vacancy rate in this situation may result in the further geographic polarisation of neighborhoods on the basis of tenure and income. (iv) Tenant Consent Requirement Three municipalities have adopted the tenant consent requirement as an integral component of their conversion guidelines. In Vancouver for example, i f two-thirds of the tenants in any building scheduled for conversion consent in writing, the conversion w i l l be approved regardless of a low rental vacancy rate. As in the rental vacancy rate requirement, the proportion of tenant consent required for conversion varies from municipality to municipality. In the lower mainland, such percentage can range from 60% in Coquitlam to 100% in White Rock. The tenant consent requirement can also take the form of tenant's agreement to purchase. In this instance, the municipality w i l l grant approval for conversion only when a pre-established percentage of tenants have agreed to purchase a unit. Such a practice, however, is found only in the United States, and has never been used in British Columbia. - 8 2 -The tenant consent requirement serves at least two functions. First, i t allows the tenants to determine i f there is "appropriate" replacement housing and takes into account their individual needs in deciding whether to consent to conversion. Second, i t is a mechanism for compensating tenants for the inconvenience of an unanticipated housing move. From a p o l i t i c a l perspective, both these concepts are attractive. They not only give the tenants a vehicle to voice their concerns, but also places onus on the developers to negotiate the concessions necessary to gain a tenant's consent. While the two functions undoubtedly have merit from the view of the democratic process, the tenant consent requirement, like i t s counterparts, may also have it s defects. First, i t is conceivable that the tenants, many of whom may be emotionally charged, can deny the developer a rational and reasonable assessment of the conversion project. Such provision rely on the discretion of the tenants. As such, some tenants may prevent or hold-out on a proposal based on personal or even vindictive reasons rather than a legitimate plea of hardship. Second, the tenant consent requirement also raises questions of legality on procedural grounds, known as -83-Delegate non Poteste Delegatas. That is, p o l i t i c a l power can be exercised only by those who are responsible in law for its execution. As a creation of the Province, the municipality receives i t s legal powers from the province. As a recipient of delegated authority i t s e l f , i t cannot redelegate i t s legislative or discretionary powers to another o f f i c i a l or agency. On the subject of the delegation of power by municipal councils, Rogers (1978) notes: There is another type of by-law sometimes enacted by councils which is framed so that an essential element of the by-law is not defined but is l e f t to others to decide. Such a by-law would not only be bad for uncertainty but also for improper delegation of discretion which the council i t s e l f should exercise...For example, a by-law under which i t was unlawful to build a livery stable without the consent of the neighbouring property or the consent of an officer of the corporation would bei invalid. .. (Roger, 1978:323). There are two exceptions to this general rule of law: where the legislature has specifically authorized the redelegation of such power and where only administrative powers are involved. Section 9 of B.C.'s Condominium Act, however, does not specifically provide for the power of redelegation in matters relating to conversions nor is there such provision made either in the Municipal Act or the Vancouver Charter. It is also unreasonable to classify the tenant's consent requirement as an exercise of administrative power by those involved. -84-In municipalities where the consent approached is used, conversion requirements, as alluded to earlier, are set forth as guidelines adopted by council, rather than by-laws or resolutions. They therefore, do not have the force of law. It is uncertain whether declaring the tenants consent requirement as part of a set of guideline rather than a by-law or resolution w i l l resolve this legal issue. Another problem associated with the use of tenants consent approach is that i t is subject to abuse by developers. Such abuse has been observed in Vancouver where a developer evicted the tenants of a rental apartment for the purpose of doing renovations, which is allowed under the 1984 amendment to the Residential  Tenancy Act (Section 17). Upon completion, the developer applied to have the building strata-titled before the units were reoccupied. With the building empty, the tenants consent requirement is evaded (Baxter, 1987). In an attempt to discourage the use of such technically legal but questionnable practices, the City of Vancouver has included a caveat to developers in their conversison guidelines: Council may refuse an application where in Council's opinion there appears to be an intent to circumvent these guidelines, or the interests of the rental tenants were not adequately respected in the change of occupancy -85-(City of Vancouver, Strata-Title and Cooperative Coversion Guidelines, April 29, 1986, pg. 2) Even so, i t is often d i f f i c u l t for municipal o f f i c i a l s t keep up with the ingenuity of some developers in finding ways to "beat the system". The following case from Toronto is a good example. Tom Deacon, lawyer for the Bretton Place Tenants Association (Toronto), uses the term mousetrap to refer to a crucial agreement giving tenants lifetime security of tenure in return for support for [a] condominium conversion. A month ago, the mousetrap he devised didn't work, but now he says cheerily: "We've got four better mouse traps" (Globe and Mail. April 16, 1986:A8). One planner who oversees the condominium conversion division of the San Francisco Planning Department notes: the part of the law requiring 40 percent of the tenants to agree to a conversion has been thoroughly abused...in the past, bribes of tenants and other chicanery have won owners enough votes for approval to render this pro-vision ineffective (Lauber, 1981:20-21). Another potential weakness of the tenants consent approach to conversion control is that tenants must effectively organize themselves in order to make a concerted effort to resist conversion (Baxter, 1987). Tenants facing a conversion proposal are often unwilling to take an opposing stance on their own, fearing retaliation (i.e., future economic eviction) by the developer i f conversion plans f a i l . Tenants will often, as a result, opt to take any financial assistance or relocation assistance offered to them in return for thei -86-support, rather than risk an unsuccessful battle and possible economic eviction with l i t t l e or no compensation. The goal of maximizing the interests of the general community, which a l l public policy should strive to achieve, is virtually impossible to achieve i f a situation of fear and coercion is created by government regulations. (v) Tenant's Notice to Vacate and Other Relocation Assistance Requirements Once an application for conversion has been approved, the conditions set forth in Section 17 of the B.C. Residential Tenancy Act must be met. The landlord must allow the tenant two months from the date of council's approval to find another residence. Prior to the amendment of the Act ( B i l l 17) in 1984, the landlord was required to give at least 120 days notice and pay tenant moving expenses up to a maximum of $300. With the passage of B i l l 17, not only has the notice of eviction period been shortened, but landlords are also no longer required, at least by provincial legislation, to pay moving expenses. In spite the apparent relaxation of the landlord's responsibilities to tenants upon conversion, one municipality within the study area has maintained s t r i c t -87-tenant relocation guidelines. In White Rock, where there is a significant number of elderly, retired citizens, the landlord/developer is required to assist displaced tenants in finding comparable replacement housing and pay the f u l l cost of relocation. Such requirements may indeed seem draconian, until they are compared to some American cities where the negative effects of conversions have brought about even more severe requirements. In Los Angeles, for example, developers are required to pay a rental subsidy, equal to the increase in rent necessitated by relocation, for one year, with a $100.00 per month limit. An unconditional $500.00 payment is also paid by the developer for moving expenses. In addition, special needs tenants (i.e., seniors, disabled tenants, families with one or more minor children, tenants occupaying low- or moderate income housing) are entitled to a $2,500 payment per household, in lieu of relocation expenses and rental subsidies (HUD, 1980:XII-17). 