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Low-rise market rental buildings in New Westminster : past, present, and future Bogren, Lyle 1990

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LOW-RISE MARKET RENTAL BUILDINGS IN NEW WESTMINSTER PAST, PRESENT, AND FUTURE By LYLE BOGREN B.A., The University of B r i t i s h Columbia, 1963 M.S.W., The Universtiy of B r i t i s h Columbia, 1967 A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS in THE FACULTY OF GRADUATE STUDIES School of Community and Regional Planning  We accept this thesis as conforming to the required  standard  THE UNIVERSITY OF BRITISH COLUMBIA A p r i l 1990 @  Lyle Bogren, 1990  In  presenting this  degree at the  thesis  in  University of  partial  fulfilment  of  of  department  this or  thesis for by  his  or  requirements  British Columbia, I agree that the  freely available for reference and study. I further copying  the  representatives.  an advanced  Library shall make it  agree that permission for extensive  scholarly purposes may be her  for  It  is  granted  by the  understood  that  head of copying  my or  publication of this thesis for financial gain shall not be allowed without my written permission.  Department of The University of British Columbia Vancouver, Canada  DE-6 (2/88)  ii  ABSTRACT  In Canada, the supply of new rental housing has been decreasing, leaving renters more dependent on existing rental stock.  Less supply, with increasing demand, necessitates the  preservation of the existing rental stock.  In recent years,  many Canadian c i t i e s have experienced threats to their rental stock from deteriorating buildings, lessening a f f o r d a b i l i t y , and from luxury conversions or demolitions for redevelopment. L i t t l e information i s a v a i l a b l e on threats to, and ways of preserving one form of rental housing, the low-rise market rental building, sometimes referred to as the three floor walkup.  This thesis describes the interaction between supply and  demand that led to the construction of low-rise market rental buildings in the lower mainland of B r i t i s h Columbia, and p a r t i c u l a r l y in two neighborhoods of New Westminster referred to as the study area.  More importantly, because so l i t t l e  information i s available on the low-rise stock in B r i t i s h Columbia, an exploratory examination  of building, tenant, and  owner c h a r a c t e r i s t i c s in the study area was undertaken. The neighborhoods selected are important  not only because of  the large number of low-rise rental units within their boundaries,  but because of the high demand for these rental  units, and the pressure for redevelopment that i s now occurring within these neighborhoods.  Therefore, the findings of this  study are of use to other urban areas in which market forces pushing  for higher returns on investment  come into c o n f l i c t with  the need of low and moderate income people to remain in locations that meet their needs. An analysis of data obtained on building, tenant, and owner c h a r a c t e r i s t i c s revealed a number of important facts.  Firstly,  the needs of owners for an adequate return on their investment are met  by the low-rise building stock.  When c a p i t a l  appreciation of buildings i s factored into the  equation,  internal rates of return on investment from low-rise buildings are equal to or greater than returns on investments of comparable r i s k . Secondly an analysis of data revealed that although tenant needs for comfortable, well located housing was met  by  low-rise  apartments, that there were a number of problems evident. instance, 51 percent  of tenant households pay rent equal to or  greater than 30 percent result of low  For  of income.  incomes and  problem in the study area.  Lack of a f f o r d a b i l i t y ,  the  increasing rents, i s a s i g n i f i c a n t Neighborhood problems, as evidenced  by a high incidence of crime and poverty i s also a concern. Thirdly i t was  found that although most low-rise apartments  are in a good state of repair, 25 percent getting needed repair.  of them are not  This lack of required maintenance and  repair i s of special concern as this stock ages and deteriorate resulting in loss of rental stock. demolition  buildings  Threats of  for redevelopment although not of serious concern  could become a problem in the future.  now  F i n a l l y , the lack of  government involvement at a l l l e v e l s in preserving the e x i s t i n g low-rise rental stock i s a cause of concern as this stock gets  iv older. On the basis of study findings four main threats to the preservation  of t h i s rental stock were i d e n t i f i e d including  building and neighborhood deterioration, lessening a f f o r d a b i l i t y for tenants, potential for building demolition  and  redevelopment, and a lack of government involvement to a s s i s t tenants and owners in need.  