4.3 THE CITY OF VANCOUVER: AN ASSESSMENT OF RECENT CONVERSION TRENDS The City of Vancouver, along with various neighboring municipalities, experienced substantial conversion pressures in the early 1970's (Hamilton, 1978:136). Data compiled by Hamilton (1978) from the -88-Vancouver Land Registry office, which covers the areas of North and West Vancouver, the Sunshine Coast and the City of Vancouver, reveals a wave of conversion activity which began in 1971 (see Table 10). During this year, 7 rental conversions were registered in the Vancouver Land Registry Office, involving 119 st r a t a - t i t l e units. By 1972, conversions had doubled to 14 projects with 305 units. Amendments to the Strata-Title Act in April of 1973 slowed conversion activities by the latter part of the year. The City of Vancouver, imposed a one year moratorium on conversions effective June, 1973. Although conversions continued between the years 1974 to 1977, with conversion regulations in place, and the general housing market experiencing a period of slow growth, they did not again reach the level of activity experienced in 1971. , More recent conversion activities in the City of Vancouver are examined by using data gathered from city records. A s t a t i s t i c a l summary of the findings is provided in Table 11 and 12. Between 1979 to 1986, the City received an average of 21 conversion applications, involving 382 units. The number of units proposed for conversion each year range substantially, from a high of 865 units in 1979 to a low of 135 units in 1984. On 'average, 16 projects or 220 units are approved for -89-Table 10 In Condominium Conversions the Metropolitan Vancouver 1971 - 1977 Registered Land Registry Office Year Project Unit 1971 7 119 1972 14 305 1973 6 114 1974 3 51 1975 4 63 1976 2 109 1977 1 2 Total 37 763 Source: Hamilton, Condominium: A Decade of Experience  in B. C. 1978, Table 2.3, pp. 13. -90-conversion each year (see Table 11). This translates to an average approval rate of 75% (see Table 12). Correspondingly, only 7% of the applications are rejected, on average, each year. In four of the eight years surveyed, no applications were rejected by Council. Finally, 18% of the applications involving an average of 142 units are either withdrawn or closed each year. These trends are worthy of some elaboration and discussion. First, the sigificant number of conversion applications received by the City from 1979 to the present would indicate that the pressure for conversion continues to persist in the City of Vancouver. Second, notwithstanding the regulations in place, a significant number of the conversion applications are being approved each year. Correspondingly, few applications which reach council for review are refused. Indeed, most applications which do not receive f i n a l approval are either the result of the application being withdrawn by the applicant, or the closure of f i l e s by the Planning department when required documents are not submitted at appropriate intervals during the application review process. While i t could be argued that applications which are withdrawn or closed would eventually be refused by Council, the fact remains that even when such applications are added to those which are refused, a -91-Table 11 Condominium Conversions In Vancouver: 1979 - 1987 (Aug) Year Applications Proj. Unit Approvals Proj. Unit Refusals Proj. Unit Withdrawn/ Fi l e Close Proj. Unit 1979 19 865 16 219 0 0 3 646 1980 16 404 13 393 1 3 2 8 1981 38 487 25 230 0 0 13 257 1982 29 364 22 299 0 0 7 65 1983 21 272 17 166 0 0 4 106 1984 13 135 11 125 1 5 1 5 1985 14 142 9 67 2 58 3 17 1986 17 390 11 264 5 94 1 32 (Aug) 1987 20 319 N/A N/A N/A N/A N/A N/A Avg. 21 382 16 220 1 20 4 142 Note: Averages calculated from : 1979 - 1986. Source : Compiled from City Hall. City of Vancouver Records, -92-T a b l e 12 C o n d o m i n i u m C o n v e r s i o n s i n C i t y o f V a n c o u v e r A p p r o v a l s , R e j e c t i o n s , W i t h d r a w l s a n d F i l e C l o s u r e s A s a P e r c e n t a g e o f T o t a l A p p l i c a t i o n s 1979 - 1987 ( A u g u s t ) Withdrawn/ Applications Approvals Refusals F i l e Close Year Proj. Unit Proj. Unit Proj. Unit Proj. Unit 1979 19 865 84% 25% — — 16% 75% 1980 16 404 81% 97% 6% 1% 13% 2% 1981 38 487 66% 47% — — 34% 53% 1982 29 364 76% 82% — — 24% 18% 1983 21 272 81% 61% — — 19% 39% 1984 13 135 84% 92% 8% 4% 8% 4% 1985 14 142 64% 46% 14% 41% 22% 13% 1986 17 390 65% 68% 29% 24% 6% 8% 1987(Aug) 20 319 N/A N/A N/A N/A N/A N/A Avg. 21 382 75% 65% 7% 9% 18% 26% Note: Averages calculated from 1979 - 1986 Source: Compiled from City of Vancouver Records, City Hall. -93-large percentage of applications s t i l l receive f i n a l approval for conversion. The implication of these trends can be seen by comparing the total units converted each year from 1979, to the total rental starts for the City of Vancouver (see Table 13). Between 1979 to 1984, several government rental supply programs operated within the private rental market to a r t i f i c i a l l y stimulate rental construction and inflate rental starts. While conversions during these years were significant in absolute terms, they did not appear c r i t i c a l . Sufficient new units came on the market to replace those lost through conversion. With the expiration of a l l rental supply programs by 1984, however, rental starts in Vancouver declined dramatically from 1071 in 1982 to 275 in 1985. By 1986, only 88 privately initiated rental units were started in the City of Vancouver- But more disturbing is the fact that during the same year, 264 rental units were converted, resulting in a net loss of 176 units from the City's rental stock. The trend of rental starts observed over the past two years should not be viewed as market anomolies. CMHC's housing analysts estimate that i t is unlikely that rental starts w i l l return to the pre-1984 levels without substantial government assistance (Pastrick, 1987). -94-T a b l e 13 Co n d o m i n i u m C o n v e r s i o n s i n t h e C i t y o f V a n c o u v e r A n n u a l H e n t a l H o u s i n g S t a r t s a n d C o n v e r s i o n s 1979 - 1986 Rental Housing** Condominium Net Year Start (Units) Conversions (Units) Gain/Loss 1979 1099 219 + 880 1980 1453 393 + 1060 1981 1536 230 + 1306 1982 1071 299 + 772 1983 750 166 + 584 1984 846 125 + 721 1985 275 67 + 208 1986 88 264 - 176 **: Most of the 1979 - 1985 units are MURBS, ARPS or CRSPS which are likely to be registered as Condominiums. Source: Rental Housing Starts — CMHC, Vancouver Office Conversions — Compiled from City of Vancouver Records, City Hall. -95-Given that condominium conversions continue to be approved at a rate of 220 units per year, they wil l , i f continued at this rate, further decrease the net impact of the already low numbers of rental housing starts. At present, there is no indication that the pressure for conversions is easing. In 1987, as of August, the City of Vancouver received 20 applications for the conversion of 319 units of rental housing. Given an average approval rate of 75 per cent, 239 units w i l l be converted, and this is only the f i r s t eight months of the year. To this point, only the quantitative aspects of the conversion trend has been discussed. Yet, in addition to the significant numbers of conversions in recent years, there also appears to be a new trend toward conversion in Vancouver's east side. Although the majority of conversions between 1980 and 1986 are concentrated in the City's more affluent west side, over 200 rental units have been converted from rental to str a t a - t i t l e in the much less affluent neighborhoods of the City's east side. As of August 1987, another 179 units have been proposed for conversion in Vancouver's east side. The eastside stratifications appear to be occuring in neighborhoods immediately adjacent to the inner city or in areas undergoing gentrification. Furthermore, this eastward -96-movement of activities may reflect the desire by developers to tap the rental housing resources of a relatively new conversion market. While the "East End" has traditionally been the area where much of the City's affordable rental housing can be found, conversion of even a small number of these units over time, without replacement, can have serious ramifications on the availability of affordable rental housing. The use of the tenant's consent approach, with a l l its inherent weaknesses, as an integral part of the City's conversion regulations explains, at least in part, the large number of conversions in recent years. The case by case, unsystematic regulatory approach shows a lack of policy direction. While this method imposes few administrative costs for the City, i t does not address the housing issues raised by conversions. In 1981 for example, the rental vacancy rate for the City was 0.0%. Notwithstanding this signal that the rental housing sector is in trouble, 230 units of rental housing were converted. As long as the developer meets the tenants' consent and substantial compliance requirements, approval for conversion is granted, regardless of the rental housing situation. It is readily apparent that even with some fifteen years of condominium conversion experience in the City of I I -97-Vancouver, conversion regulations implemented by the city remain ineffective. Conversion regulations are not only inconsistently applied, narrow in scope, but they also contain numerous loopholes. The requirement for example, that the building be in substantial compliance with the City by-laws can be waived where the tenant consent requirement is met and undue hardship can be demonstrated (Baxter, 1987). The consumer/tenant rights problem dominate the rhetoric of housing pol!icy debates. Developers, in the meantime, can s o l i c i t tenant support by means of compensation, coercion, [intimidation or use any one of a number of the loopholes' within the regulatory system. i In the f i n a l analysis, the displaced tenants receive side payments, developers get their conversion, and prospective condominium owners get a building which may "substantially comply" with city by-laws, but the community loses some portion of i t s scarce rental resources. If conversion regulations are not reassessed, conversions w i l l continue to outnumber rental starts. In time, most soundly built, well situated rental buildings in the City w i l l be converted—a loss which wi l l be d i f f i c u l t , i f not impossible to replace. - 9 8 -CHAPTER 5 PUBLIC INTERVENTION IN THE CONVERSION MARKET The regulations described in the previous chapter represent attempts by the provincial legislature and local government to deal with the negative impacts associated with condominium conversions. From the persepective of those who advocate a social welfare approach to housing, such intervention, together with rent regulation and security of tenure legislation, is necessary, long overdue and often not strong enough. For others, however, the regulation of condominium conversions merely represents yet another example of legislation which contributes to the erosion of property rights. Over the past several decades, i t has been increasingly common to hear complaints about overregulation and unwarranted intervention by government in the housing market. According to a study published by the Ontario Real Estate Association, "property rights are being eroded at an ever increasing pace" due to an -99-unabated "avalanche of legislation that affects the citizen's property rights" (Oostergiff & Rayner, 1979:v, ix). There is a need to examine this fundamental concept, as concerns over the infringement of private property rights potentially leads politicians to settle for policies which are less effective than the public good demands. 5.1 CONDOMINIUM REGULATIONS AND PROPERTY RIGHTS Regulations defining the ownership of real property have grown rapidly in recent years. Virtually a l l real property is subjected to zoning, planning, demolition and other controls which substantially affect income, use, and alienation (Makuch and Weinrib, 1985:9). Cheung, writing in 1974 about price control, proposed that an owner must have three sets of rights to assert that his property is "private" property. These are: Exclusive right to use or decide how to use the asset, exclusive right to receive income generated from the use of the goods; the right to transfer or freely alienate i t s ownership to any individual the owner see fit...including the right both to enter into contract with other individuals and to choose the form of such contract. (Cheung, 1974:57) There is l i t t l e question that regulations governing condominium conversion and security of tenure, along with other similar regulations of the housing market violate Cheung's f i r s t and third conditions. In similar fashion, -100-Smyth and Soberman (1964) defined ownership as "the unrestricted and exclusive right to a thing, the right to dispose of a thing in every legal way, to possess i t , to use, and to exclude everyone else from interfering with i t " (Smyth and Soberman, 1964:370). Given the extensive system of land use controls, therefore, both "private property" as defined by Cheung and "ownership of land" as defined by Smyth and Soberman virtua l l y do not exist. That is, real property, for the most part, can be neither "private" nor "owned" in the l i t e r a l sense of these words. Upon closer examination, however, one must question whether this notion that people can use their land any way they please regardless of the impacts on their neighbors is not simply a cultural myth. A myth which survives, indeed thrives, even though unsupported by the historical precedents or by the pattern of court decisions (Bosselman, Callies and Banta, 1972:319). Would this imply, therefore, that possession of t i t l e to real property assures no rights to its holder? Yet, what is property except a bundle of rights bestowed by society's institutions? The owner of this bundle of rights must hold privileges to the property that are exclusively his or hers to enjoy. It must be recognized, however, that this bundle of rights is socially defined and society is continually adjusting what i t considers to -101-be the appropriate privileges associated with property-ownership. The fact that the bundle of rights associated with land ownership is socially defined represents nothing new. It has a very long history. In .1215 A.D., the Magna Carta stated: No free man shall be deprived ... of his freehold...unless by the lawful judgement of his peers and by the law of the land. Holdsworth (1924) observed that: Property...was given by the law of man, not by the law of god or reason. And therefore, the same law may assigne such conditions upon the propertie as i t listeth, so they be not against the law of God nor the law of reason. Therefore the state could determine the limitations under which property could be acquired... (Holdsworth, 1924:316 cited in Bosselman, Callies and Banta, 1972:319). The historical acceptance of society as the institution which establishes and determines property rights did not only exist in theory, but also in practice. Throughout English and American history, land use regulations, even i f they forbade land owners any development of their property, did not appear to have offended the medieval sense of justice. In 1580, for example, Queen Elizabeth restricted the construction of any new housing within three miles of the City, a rule which would prevent many owners of vacant land from developing i t . Similarly, in -102-1592, parliament prohibited the conversion of existing houses to multifamily dwelling. The colonists also inherited...a concept of property which permitted extensive regulation of the use of that property for the public benefit—regulation that could go so far as to deny a l l productive use of the property to the owner if...the regulation extends to the public benefit...for this is for the public, and every one hath benefit by i t (Bosselman, Callies and Banta, 1972:64-75). That there is nothing "certain" about the bundle of rights associated with property is reflected in the absence of any protection against its interference by the state in the Canadian Constitution. Although "infi n i t e justice" is not afforded to the protection of property rights, the judicial system has, however, established a high standard of behaviour on the part of those administering laws and by-laws affecting the enjoyment of property rights (Lane, 1983:7). Lane, in his address to the Canadian Institute of Planners Conference on the subject of property rights and its enshrinement in the Canadian Constitution explains: We must surely question whether the extension of the rule of "infinite justice" to the more mundane f i e l d of property rights is justified... the enjoyment of property rights is already well protected by a combination of Common Law principles, the rules of natural justice, the duty of procedural fairness, the availability of the prerogative remedies and by easy access to local decision-makers (Lane, 1983:10). In the context of condominium conversion control, society, through the democratic process, determined -103-regulation to be the appropriate means of dealing with the social and housing issues relating to conversion. Should these regulations be conceived to be unreasonable, too onerous or unjustified, the democratic process and judicial system provide vehicles for redress. The more relevant public policy issue with respect to condominium regulations, therefore, is not the possible infringement of private property rights, but the development of a policy and a set of procedure which wi l l balance the various social and economic costs and benefits of conversion. In so far as a valid public purpose is being served, then the issue of private property rights must be l e f t as the subject of academic and judicial debate. 5.2 THE POLICY OBJECTIVES OF CONDOMINIUM CONVERSION REGULATIONS The justification for implementing condominium conversion, or indeed, any regulation in public administration is that there is public good to be served by the regulation and that the policy objectives are both valid and important. This suggests an emphasis on demonstrating the importance of the purpose behind conversion regulations and on ensuring the intended policy goals are achieved. -104-In most literature on condominium conversions, two particular issues are usually the focus of discussion: the displacement of tenants and the depletion of affordable housing stock. These conversion impacts are also the bases from which both American and Canadian legislation, in general, has been rationalized. In theory, that the community wi l l suffer a net loss of moderately priced rental housing is of equal importance to the social injustice of a forced displacement. In view of this, one would expect municipalities, in devising conversion regulations, to allocate equal emphasis to the protection of displacement tenants and condominium purchasers, as to the erosion of the affordable housing stock. In reality, however, there is much evidence to suggest that in most municipalities, conversion regulations are aimed only at providing consumer and tenant protection with scant concern shown for the long-term effects of conversions on the rental housing stock. It is generally acknowledged by those in the industry that buyer and tenant protection are legitimate public interest questions, whereas far less acknowledgement is given to the public interest served by preserving rental housing for low and moderate income households (Lukerman and others, 1981:20). In Vancouver, the emphasis on tenant/consumer protection is readily apparent in the city's conversion guidelines, where the statement of intent reads: / -105-These regulations are intended to protect tenants who may not wish, or who are unable, to purchase their unit and to ensure that the buildings proposed for conversion are in a reasonable state of repair. The general lack of attention or unwillingness to address the broader housing concerns raised by conversions may be understood by one of a number of explanations. First, whereas the impact of conversion on tenant displacement is direct and readily identifiable, the f u l l impact of conversion on rental housing is less clear and subjected to intense debate (Casassa, 1982:11). That is, the problems of the. rental market are more d i f f i c u l t to understand, as they are bound up in complicated, interlocking social, economic and p o l i t i c a l forces. Consequently, local governments may feel such problems are ultimately beyond their control or require long term p o l i t i c a l committment—something which White (1982) concludes to be "unattractive to local p o l i t i c a l representatives" (White, 1982:98). Second, the people affected by the