Twenty-one alternatives to deal  with threats to stock preservation, undertaken by Federal, were analyzed.  that have or might be  P r o v i n c i a l , or Municipal Governments,  Guiding p r i n c i p l e s such as comprehensiveness,  l o c a l responsiveness, time frame awareness, and p o l i t i c a l / f i n a n c i a l astuteness were u t i l i z e d in selecting thirteen alternatives for implementation in the study area.  V  TABLE OF CONTENTS ABSTRACT LIST OF TABLES  i i ix  ACKNOWLEDGEMENT  X  1.0  1  INTRODUCTION  1 .1 Introduction  1  1 . 2 Rationale  2  1 . 3 Context  4  1 . 4 Scope  7  1.5 Methodology and Organization 2.0  HISTORY  8 13  2.1 Before World War II  13  2.2 Post War Construction  17  2.3 The 1960s  22  2.4 The 1970s  33  2.5 The 1980s  37  2.6 Summary  39  3.0  BUILDINGS, NEIGHBORHOOD, AND LOCAL GOVERNMENT  3.1 Buildings  41 41  Number and Location of Low-rise Buildings  41  Nature of Tenure  42  Building and Apartment Unit Size  43  Building Design  44  Period of Construction  49  Building Condition  52  Rent Prices  56  vi 3.2 Neighborhood Quality Appearance of Buildings  59  Parking and T r a f f i c Congestion  60  Crime  60  Incidence of Poverty  61  Condition of Infrastructure  63  Neighborhood Amenities  63  3.3 Local Government P o l i c i e s  63  Zoning  63  O f f i c i a l Community Plans for Neighborhoods  64  Demolitions  65  Conversion to Condominiums  65  3.4 Summary 4.0  59  TENANTS  65 67  4.1 Density  68  4.2 Age of Residents  69  4.3 Household and Family Characteristics  72  4.4 Marital Status  76  4.5 Education  77  4.6 Labour Force Analysis  78  4.7 Income  80  4.8 Mobility  86  4.9 Summary  89  5.0  OWNERS  92  5.1 Ownership Form  92  5.2 Holding Periods  95  5.3 Incidence of Leveraging  96  vii 5.4 Property Values  97  5.5 Assessed Values  98  5.6 Rental Rates  99  5.7 Expense Ratios  100  5.8 Returns on Investment  101  Assumptions  102  Measures of Single Year Returns  104  Multi-year Measures  105  5.9 Summary 6.0  -  COMPLEMENTARITY  109 112  6.1 Indications of Adequate F i t  112  Owner/Investor S a t i s f a c t i o n  112  Terms of Tenancy  115  Household Size and Apartment Size  116  Accessibility  117  Community F a c i l i t i e s  117  Building Amenities  117  6.2 Indications of Poor F i t  117  A f f o r d a b i l i t y a Problem  117  Maintenance and Repair  128  Poor Building Design  129  Neighborhood Problems  130  Owner's Attempts to Improve Complementarity  131  Attempts to Improve Complementarity (Neighborhood Level) 6.3 Summary  138 140  viii 7.0 CONCLUSION AND RECOMMENDATIONS  143  7.1 Future Demand  143  7.2 Recommendations  147  Threats  147  Goals  147  Principles  149  Alternative Measures to Meet Goals  149  Alternatives Selected  166  Redevelopment  177  As Well As Preservation  7.3 Summary REFERENCE LIST  178 180  APPENDIX A- New Westminster in the Lower Mainland  188  B- The Study Area in New Westminster  189  C- The Study Area Neighborhoods  190  D- A Sample of Low-rise Buildings  191  E- Calculations of Internal Rates of Return on Property #6  197  LIST OF TABLES TABLE 1 APARTMENT STOCK BY DECADE FOR CANADA, VANCOUVER, AND NEW WESTMINSTER TABLE 2 NUMBER OF APARTMENT UNITS AND LOW-RISE BUILDINGS IN THE STUDY AREA BY PERIOD OF CONSTRUCTION TABLE 3 CONDITION OF RENTAL DWELLING UNITS BY STUDY AREA NEIGHBORHOOD TABLE 4 AGE DISTRIBUTION IN STUDY AREA AND VANCOUVER CMA POPULATIONS BY PERCENT, 1986 TABLE 5 INCIDENCE OF LOW INCOME IN THE ADJUSTED STUDY AREA AND THE VANCOUVER CMA BY HOUSEHOLD TYPE, 1985 TABLE 6 AVERAGES OF SELECTED OWNERSHIP CHARACTERISTICS  X  ACKNOWLEDGEMENT I would l i k e to thank those who generously gave of their time in answering the many questions I had regarding low-rise rental buildings and the people who l i v e d in them. Steve Scheving, Val MacDonald, and Yvonne Cocke were especially helpful in this regard. David Hulchanski was very helpful in providing d i r e c t i o n and encouragement, while Henry Hightower's c r i t i q u e of early work provided the motivation to get the job done. Special thanks go to my friends who put up with my preoccupation with thesis material and my family who seldom saw me over the course of my studies. Their emotional and f i n a n c i a l help w i l l not be forgotten.  1  CHAPTER ONE INTRODUCTION  1 . 1 Introduction This study deals with one form of market rental  housing,  variously referred to as low-rise apartment buildings, or just 'three floor walk-ups', in the City of New Canada, the supply of new  Westminster.  In  1  rental housing has been decreasing,  leaving renters more dependent on e x i s t i n g rental stock.  Less  supply, with increasing demand, necessitates the preservation of the existing rental stock.  L i t t l e information i s available on  ways to preserve market rental low-rise stock.  