process bring a human and emotional aspect to the conversion problem. "They are a numerous, potent and vocal p o l i t i c a l reality with a good deal of clout" (Rosenberg, 1974:25). On the other hand, the gradual erosion of the existing affordable rental housing stock is a problem which is regional, i f not national, in scope. Few individuals or -106-gToups in society, even for whom i t wi l l create a hardship in the long run, are likely to make a personal plea or ra l l y local politicians for action to address a somewhat abstract and long term issue of preserving the affordable rental stock. Finally, i t can be said that there is an inherent unwillingnes on the part of government to interfere with free enterprise and private investments. Premier Barrett's speech (elaborated on page 55), is only one reinforcement of this philosphy. Lukerman and others (1981) agree that: It is probably f a i r to state that there is a philosophical opposition to the concept of "preserving" a market (for whatever reason) as an a r t i f i c i a l and unneeded constraint over supply. (Lukerman and others, 1981:20) Regulations such as tenant's consent, extended eviction notice and even relocation assistance exert rainimial interference on the market processes. They are, therefore, favoured by conventional neo-classic analysts concerned with preserving the supremacy of market relations in dealing with conversion issues. In a system where developers obtain conversion approval through negotiations with tenants, only the private costs of conversion are covered by payments, financial or otherwise, made to the individuals. That displaced tenants are compensated by the developers -107-and a r e , f o r t h e most p a r t , s a t i s f i e d w i t h t h e a r r a n g e m e n t s , t h e r e g u l a t i o n s a r e j u s t i f i e d a n d i m p o r t a n t . I f , h o w e v e r , t h e s c o p e o f c o n v e r s i o n p o l i c y -i s t o be b r o a d e n e d t o i n c l u d e t h e p r o t e c t i o n o f t h e r e n t a l h o u s i n g s t o c k , t h e n t h e e x i s t i n g r e g u l a t o r y s y s t e m i m p l e m e n t e d i n most m u n i c i p a l i t i e s i s i n e f f e c t i v e a n d must be r e a s s e s s e d . The c o m m u n i t y ' s o b j e c t i v e o f r e t a i n i n g a d i v e r s i t y o f h o u s i n g s t o c k a n d t e n u r e w i l l o t h e r w i s e r e m a i n u n a c h i e v e d . 5.3 TOWAED COMPREHENSIVE AND INNOVATIVE POLICIES i An o v e r v i e w o f t h e c o n v e r s i o n p o l i c i e s i m p l e m e n t e d b y m u n i c i p a l i t i e s i n t h e G r e a t e r V a n c o u v e r A r e a i d e n t i f i e s s t r a t e g i e s w h i c h r a n g e f r o m a b s o l u t e p r o h i b i t i o n a t one end o f t h e s p e c t r u m t o a t o t a l l a c k o f p o l i c y ( o t h e r t h a n t h o s e c o n d i t i o n s e s t a b l i s h e d b y S e c t i o n 9 o f t h e C o n d o m i n i u m A c t ) a t t h e o t h e r e n d o f t h e s p e c t r u m . C o n v e r s i o n r e g u l a t i o n s w h i c h r e q u i r e l i t t l e more t h a n t h e b u i l d i n g s t o be i n " s u b s t a n t i a l c o m p l i a n c e " w i t h r e l e v a n t b y - l a w s a r e a i m e d a t p r o t e c t i n g c o n s u m e r s , and i g n o r e t h e d i s p l a c e m e n t and r e n t a l s t o c k d e p l e t i o n a s p e c t s o f t h e p r o c e s s . I n s i m i l a r f a s h i o n , p o l i c i e s w h i c h p e r m i t t h e d e v e l o p e r t o o f f e r c o m p e n s a t i o n i n e x c h a n g e f o r t e n a n t ' s c o n s e n t , w i t h l i t t l e o r no c o n s i d e r a t i o n f o r t h e p o t e n t i a l e f f e c t s on t h e r e n t a l s t o c k a r e t o o n a r r o w i n s c o p e . R e g u l a t i o n s w h i c h t a k e -108-th e form of a sweeping prohibition and blanket indictment of a l l conversions simply because no one has taken the time to study the problem in depth and work out a reasonable compromise is equally unacceptable. The policy strategy that perhaps best balances the interests of tenants, buyers and developers in a condominium conversion is a combination of various approaches such that the strength of one compensates for the weakness of another. The rental vacancy rate approach for one, has the potential of achieving the social and housing objectives underlying conversion regulations. Under this proposed strategy, conversions would be allowed i f the vacancy rate reaches some pre-established percentage. While the exact figure is to be determined by the municipalities, the provincial legislature w i l l set a minimum rental vacancy rate (i.e. 2%) below which no municipality shall permit conversions. This ground rule ensures that municipal authorities who may be inclined to apply regulations inconsistently or to waive requirements under pressures from conversion applicants w i l l not be able to do so. The developer's only obligation, once the rental vacancy rate requirement is met, would be to give advance (four months) notification of conversion. Elderly, handicapped or economically -109-disadvantaged tenants would be given lease extensions of up to eight months with rent increases limited to increases in the cost of living. Should the rental vacancy rate in the locality f a l l below the prescribed figure, other provisions would become applicable. The developer would not be allowed to convert the building unless he or she has earned "conversion rights". The origin and the methods of this approach are explained below. In the United States, where the condominium conversion problems are much more pronounced in major cit i e s such as Los Angeles, San Fransico and Minneapolis (also known as the Twin City), regulatory measures have also been more comprehensive and innovative. In the Twin City, for example, whereas regulations were once directed toward tenants rights and displacement, more recent concern has included protection of housing resources for low and moderate income household (Lukerman and others, 1981:1). In Oakland, where the majority of the buildings proposed for conversion are concentrated around the downtown Lake Merritt area (where many of the city's elderly live), a law was passed that required every conversion unit to be replaced with a comparable rental unit. To comply, developers must earn "conversion rights" equal to the number of units they plan to convert. A developer can earn conversion rights in a number of ways. He or she can build new rental structures, convert non-residential buildings to residential rentals, renovate buildings that have been vacant for at least a year, or build a new condominium or cooperative and agree to keep a l l the units rental for at least seven years. (Lauber, 1981:21) This innovative approach to conversion policy has a number of merits. F i r s t i t goes beyond merely easing the pain of conversion by maintaining the city's stock of low and moderate income housing. Second, i t encourages the redevelopment of the city's underutilized buildings, the restoration of dilapidated structures and even the construction of new rental units. Third, i t avoids the problem of developers using economic eviction to circumvent conversion regulations. Even with the building vacant, the developer can only convert when the rental vacancy requirement is met or i f conversion rights are acquired. Finally, this approach to conversion regulation provides developers with a certain amount of f l e x i b i l i t y in meeting conversion requirements, a process which emphasizes proactive planning rather than reactive control. -111-Th e importance of maintaining, to the extent possible, a viable investment climate for rental housing is very important. As long as funding for public, non-profit and co-operative housing cannot r e a l i s t i c a l l y replace the private rental sector, any policy which potentially impacts not only the present but also the future a b i l i t y and willingness of the private sector to produce rental housing must be carefully considered. To this end, a conversion policy which can achieve its intended goals while providing developers with some f l e x i b i l i t y in making investment decisions is desirable. Furthermore, in a market situation where there is a virtual consensus that, for reasons not yet clearly understood by even the most astute housing analysts, the market (actual) rent is consistently lagging behind economic (recovery) rent, i t is conceivable that a given rental investment is only marginally, or worse, no longer economically viable. Under such circumstances, policies which provide an avenue for the owner to dispose of his investment in a profitable way via conversion, while allowing him to make a positive contribution to the affordable housing stock is highly commendable. Indeed, this sense of reasonableness was demanded by the Supreme Court of the State of New York in the case of Penn Central Transportation Co. versus the City of New -112-York. Here, Penn Central Transportation Co. who owned a dilapidated terminal was denied by the city of New York the development permission to build a 59 story tower on the choice mid-town Grand Central site. In i t s judgement, the Supreme Court judge ruled: Depriving p l a i n t i f f s of the privlege to make millions of dollars per year, and at the same time having forced Penn Central which is bank-rupt to maintain an aging and deteriorating terminal at a d e f i c i t is a regulation which undeniably goes far that i t amounts to a taking for which compensation must be provided. (Penn Central Transportation Co. et al V. City of New York, et al., Supreme Court of the State of New York, No. 14763/69 f i l e d Oct. 7, 1969, cited in Bosselman, Callies and Banta: 1973:12). 5.4 CONCLUSION: PROSPECTS FOR THE FUTURE In any jurisdiction where rent control is in effect, the need to prevent landlords from circumventinng rent control through conversion is readily apparent. Yet, even in provinces such as B.C., where the rent control program has been dismantled, pressure for conversions continues. In light of the meagre levels of unsubsidized investment in private rental housing and the lack of government committment to the production of enough comparable replacement housing, the effect of conversions on the affordable rental housing stock must be carefully monitored. -113-Th e inadequacies in the regulatory system do not result from a lack of legislative authority or a lack of ideas, but from a lack of p o l i t i c a l committment to come to grips with the problem and to deal with i t systematically and comprehensively. By using regulation as a tool to ensure that the private costs of conversion are recovered by displaced tenants, municipal o f f i c i a l s have been successful in minimizing p o l i t i c a l controversy, while avoiding intervention in the private conduct of economic affairs. As they stand, most of the existing regulations guard against the unscrupulous treatment of tenants by developers. These approaches, however, only provide short-term social benefits for existing tenants. In the long-run, the costs to the community, which pays for conversions through the loss of rental stock and higher rents for the remaining units, are not being addressed. As people move further away from the inner city to find comparable housing, the community is also burdened with higher transportation costs. This study has provided strong evidence to show that serious inadequacies exist within the regulatory system. The need to re-evaluate the provincial and municipal policies with respect to conversions in B.C. cannot be overemphasized. Looking to the future, i f the rate of conversion continues to surpass rental housing starts -114-each year, the current stock of rental housing in the City of Vancouver w i l l continue to dwindle. It must be remembered that while conversions resulted in a net loss of 176 units to the rental stock in 1986, this figure did not include those units loss through rental housing demolition, deconversions, f i r e and other phenomenon which contribute to the removal of units from the rental stock. In a municipality with limited land zoned for multiple dwellings, for example, government rental housing supply programs, such as MURB, ARP and CRSP, which stimulate rental housing construction, result in the demolition of existing rental units. In Vancouver, i t is estimated that, as a result of this demolition factor, construction of two ARP/MURB units resulted in a net gain in the City's housing of only one unit (McAfee, cited in Dowler, 1983:45). Yet, only the rental starts and not the demolished units, or the net gains to the rental stock are reflected in o f f i c i a l housing statistics. Considering that housing o f f i c i a l s at a l l levels of government conduct detailed and careful accounting of each unit of rental housing constructed annually, i t is time the same attention is accorded to those units lost to the rental stock. Only with complete data can the overall picture of rental market conditions -115-be monitored and wise and informed policy decisions be made. Finally, as we look at condominium conversion controls in the broader context of the Canadian rental housing market, i t is apparent that conversion regulations, even when they are effective, can only alleviate some of the pressures of the rental housing market. As the number of buildings worth converting decrease over time, current conversion regulations may well become anachronisms. With the majority of the buildings constructed since the mid 1970's already registered as condominiums, future policy concern w i l l be focused on rental apartments which can be sold without municipal approval. Indeed, this issue has already been raised in the Ottawa area where several developers who received $7.25 million in interest free loans (15 years) from the Canda Rental Supply Program used "loopholes" in the programs to build rental units, then sold the units as condominiums (The Province, Jan. 29, 1984). This problem of pre-stratified rental units being sold without requiring municipal approval is not isolated to government assisted units. Particular attention is focused on the subsidized units because government incentive programs are responsible for a significant -116-number of the total rental starts over the last decade. It is reasonable to question why developers who received subsidies and tax concessions to build rental units are able to s e l l these units simply by repaying the subsidy, with no penalty or interest charged. Since this study is concerned with conversion regulations and not the rationales behind, or the effectiveness of government rental housing incentive programs, only the conversion issue is addressed. As they stand, current municipal conversion regulations do not apply to rental buildings which are stratif i e d prior to occupancy. Indeed, there is much doubt as to whether legislation of any sort can be enacted to prevent owners/developers from selling pre-stratified rental units. As noted in the Ottawa example, such market transactions do not constitute "conversions" and i t would be unrealistic to force builders to promise not to turn these projects into condominiums. This situation epitomizes the limitations of using restrictive controls to redress the imbalance of the rental housing market. The answer does not l i e in devising yet more rental housing incentive programs. It lies in direct government involvement to provide housing for those in need through social housing supply programs. -117-As Canada continues to open its doors to new immigrants and refugees and as household formation continues to increase (Dumas, 1985; Miron, 1983), a substantial net addition to the housing stock is required in the next decade. Many of the additional housing requirements w i l l be accommodated in the ownership sector and much of this in condominium form. Others, however, wil l need to be accommodated in the rental housing market. For those who can generate effective demand, their housing requirements w i l l be met by the private rental sector. But rapid household formation is also projected among the traditionally low income groups (Miron, 1983:14). As such, a l l levels of government have a role to play in directly meeting the housing needs of these people through a wide range of social housing programs. 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(1983) The State of the Rental  Housing Market: Implications for CMHC and  Federal Government Housing Policy in the 1980's. U.B. C. : CMHC. Judson, Victoria A. (1983) "Defining Property Rights: The Constitutionality of Protecting Tenants From Condominium Conversion", Harvard C i v i l Rights  C i v i l Liberties Law Review. Vol. 18, 1983, pp. 179-229. Kuttner, R. (1985) "The Poverty of Economics", The  Atlantic Monthly. February, 1985, pp. 74-84. Lane, Peter J. (1975) Converting Rental Housing into  Condominiums. New York: Practising Law Institute. Lane, William T. (1983) "The Enshrinement of Folly: "Enjoyment of Property" and THE CHARTER OF RIGHTS" Unpublished paper presented at the Canadian Institute of Planners Conference, June, 1983 Victoria. Lauber, Daniel (1981) "Condo Conversion Laws: The Next Generation", Planning. Feb. 1981, pp. 19-23 Lawrenson, Ian M. (1984) Strata T i t l e Conversions in the City of Vancouver. Vancouver: The Continuing Legal Education Society of B.C., 1984. Levine, D.P. (1983) "How Economists View Policy", Democracy 3(3), Summer, 1983, pp. 83-93. -121-Lipsey, Richard G., Sparks, Gordon R., Steiner, Peter 0. (1979) Economios. 3rd Edition, New York: Harper & Row. Longhini, Gregory, Lauber, Daniel (1979) Condominium  Conversion Regulations: Protecting Tenants. American Planning Association, 1979. Lukerman, Barbara and others (1981) Twin City Conversions of The Real Estate Kind. Minneapolis: Center for Urban and Regional Affairs, 1981. Lundqvist, Lennart J. (1984) "Housing Policy and Alternative Housing Tenures", Policy and  Politics. 12(1), 1984, pp. 1-12. Makuch, Stanley M. , Weinrib, Arnold (1984) Security of  Tenure. Research Study No. 11, Toronto: Commission of Inquiry into Residential Tenacies. Miron, John R. (1983) Demographic Change and Housing  Demand in the 1980's and 1990's. Toronto: The Center for Urban and Community Studies, 1983 Olsen, E.O. (1969) "A Competitive Theory of the Houing Market", American Economio Review, pp. 612-622, 1969. McDonald, Peter J. (1983) "Displacement in Gentrifying Neighborhoods: Regulating Condominium Conversion Through Municipal Land Use Control", Boston  University Law Review. Vol. 63:995, 1983, pp. 955-982. Paris, Chris (1984) Affordable and Available Housing. Canberra: Australian Institute of Urban Studies. Patterson, Jefferey (1985) Rent Review in Ontario and  Factors Affecting the Supply of Rental Housing. Draft, Discussion Papers in Social Policy, No. 1. Toronto: Social Planning Council of Metropolitan Toronto. -122-Pereboom, Zwanette (1983) Buying a Condominium: Strata  Titles Legislation in B.C.. 3rd Edition, Vancouver: People's Law School Public Legal Education Series. Roistacher, Elizabeth A., V i l l a n i , Kevin E., Weicher, John C. (1980) Rental Housing: Is There A  Crisis, Washington, D.C: The Urban Institute Press, 1980. Rhyne, Charles S., Rhyne, William S., Asch, Pat Wynns (1975) Municipalities and Multiple Residential  Housing: Condominiums and Rent Control. Washington: National Institute of Municipal Law Officers. Rosenberg, Alvin B. (1969) Condominium in Canada. Toronto: Canada Law Book Ltd. Rosenberg, Alvin B. (1976) Conversion of Rental Properties To Condominium in Canada. Toronto: Appraisal Institute of Canada, 1976. Silver, Jennifer, Shreve, Cathy (1979) Condominium Conversion Controls. Urban Consortium Information  Bulletin. Washington: U.S. Department of Housing and Development. Smith, Lawrence B. (1977) Anatomy of a Crisis. Canadian  Housing Policy in the Seventies. Vancouver: Fraser Institute, 1977. Smith, E. H. Q. (no date) "Old Wine in New Bottles", Habitat. Undated Periodical in U.B.C. Planning Library's "Condominium" clipping f i l e . pp. 2-11. Smith, Lawrence B. (1983) "The Crisis in Rental Housing: A Canadian Perspective", Annals of the American  Academy of P o l i t i c a l and Social Science 465 (January, 1983), pp. 58-75. Smyth, J.E., Soberman, D.A. (1964) The Law and Business  Administration in Canada. The Carswell Company Ltd. 6th Edition. Stanbury, W. T. (1985) The Normative Basis of Rent Regulation. Toronto: Commission of Inquiry into Residential Tenacies. -123-Steel, M. (1985) Housing Allowances: An Assessment of  the Proposal for a National Program for Canada. Toronto: Canadian Home Builders' Association. Sternlieb, G. , Hughes, J. W. (1981) The Future of Rental Housing. New Brunswick, N.J. : The State University of New Jersey, 1981. Thurow, Lester C. (1983) Dangerous Currents: The State  of Economics. New York: Random House. Tobin, J. (1970) "On Limiting the Domain of Inequity", The Journal of Law and Economios. 