This study  undertaken to provide information on t h i s most important  was  rental  housing form, so that measures might be taken to protect i t . This analysis of the market rental low-rise stock includes the following areas: 1. the history of the low-rise building form, with special emphasis on one s p e c i f i c area of New 2.  Westminster;  the c h a r a c t e r i s t i c s of the present stock including  information on buildings, tenants, and owners; 3 . the government programs meant to deal with t h i s building form, and the people who 4.  own  and rent them; and  the existing threats to the low-rise stock and measures  Maps showing New Westminster in the Lower Mainland, the area under study in New Westminster, and the neighbourhoods within the study area can be found in Appendix A, B, and C.  2 that  might  be t a k e n  On t h e b a s i s research  of the f i n d i n g s  questions  1. What  factors  buildings  to protect i t . of t h i s a n a l y s i s ,  are addressed: l e d to the c o n s t r u c t i o n  i n New  o f so many  low-rise  Westminster?  2.  What  of  t h e i r l o c a t i o n s i z e , age, d e s i g n ,  i s the state  of e x i s t i n g l o w - r i s e  rental  rates,  3.  are the people  Who  the f o l l o w i n g  buildings  physical  i n terms  condition,  and n e i g h b o r h o o d ? that  live  i n low-rise  apartment  buildings? 4. Who  a r e t h e owners o f l o w - r i s e  why do t h e y 5.  own s u c h  What n a t i o n a l ,  apartment  buildings?  p r o v i n c i a l and l o c a l  h a v e been d e v e l o p e d  b u i l d i n g s , and  to deal  government  with tenant,  programs  owner, and b u i l d i n g  needs? 6. What  i s the future  of l o w - r i s e  apartment  buildings  i n New  Westminster? 7. What a r e t h e t h r e a t s  to low-rise  what p o l i c i e s a n d p r o g r a m s might any  apartment  he u s e f u l  b u i l d i n g s , and  i n dealing  with  threats?  1.2 Rationale The  problem of a f f o r d a b l e  housing problem forced percent  r e n t a l housing  f a c i n g Canadians.  t o pay r e n t s  Low  i s t h e most  important  income h o u s e h o l d s a r e  i n e x c e s s o f t h e a c c e p t a b l e norm o f 30  o f income a n d , a s a r e s u l t , a r e o f t e n  unable t o p r o v i d e  3  themselves or their families with adequate food or clothing. The supply of affordable rental stock coming onto the market i s i n s u f f i c i e n t to meet current need. for to  this.  There are several reasons  F i r s t l y , i t i s not p r o f i t a b l e for the private sector  build at existing market rents.  Secondly, government  finds  i t too costly to provide the c a p i t a l to fund new rental accommodation.  Since very l i t t l e new rental stock i s being  b u i l t , i t i s important that the existing rental stock be conserved. Most of present rental stock i s market rentals, meaning that the buildings are owned by private investors as opposed to nonprofit societies or public corporations.  It i s therefore  important to understand how owners, tenants, and government programs interact to produce the types of arrangements we now have in these buildings. In many communities the present rental stock i s under severe pressure for redevelopment.  E x i s t i n g market rents often do not  provide a competitive rate of return for the private investor. When market factors allow a conversion to a more p r o f i t a b l e use, existing affordable rental stock i s either 'bulldozed down' or converted to luxury apartment accommodation.  If existing market  rental buildings are important because they provide so much rental accommodation  to people, and i f they are building few new  rental units, we need to better understand how they work and what can be done to conserve them. Very l i t t l e l i t e r a t u r e exists on the low-rise rental stock.  4  Books and a r t i c l e s have been written in the United States on the state of multi-family rental housing and on the garden apartment rental stock, but almost nothing, outside a report prepared by Peter Barnard Associates for the Ontario Ministry of Municipal A f f a i r s and Housing, has been written on the low-rise stock. This may be related to the preoccupation of many persons who are interested in rental housing with the creation of new units rather than with the conservation of existing stock.  It seems  that in the United States and Canada rental buildings must reach a state of extensive deterioration or abandonment before  people  r e a l l y get interested in preservation of existing stock.  1.3 The Context: l o c a l rental housing markets In Greater Vancouver Greater Vancouver, of which New Westminster i s a part, has been experiencing continuously increasing pressure on i t s rental stock.  