13(2), 1970 pp. 263-277. U.S. Department of Housing and Urban Development (HUD) 1980 The Conversion of Rental Housing to  Condominiums and Cooperatives: A National Study  of Scope. Causes and Impacts. Washington: HUD. Waligorski, CP. (1984) "Conservative Economist C r i t i c of Democracy", Social Soience Journal. 21(2), April, 1984, pp. 99-117. Wessop, J. Van, Maas (1984) "Housing Policy and Conversions to Condominiums in the Netherlands", Environment and Planning. Vol. 16, 1984 pp. 1149-1161. -124-Eesource People Baxter, Joanne, Planning Technician, Planning Department, City of Vancouver. Chang, Ian, Manager of Operational Planning Services, Planning Department, Township of Richmond. Dillon, Jack, Deputy Director of Planning Services, Planning Department, District of Delta. Gilbert, Cathy, Planner, Planning Department District of North Vancouver. Janczewski, Daniel, Planning Consultant, City of Port Moody and City of White Rock. Jang, Pauline, Planning Technician, Planning Department City of North Vancouver. Laustrup, Karen, Department of Development Services, City of Port Coquitlam. Lustig, Vicky, Building Secretary, Buildings and Permits Department, District of Surrey. Pastrick, Helumut, Regional Economist, CMHC, B.C. Regional Office. Schreving, Steve, Planning Technician, Planning Department, City of New Westminster. Tremblay, Diane, Planning Technician, Planning Department, District of Coquitlam. Wagner, Richard, Social Planner, Planning Department, District of West Vancouver. Waite, Barry, Planner, Zoning Department, District of Burnaby. i / ;-125-A P P E N D I X A L A N D U S E A N D D E V E L O P M E N T P O L I C I E S A N D G U I D E L I N E S STRATA TITLE AND COOPERATIVE CONVERSION GUIDELINES Adopted by City Council April 29,1986 APPLICATION AND INTENT These guidelines out l ine various factors which Council w i l l take into consideration in reviewing an appl icat ion for converting a previously occupied bui ld ing to strata t i t l e or cooperative ownership, and note certa in conditions which w i l l be appl icable to both types of app l icat ions . The guidel ines are intended to protect tenants who may not wish, or who are unable, to purchase the i r proposed strata l o t or cooperative unit and to ensure that the bui ld ing proposed for conversion is in a reasonable state of repa i r . Under section 9(4) of the Condominium Act of B r i t i s h Columbia, C i ty Council is the approving authority for conversion of previously occupied bui ldings Into strata l o t s . Under section 50(5) of the Real Estate Act of B r i t i sh Columbia, C i ty Council i s the approving authority for conversion of previously occupied bui ldings into cooperative un i t s . STATUTORY PROVISIONS With respect to s trata t i t l e conversion app l icat ions , the Condominium Act requires that the approving author i ty/sha l l consider, in making i t s . d e c i s i o n , the fol lowing: (a) The p r i o r i t y of rental accommodation over pr ivate ly owned housing 1n the area; (b) The proposals of the owner developer for the relocat ion of persons occupying the bu i ld ing ; (c) The l i f e expectancy of the bu i ld ing ; and (d) Projected major increases 1n maintenance costs due to the condit ion of the bu i ld ing . The approving authority may also consider any other matters that, In Its opinion, are relevant. CITY O F V A N C O U V E R PLANNING D E P A R T M E N T APRIL 1986 The appl icant shal l include the fo l lowing: (a) A l e t t e r s tat ing the property address and legal descr ipt ion of the s i te and providing the names and mail ing addresses of the persons occupying the bu i ld ing , together with the proposals by the owner developer for the re locat ion of persons who may be affected by the proposed conversion; (b) A s i te p lan, drawn to a scale of at least 1/16-inch to one foot (1:200 in metr ic ) , including a northpoint and an indicat ion of the sca le , and showing: o The locat ion and dimensions of the s i te boundaries and the area of the s i t e ; o Adjoining street names; o The loca t ion , s i ze , shape and s i t i n g ( including setbacks) of a l l ex i s t ing and proposed bui ldings or addit ions, inc luding accessory bui ld ings ; and o The locat ion and dimensions of a l l o f f - s t ree t parking and loading spaces, manoeuvring a i s le s and access driveways from streets and lanes. (c) Floor plans, drawn to a scale of at leas t 1/8-inch to one foot (1:100 in metr ic ) , inc luding a northpoint and an indicat ion of the sca le, and showing: o The dimensions of a l l rooms and h a l l s , and a l l outside dimensions including balconies and decks; and o The areas of the bui ld ing designated as strata l o t s , common property and l imited common property. (d) A notarized declarat ion s tat ing : o That each person occupying the bui ld ing has been given written notice of the intent to convert the bui ld ing into strata lo ts under the Condominium Act or cooperative units under the Real Estate Act together with the date of not ice; o The number of units occupied on the date of the not ice; o That notices have been posted in conspicuous places in the bu i ld ing , advising of the intent to convert the bui ld ing into strata lo ts under the Condominium Act or cooperative units under the Real Estate Act; and o That each person occupying a unit in the bui ld ing has been provided with prospective sale p r i ce s , example management fees and a copy of the declarat ion of the bui ld ing qual i ty outl ined in (e). C i ty of Vancouver Planning Department 3 Strata T i t l e and Cooperative Conversion Guidelines Apr i l 1986 -129-APPROVED RY CDUNCIL RESOLUTION No. 192fl 1977 V Ofi AMENDED 197ft 10 30 AMENDED 1982 04 13 AMENDED 19ft2 1? ?0 DISTRICT OF COQUITLAM STRATA TITLE CONVERSION GUIDELINES The fo l l ow ing gu ide l ines w i l l he considered by the C o u n c i l , under Sect ion 9 of the Condominium A c t , R.S.B.C., when dea l ing with app l i ca t ions for the convers ion to s t r a t a t i t l e of e x i s t i n g b u i l d i n g s . These gu ide l ines are in add i t i on to C o u n c i l ' s p o l i c i e s in regard to a l l s t r a t a a p p l i c a t i o n s , set out i n Counci l Reso lut ion No. 1?29, 1972 and Reso lut ion No. 1 U 9 , 1077. The gu ide l ines are without prejud ice to C o u n c i l ' s power as approving author i ty to approve, or not approve, or to approve subject to terms and condi t ions as set out 1n Sect ion 9 of the Condominium A c t . I. COMPLIANCE WITH MUNICIPAL BYLAWS 1. App l i ca t i on s f o r s t r a t a convers ion of e x i s t i n g bu i ld ings w i l l be expected to comply with bylaw requirements at the time of a p p l i c a t i o n in regard to the fo l l ow ing c r i t i c a l matters; a) s a fe t y , f i r e hazard and san i tary cond i t i on s ; b) o f f - s t r e e t parking and load ing requirements; c ) minimum dwel l ing unit and room s i z e s ; d) soundproofing between dwel l ing un i t s - wa l l s , c e i l i n g s and f l o o r s . 2. App l i ca t ions f o r s t r a t a convers ion w i l l he reviewed by the B u i l d i n g , Eng ineer ing , Planning and F i r e Departments. The app l i cant w i l l pay the actual costs of on - s i t e inspect ions when requ i red by Counci l because of undue costs to the D i s t r i c t f o r such i n s p e c t i o n s . 3. Any upgrading requ i red by the Counci l to comply with bylaw standards is to he completed p r i o r to the Approving O f f i c e r and Munic ipa l C lerk s i gn ing the necessary form or forms for the Land T i t l e s O f f i c e . II. COMPLIANCE WITH SERVICING STANDARDS AND REQUIREMENTS 1. Except where such upgrading has prev ious ly been provided f o r , s e rv i ce s on highways abutt ing the lands, subject to a conversion a p p l i c a t i o n , sha l l he upgraded to comply with the prov i s ions of the D i s t r i c t of Coquitlam Subd iv i s i on Control Bylaw, except 1n the case of r e s i d e n t i a l duplex convers ions . Such upgrading sha l l he completed, or bonding there fo re prov ided, according to normal procedures, p r i o r to s i gn ing of r e g i s t r y forms by the Approving O f f i c e r and Munic ipa l C l e r k . 2. Where located on an a r t e r i a l s t r e e t , any ded icat ions or road reserva t ions required f o r fu ture widening s h a l l he provided p r i o r to s i gn ing of r e g i s t r y forms by the Approving O f f i c e r and Munic ipa l C l e r k . IZ - 1 3 0 -- ? -II. COMPLIANCE WITH SERVICING STANDARDS AND REQUIREMENTS cont ' d 3. On - s i te roads and u t i l i t i e s which are to he common property of the s t r a t a corporat ion s h a l l be to standards con s i s t en t , as determined by the Municipal Engineer, with the D i s t r i c t of Coquit lam Subd iv i s ion Control Rylaw. Any upgrading sha l l be completed p r i o r to s i gn ing of r eg i s t r y forms by the Approving O f f i c e r and Munic ipal C l e r k . 4. Repealed 1978 10 30. III. PROTECTION OF EXISTING TENANTS 1. Counci l w i l l not normally g ive favourable cons idera t ion to a p p l i c a t i o n s f o r convers ion of e x i s t i n g renta l r e s i d e n t i a l premises conta in ing three or more dwel l ing un i t s at any time when the apartment vacancy rate in Coquitlam and/or the Greater Vancouver Regional D i s t r i c t is less than 2%. 2. Where tenants of a bu i l d i ng other than an apartment are a f f ec ted by the app l i c a t i on fo r convers ion, s a t i s f a c t o r y wr i t ten evidence s h a l l be presented that a l l a f f e c t e d tenants consent to the proposed convers ion. 3. The attached document, descr ibed as Appendix A, sha l l be presented to a l l tenants 1n a b u i l d i n g f o r apartment use proposed fo r convers ion and signed by sa id tenants as to whether they are in favour or opposed to the convers ion , wish to enter Into a lease f o r three years less one day, and whether they wish to purchase a un i t at a p r i c e commensurate with the general 11st p r i c e fo r u n i t s . 4. In a b u i l d i n g for apartment use proposed fo r convers ion, tenants represent ing at least 60% of a l l su i tes sha l l be in favour of the proposed convers ion , and such number sha l l exclude any owners with an Interest 1n the land upon which the bu i l d i ng 1s l oca ted . 5. The Municipal S o l i c i t o r w i l l review a l l documents submitted to make sure they are in the form descr ibed in Appendix A and sha l l review any lega l undertakings as to l ea s ing or sa le of un i t s 1f any tenant a f f ec ted hy the proposed conversion wishes to enter i n t o such lease or purchase arrangement. (Amended 1982 04 13) (Amended 1982 12 20) IV. PROTECTION OF PURCHASERS 1. App l i c a t i on s f o r s t r a t a convers ion sha l l Include appropr ia te p r o v i s i o n f o r l andscap ing , and In the case -of m u l t i - f a m i l y r e s i d e n t i a l convers ions , adequate open space and common f a c i l i t i e s , a l l of which s h a l l be of such des ign , mater i a l s and cons t ruc t i on as are not l i k e l y to re su l t 1n undue maintenance c o s t s . Where Improvements are requ i red by C o u n c i l , they sha l l be completed p r i o r to s i gn ing of r e g i s t r y forms by the Approving O f f i c e r and Munic ipal C l e r k . 2. The Ch ie f Ru l l d lng Inspector may, when he deems adv i sab le , requ i re that the cond i t i on of b u i l d i n g elements such as roof ing or heat ing and plumbing systems be c e r t i f i e d 1n w r i t i n g by a q u a l i f i e d p ro fe s s i ona l engineer and/or a r c h i t e c t , at the a p p l i c a n t ' s co s t . /3 - 1 3 1 -1 . PROTECTION OF PURCHASERS cont 'd Furthermore: 1. In 1973 08, Counci l adopted the fo l l ow ing re so lu t i on s : "1?;>9 That Counci l e s t a b l i s h the fo l l ow ing po l i c y in regard to (1973) a l l app l i ca t i ons for s t r a t a plan approval : a) That the a p p l i c a t i o n proceed hy way of a subd iv i s ion a p p l i c a t i o n which would be reviewed hy the Subd iv i s ion Committee, who would report to C o u n c i l . b) That app l i ca t i ons be accompanied by: i ) the proposed plan of s t ra ta s u b d i v i s i o n , i i ) a s i t e plan showing access and park ing, i i i ) a landscaping p l an , i v ) f l o o r p lans , v) e l eva t i on drawings. c) That approval of the a p p l i c a t i o n be subject to a r e s t r i c t i v e covenant, to he reg i s te red with the s t r a t a plan to p roh ib i t f u r t h e r s u b d i v i s i o n , where such fu r the r subd i v i s i on would not he he prevented hy e x i s t i n g bylaws." 2. In 1977 08, Counci l passed the fo l l ow ing r e s o l u t i o n : "1149 That Counci l formal ly approve a po l i c y of requ i r ing o n - s i t e se rv i ce s to meet the requirements and standards of the Subd iv i s ion Control Rylaw, as determined hy the Municipal Eng ineer, and such p o l i c y to he implemented at the time of review of s t r a t a p l ans , and preparat ion of development agreements or land use c o n t r a c t s . " -132-APPENniX A (1 Of 2) To: D i s t r i c t of Coquitlam Planning Department Dear Si r: I/We of s u i t e number , at Coquit lam, B.C., s ta te t ha t : 1) I/We have no object ions about the s t r a t a t i t l e conversion of ; , Coquit lam, B.C. 2) I/We have been o f fe red a lease of three years less one day 1n the attached form, which allows for a t h i r t y - d a y not ice by a tenant wishing to vacate the s u i t e . 3) I/We have been o f fe red the opportunity to purchase th i s s u i t e , or a l t e r n a t i v e s u i t e s , at the p r i c e to he set f o r purchase genera l l y to a l l p rospect ive buyers. S ignature - 1 3 3 -APPF.NniX A (2 OF 2) THIS LEASE made the day of , 1982. BETWEEN: (he re ina f te r c a l l e d the "Land lord" ) OF THE FIRST PART AND: of Suite Number at , in the Mun i c i pa l i t y of Coquit lam, in the Province of B r i t i s h Columbia. (he re ina f te r c a l l e d the "Tenant") OF THE SECOND PART WHEREAS: The Landlord hereby acknowledges that the above tenant was in possession of Sui te Number at , Coquit lam, B r i t i s h Columbia, and being more p a r t i c u l a r l y known and descr ibed as: S t r a ta Lot D i s r i c t Lot Group S t ra ta Plan NW on a month-to-month has 1s at the time that the premises were converted hy way of s t r a t a t i t l e , and 1n cons idera t ion of the tenant cont inu ing to make regular monthly payments, DOES HEREBY GRANT t o the tenant th i s lease for a per iod of three years less one day from the f i r s t day of the month fo l lowing the date of the c rea t i on of the s t r a t a t i t l e l o t s under the fo l l ow ing terms and cond i t i on s : I. (1) That the Tenant may terminate t h i s lease upon the g iv ing of t h i r t y (30) days ' n o t i c e ; and (2) That the Landlord may terminate the tenant ' s lease only for those reasons a l lowable under the Re s i den t i a l Tenancy Act . II. The Tenant hereby agrees to abide hy the bylaws of the S t ra ta Corpora -t i o n and the requirements of the Re s i den t i a l Tenancy Act , and that t h i s agreement may not be assigned nor the rental premises sub le t . II I. The Landlord and Tenant hereby agree that any future rent increases w i l l be governed hy the Res ident i a l Tenancy Act . IN WITNESS WHEREOF the pa r t i e s hereto have executed t h i s Indenture on the date here inbefore mentioned. SIGNED, SEALED ANn OELIVERF.O hy the Landlord 1n the Presence of: NAME: ' '  AUTHORIZED SIGNATORY" ADDRESS: SIGNtB, StALLn ANI1 llbLlVtRLU by the lenant In the Presence of: NAME: - ADDRESS; ] 11 KLT .U 1 -ti l l M r e e l N o r t h V a n c o u v e r , 13. C . V'.'M 1119 -134-CONVKRSJON UNDER Tin: CONDOMINIUM ACT lNl 'OKMATlON FOR A P P L I CANTS City of North Vancouver When c o n s i d e r i n g r e c e n t amendments t.o t h e Condomin ium  A c t , C i t y C o u n c i l a d o p t e d a r e v i s e d p o l i c y w i t h r e s p e c t t o a p p l i c a t i o n s f o r c o n v e r s i o n i n t o s t r a t a l o t s o f e x i s t i n g b u i l d i n g s wh i ch have been p r e v i o u s l y o c c u p i e d . H e n c e f o r t h , a l l a p p l i c a t i o n s must be s u b m i t t e d t o t h e P e r m i t s 6 L i c e n c e s Depar tment f o r e x a m i n a t i o n and i n s p e c t i o n and w i l l t h e n be f o r w a r d e d t o t h e A p p r o v i n g A u t h o r i t y ( C i t y C o u n c i l ) f o r c o n s i d e r a t i o n and i t s d e c i s i o n t o a p p r o v e o r r e f u s e s h a l l be f i n a l . A BASIC CRITERIA A l l b u i l d i n g s w h i c h a r e t h e s u b j e c t o f an a p p l i c a t i o n f o r s t r a t i f i c a t i o n must be a b l e t o meet t h e f o l l o w i n g b a s i c c r i t e r i a : When the v a c a n c y r a t e , d e t e r m i n e d by Canada M o r t g a g e & H o u s i n g i s l e s s t han 3.0%, t h e C i t y o f N o r t h V a n c o u v e -w i l l n o t approve a p p l i c a t i o n s f o r t h e c o n v e r s i o n o f a p a r t m e n t b u i l d i n g s o f t h r e e a n d m o r e - u n i t s . (1) c o m p l i a n c e , o r s u b s t a n t i a l c o m p l i a n c e , w i t h t h e B .C . B u i l d i n g R e g u l a t i o n s w h i c h a d o p t t h e N a t i o n a l B u i l d i n g Code; (2) c o m p l i a n c e , o r s u b s t a n t i a l c o m p l i a n c e , w i t h t h e C i t y o f N o r t h V a n c o u v e r ' s c u r r e n t Z o n i n g By - l a w . Where an a p p l i c a t i o n i s f o r t h e s t r a t i f i c a t i o n o f an e x i s t i n g d u p l e x w h i c h was p r e v i o u s l y o c c u p i e d , t h e a p -p l i c a n t must be p r e p a r e d t o e n t e r i n t o a c o v e n a n t , under S e c t i o n 215 o f t h e Land T i t l e A c t . T h i s w i l l r e s t r i c t t h e use o f t h e b u i l d i n g on t h e o r i g i n a l l o t t o two d w e l l i n g u n i t s o n l y - - e a c h t o be o c c u p i e d by o n l y one f a m i l y , as d e f i n e d i n t h e C i t y ' s Z o n i n g E y - l a w . Each a p p l i c a n t f o r c o n v e r s i o n o f a d u p l e x must s i g n i f y i n the a p p l i c a t i o n h i s ag reement t o e n t e r i n t o s u c h a c o v e n a n t and t o pay a l l c o s t s o f i t s c o m p o s i t i o n and r e g i s t r a t i o n ; t h e s e a r e e s t i m a t e d n o t t o e x c e e d $90.00. NOTE: APPLICATIONS FOR STRAT IF ICAT ION OF A DUPLEX WHICH PREVIOUSLY HAS BEEN CONVERTED FROM A S INGLE -FAMILY DWELLING K I L L NOT BE CONSIDERED UNDER THIS POLICY. B BASIC INFORMATION TO BE SUBMITTED ON APPL ICATION (1) A p p l i c a n t ' s name, a d d r e s s and t e l e p h o n e number . I f t h e a p p l i c a n t i s n o t t h e o w n e r , t h e n t h e o w n e r ' s name, a d d r e s s and t e l e p h o n e number must a l s o be p r o v i d e d . (2) I f t h e a p p l i c a n t i s n o t t h e o w n e r , t h e n he must p r o v i d e w r i t t e n a u t h o r i s a t i o n f r om t h e owner , a p p o i n t i n g him a g e n t . (3) Name and t e l e p h o n e numbers o f any t e n a n t s o f t h e b u i l t l i n y . 