Economic growth and international immigration  have l e d  to large numbers of persons coming to B r i t i s h Columbia, and especially the greater Vancouver area. In the absence of any s i g n i f i c a n t increases in supply, vacancy rates have f a l l e n to almost zero in most areas of the Lower Mainland.  This has produced a continuous upward pressure on  rents, resulting in many cases, in rent increases of 20 and 30 percent per year.  Rental housing has become less and less  affordable in the lower mainland over the past several years. Investors in existing low-rise buildings in some areas of  5  Vancouver have found that the escalating prices of housing and land make the demolition of e x i s t i n g low-rise buildings attractive.  For instance, many low-rise rental buildings have  been demolished in the Kerrisdale neighborhood of Vancouver over the past several years. condominiums.  They have been replaced by high priced  E x i s t i n g tenants were displaced, often with  considerable emotional d i s t r e s s .  Government i n i t i a t i v e s to ease  the problem through support to the private sector to create more rental housing have led to the creation of few new  In New One  rental units.  Westminster  of the objectives of New  Westminster's O f f i c i a l Community  Plan i s to "provide adequate, safe, healthy housing for a l l the c i t i z e n s , while encouraging d i v e r s i f i c a t i o n of places to l i v e with respect to f i n a n c i a l resources, ages and household composition" (City of New  Westminster 1982c, 8).  t h i s committment, as well as to f u l f i l l  To  fulfill  i t s committment to the  development of a regional town centre, the City of  New  Westminster has worked with the P r o v i n c i a l Government and private sector in developing as New  Westminster Quay.  commercial buildings, 1016 constructed  in New  New  the  Westminster Landing, also known  In addition to the development of condominium units have already been  Westminster Landing to meet the housing needs  of middle income people.  Another 300 units are under  construction or w i l l be constructed To the west of New  in the near future.  Westminster Landing, along the Fraser  6 River, another large development i s under construction. Renaissance Neighborhood  The  w i l l see the construction of 1400  condominium units for middle and upper income persons.  Fraser  Heights, located on the s i t e of the old B.C. Penitentiary, i s another neighborhood  in which the City of New Westminster has  been active in encouraging housing development.  This  neighborhood w i l l have 903 single family houses or condominium units when i t i s completed.  Already there are 639 housing units  completed or are under construction. The City of New Westminster  has c e r t a i n l y f u l f i l l e d i t s  objective of encouraging development of housing for some c i t i z e n s with the development of 3626 dwelling units. i t appears that not a l l c i t i z e n s have benefited  However,  as was outlined  in the housing objective in the O f f i c i a l Community Plan. dwelling units created in the three new neighborhoods  New  are for  ownership by middle and upper income c i t i z e n s . Within New Westminster's O f f i c i a l Community Plan i s a housing policy whereby " d i v e r s i f i e d housing types should be encouraged for people with low and moderate incomes; various ages; d i f f e r e n t family sizes and housing preferences" (City of New Westminster  1982c, 15). Although 156 cooperative housing units  were included in the New Westminster  Landing Neighborhood,  there  were no provisions for the inclusion of cooperative housing or s o c i a l housing in the Renaissance or Fraser Heights neighborhoods.  Only four percent of the dwelling units that  have been or w i l l be b u i l t  in the three New  Westminster  7  neighborhoods w i l l have been b u i l t for rental purposes.  In  e f f e c t , no new accommodation for people of low or moderate income has been provided. Since l i t t l e new construction for rental purposes i s being undertaken in the Province, the Greater Vancouver Region, or in the City of New Westminster i t was f e l t that an exploratory study should be undertaken on the state of the existing rental stock.  1.4  Scope  This thesis focuses on market rental low-rise apartment buildings containing six or more units in two New neighborhoods.  Westminster  One of these neighborhoods i s referred to as the  Uptown neighborhood by the City of New Westminster Planning Department.  The other i s the Brow-of-the-Hill neighborhood,  which i s , for the purposes of this thesis, further divided into eastern and western Brow-of-the-Hill.  These three neighborhoods  together are referred to in the thesis as the study area. Boundaries of the neighborhoods used in this thesis are somewhat d i f f e r e n t than the boundaries as determined by the City of New Westminster's Planning Department.  