'Condominium Act r . - j t i c 7. - 1 3 5 -(4) If the b u i l d i n g i n question i s owned co-oper-a t i v e l y , with an accompanying )cnse, the a p p l i -cant must advise and provide proof of the term of the lease ( i . e . i s the lease for l e s s than throe years or more than three y e a r s ? ) . In ad d i t i o n , proof i s required that 100 per cent of the owners agree to the conversion to s t r a t a ownership. (5) A statement d e s c r i b i n g the proposal of the owner/ developer for the r e l o c a t i o n of the persons oc-cupying the b u i l d i n g and an undertaking that the requirements of the laws governing tenant e v i c t i o n s and r e l o c a t i o n s w i l l be met. (6) A statement of the age and projec t e d l i f e expectancy of the b u i l d i n g . (7) A statement d e s c r i b i n g the current c o n d i t i o n of the b u i l d i n g and any projected major increases i n maintenance c o s t s , due to the c o n d i t i o n of the b u i l d i n g . C GENERAL INFORMATION (1) I f i l l e g a l s u i t e s are found i n a b u i l d i n g during the course of i n s p e c t i o n s , no prosecution w i l l r e s u l t from t h i s discovery, provided the u n i t s are vacated w i t h i n a reasonable time f o l l o w i n g Council's preliminary approval of the a p p l i c a t i o n . (2) Where no municipal records are a v a i l a b l e , the applicant s h a l l submit a s i t e plan showing the l o c a t i o n of the b u i l d i n g on the l o t ( f r o n t , r e a r and sideyard setbacks), the l o c a t i o n of any accessory b u i l d i n g s (garage, carport) and the number of parking spaces provided. (3) Information provided by the a p p l i c a n t w i l l be r e -viewed by s t a f f and o n - s i t e i n s p e c t i o n s w i l l be conducted by the B u i l d i n g and E l e c t r i c a l Inspectors. PLEASE NOTE: IT IS THE APPLICANT'S RESPONSIBILITY TO ARRANGE FOR INSPECTION OF THE BUILDING BY THE CITY'S BUILDING AND ELECTRICAL INSPECTORS. , (4) The Approving A u t h o r i t y may consider any other information which i t considers t o be relevant to the a p p l i c a t i o n . A l l a p p l i c a t i o n s must be accompanied by a non-refundable deposit of $40.00, to cover a d m i n i s t r a t i v e costs and, i n the case of s t r a t i f i c a t i o n of a duplex, an a d d i t i o n a l deposit of $90.00 to cover l e g a l c o s t s . A p r i l 23, 1979 Rev. Feb. 13, 1981 -136-THE CORPORATION OF THE DISTRICT OF NORTH VANCOUVER PROCEDURE REGARDING CONVERSIONS INTO STRATA LOTS The Council has adopted the following procedure with respect to applications for the conversion of previously occupied residential buildings into strata lots: The applicant shall submit with the application a fu l l l i s t of tenants' names and addresses, any measures proposed by the applicant to protect the tenants, and a fee of $415. plus $5. per unit. The Social Planner wil l prepare and mail letters (double registered or cert i f ied mail) to a l l tenants as soon as possible after receipt of the application containing the following: - advice of the application; - measures proposed by applicant to protect the tenants; - time l imit for reply (three weeks); and - request for written response by tenant. When the time l imit has expired, the replies wil l be summarized in a staff report for disposition by Council. For further information on applications, please contact the Social Planner. July, 1985 tX -137-Strata T i t l e Conversion Policy West Vancouver City May 1984 A) APPLICANT NOTIFIES TENANTS IN WRITING (WITH A COPY TO THE MUNICIPALITY) OF THE INTENT TO CONVERT AND THAT AN APPLICATION IS BEFORE COUNCIL. B) APPLICANT APPLIES TO COUNCIL IN WRITING FOR CONVERSION FROM RENTAL TO STRATA TITLE. C) APPLICANT IS REQUIRED TO INFORM TENANTS IN WRITING (AND COPY OF SUCH LETTER TO THE PLANNING DEPARTMENT) THAT THE CONDITIONS SET FORTH FOR' CONVERSION IN SECTION 17 OF THE RESIDENTIAL TENANCY ACT MUST BE MET. (SPECIFICALLY, THAT IF THE APPLICATION IS APPROVED, THE LANDLORD MUST ALLOW THE TENANT TWO MONTHS FROM THE DATE OF COUNCIL'S APPROVAL TO FIND ANOTHER RESIDENCE. (BILL 17 - LANDLORD IS NOT REQUIRED TO PAY MOVING EXPENSES). D) PREPARATION OF A STAFF REPORT (FROM THE BUILDING AND FIRE DEPART-MENTS) FOLLaVING A REVIEW OF THE PREMISES TO DETERMINE ACCEPTABILITY OF THE BUILDING FOR STRATA CONVERSION. E) PREPARATION OF A STAFF REPORT CONFIRMING OR COMMENTING ON STATEMENTS MADE BY, OR ON BEHALF OF, THE APPLICANT RESPECTING TENANTS, FINANCING, BUILDING, ETC. F) CONSIDERATION OF THE MATTER OF HARDSHIP TO THE OCCUPANTS OF THE PREMISES. (THAT IS, RECCMMEtClATIONS FOR THE TIME PERIOD AS TO WHEN CONVERSION WOULD BECOME EFFECTIVE IN ORDER TO MINIMIZE OR ELIMINATE THE HARDSHIPS.) - 1 3 8 -APPENDIX B Co n d o m i n i u m C o n v e r s i o n s i n t h e C i t y o f V a n c o u v e r A p p l i c a t i o n s o f 3 u n i t s o r more 1979 - 1987 ( A u g u s t ) No. Of C l o s e d / Address U n i t s Approved Refused Withdrawn 1979 A p p l i c a t i o n s 2508-10 W. 1st 5 * 8622 S e l k i r k St. 15 * 460 E. 15th 36 (ARP) 985 W. 15th 5 838-848 W. 7th 6 * 8777 Hudson St. 75 1494-96 Harwood St. 3 * 1615 Maple St. 6 1101 N i c o l a St. 28 * 1924-26 W. 13th 3 * 2655 Pt . Grey Rd. 3 1902-10 Stephen St. 5 * 1075 J e r v i s St. 37 1095 J e r v i s St . 9 Shawnoaks P r o j . 70 * 3579 W. 1st. 5 * 2493 W. 1st. 16 5404-22 Yew St. 4 Langara Gardens 534 -139-No. of Closed/ Address Units Approved Refused Withdrawn 1980 Applications 3020 Quebec St. 30 * 2620 Commercial Dr. 18 * 2061-2063 Whyte Ave. 3 1045 Haro St. 161 * 2221-25 W. 15th 3 2370 W. 2nd 95 2011-2045 Larch St. 4 1316 Maple St. 4 * 1918 Trafalgar St. 3 550 Beatty St. 31 * 676-680 Leg-in-Boot 27 1840 McNicoll Ave. 4 210-18 W. 12th 5 * 3720 Quebec St. 4 * 1996 W. 15th 6 * 335 W. 13th 6 * -140-No. o f C l o s e d / Address U n i t s Approved Refused Withdraw 1981 Applications 2406 W. 6 t h 4 2646 Yukon S t . 6 * 2465 W. 5 t h 5 * 856-62 E. Broadway 9 * 777 B u r r a r d St. 52 * 1835-39 W. 12th 3 1831-39 W. 14th 5 3208-32 W i l l o w S t . 8 * 3542 P t . Grey Rd. 6 1839-41 W. 5 t h 6 2929 Commercial Dr. 5 * 1419 P e n d r e l l S t . 8 * 1229 W. 8 t h 5 * 2975 L a u r e l S t . 6 * 4303-05 W. 10th 20 * 2017 W. 15th 6 * 2656 Y o r k St. 4 * 1866 W. 15th 3 1809 F r a n c e s St. 20 * 2648 A l b e r t a S t . 7 * 1331 N e l s o n St. 17 * 2379-95 Cypress S t . 5 * 1169 N e l s o n S t . 33 * 2575 C o r n w a l l S t . 4 2718 A l b e r t a S t . 5 * 2536-38 C o r n w a l l S t . 4 2803 W. 41st. 162 * 2310-20 C o r n w a l l S t . 27 2526 C o r n w a l l St. 5 * 204 W. 14th 4 * 946-56 W. 19th 4 602-622 J a c k s o n Ave. 6 * 2292-96 W. 13th 3 * 1876 W. 12th 4 * 3150-80 Alma St. 6 * 1945 W. 15th 5 214 W. 15th 5 Address No. of Closed/ Units Approved Refused Withdrawn 1982 Applications 1866 W. 12th 6 * 1906 Trafalgar 3 2394 W. 6th 5 * 2140-44 W. 3rd 3 * 2001 W. 15th 4 * 2814 W. 3rd 6 123 W. 14th 4 2433-39 W. 6th 4 * 913-19 W. 14th 4 * 611-17 W. 13th 4 1160 W. 15th 5 * 2958 W. 3rd 3 * 1967 Barclay St. 40 2597 W. 1st. 4 1655 Nelson St. 75 * 2211 W. 5th 35 1553-93 Larch St. 6 * 2326 Eton St. 41 2312-18 W. 6th 4 * 3290 Granville St. 5 * 1945 W. 12th 5 * 2732 Quebec St. 5 2423-29 W. 6th 4 * 1235 W. 10th 9 * 2563-67 W. 7th 3 * 148-50 Alexander St. 16 * 1603 E. Broadway 22 885 W. 70th 22 * 1922 W. 7th 17 * -142-No. of Closed/ Address Units Approved Refused Withdrawn 1983 Applications 1331 Nelson St. 17 2544 W. 2nd 5 * 2708 W. 3rd 3 * 2595 W. 6th 3 * 1176 W. 11th 10 2324-28 W. 6th 3 * 2570 Hemlock St. 56 * 2573-75 W. 6th 3 * 1790 W. 10th 36 2536 Cornwall 4 * 1802-06 W. 14th 4 * 3465 Glen Drive 22 * 250-254 W. 18th 3 148-152 W. 13th 4 •* 8777 Hudson St. 75 2312 W. 6th 4 1986 W. 14th 4 * 1936 W. 15th 4 * 1638 Matthews Ave. 6 * 1106 Maple St. 3 * 3525-29 Pt. Grey Rd. 3 * -143-No. of Closed/ Address Units Approved Refused Withdrawn 1984 Applications 8680 Fremlin St. 44 * 1480 Trafalgar St. 4 * 2716-46 Maple St. 4 * 1967 Barclay St. 40 * 2525 W. 2nd 5 * 701-725 Hawks Ave. 7 * 315 W. 13th Ave. 5 * 2696 W. Broadway 5 * 1093 Nicola St. 5 * 115 W. 10th Ave. 3 * 1855 Vine St. 5 * 324-26 W. 11th 4 * 1934-40 W. 11th 4 * -144-No. of Closed/ Address Units Approved Refused Withdrawn 1985 Applications 149-155 W. 13th 5 * 1601 Comox St. 26 3838 Hudson St. 5 1875 W. 15th 3 * 1545 W. 13th 15 * 2264 Cornwall 8 2565 W. 15th 4 * 1916 W. 15th 4 * 1050 Jervis St. 25 * 1985 W. 14th 4 * 835 W. 7th 3 * 2565-95 Pt. Grey Rd. 4 2030 Barclay St. 32 148 W. 11th 4 * -14.5-No. of Closed/ Address Units Approved Refused Withdrawn 1986 Applications 1350 W. 70th 21 * 1915-21 W. 15th 4 2415 W. 6th 4 * 1125 W. 12th 222 * 1845 W. 12th 4 * 2651 W. 15th 3 1825 W. 13th 4 * 145 W. 14th 4 * 1946 W. 15th 4 * 430-36 W. 14th 4 1995 Beach Ave. 55 700 E. Pender 12 * 148-52 W. 13th 5 1041 Comox St. 32 2156 W. 3rd 3 * 1080 W. 16th 5 * 1705 W. 16th 4 * -146-(1987 Applications to August 31) - In many cases, a f i n a l decision on conversion applications has not been made by Council. These wi l l be denoted by "N/A" on the "Approval" column. No. of Closed/ Address Units Approval Rejection Withdrawn 3590 Hudson St. 5 * 808 East 8th 48 N/A 811-15 Prior St. 3 N/A 53 W. 15th 4 N/A 1246 Broughton St. 40 N/A 136 W. 14th 4 * 45 W. 13th 4 2503-09 W. 6th 4 * 3450 Osier St. 4 * 502-520 Hawks St. 6 N/A 761-775 Keefer St. 8 N/A 1550 W. 10th 33 N/A 2745-47 W. 1st. 3 N/A 1846 W. 11th 4 * 2626 W. 1st 4 N/A 1856 W. 10th 4 N/A 2998 W. 3rd 3 N/A 1922-26 W. 14th 4 N/A 2640 Pt. Grey Rd. 3 N/A 700 Gt. Northern Way 131 N/A 

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