For instance, the  Uptown neighborhood referred to in this thesis runs from Sixth Avenue in the North to Royal Avenue on the South, and from Sixth Street on the East to Eighth Street on the West.  The eastern  Brow-of-the-Hill neighborhood runs from Sixth Avenue on the  8  North to Royal Avenue on the South, and from Eighth Street on the  East to Twelfth Street on the West.  The western Brow-of-  t h e - H i l l runs from Twelfth Street on the East to Fourteenth Street on the West, and from Sixth Avenue on the North to Third Avenue on the South. The boundaries were chosen on the basis of d i f f e r i n g c h a r a c t e r i s t i c s , h i s t o r i c a l reference, and ease of analysis of census data.  The Uptown area, as defined in the thesis, shares  similar boundaries with Census Tract 205, while the eastern Brow-of-the-Hill neighborhood has similar boundaries as Census Tract 204.  The western Brow-of-the-Hill has similar boundaries  as Census Tract 202.  At times the term unadjusted study area i s  used, and i t refers to the area contained by Census Tracts 202, 204, and 205. The neighborhoods were chosen for study primarily because of the  large numbers of low-rise rental buildings within their  boundaries. of  Another reason for selecting them i s that because  their proximity to Vancouver, as well as their good  transportation and community f a c i l i t i e s , they are now pressure for redevelopment.  under  These neighborhoods and their  buildings are in the forefront of the c o n f l i c t between market forces pushing for higher returns on investment, and the needs of  low and moderate  meet their needs.  income people for housing in locations that It i s important to describe the participants  in this c o n f l i c t as well as land and buildings that are the subject of disagreement.  9  1.5 Methodology and Very l i t t l e available.  Organization  l i t e r a t u r e on the low-rise apartment building i s  In 1985  the Ontario government commissioned a study  of low-rise buildings since such buildings comprised a s i g n i f i c a n t proportion of the province's rental stock Barnard Associates 1985).  (Peter  They also were aware that the  low-  r i s e stock was a source of a great deal of low cost housing that the stock was buildings was  and  getting older so that deterioration of the  likely.  In addition, l i t t l e research had been  done on the subject in Ontario. The study had a number of aims which included a desire to better understand the c h a r a c t e r i s t i c s of the buildings, their owners and their tenants.  The Government of Ontario wanted to  identify the future of these units and policy issues a r i s i n g from their projections. Peter Barnard Associates conducted in-depth  personal  interviews with owners and tenants of these buildings throughout Ontario.  In addition, the study organizers had trained  inspectors go over approximately present condition.  100 buildings to evaluate their  F i n a l l y , Peter Barnard Associates  interviewed housing analysts as well as federal and  provincial  government o f f i c i a l s to get their views on t h i s important  stock.  Peter Barnard Associates findings suggested that low-rise units accounted for one-quarter of a l l rental accommodations in the province.  One-third of a l l the existing low-rise buildings  10 in the Province of Ontario were over 40 years old, and 25 percent of them were in need of r e h a b i l i t a t i o n . important  finding was  Another  that units in low-rise buildings in large  c i t i e s tended to rent at s i g n i f i c a n t l y lower levels than units in' other rental forms.  In fact such units attracted a  s i g n i f i c a n t number of tenants whose incomes were at or below the poverty l i n e , and therefore these units, in terms of a f f o r d a b i l i t y , were especially valuable. Peter Barnard Associates found that the majority of owners were small business people for the most part, and often individuals or husband and wife operations.  The motivation of  these small entrepreneurs and their management practices d i f f e r e d from the large scale owners(holding  companies).  F i n a l l y , they found that the low-rise stock, in a number of urban areas in the Province of Ontario, was  threatened with  demolition for redevelopment, conversion or luxury renovation. This threat was  related to the age of the stock and to the  disincentives for owning these buildings experienced by the owners. Since l i t t l e information was available in written form on rise apartment buildings, a variety of other techniques were used in obtaining data on buildings, tenants, and owners, including information from the following sources:  1. reports from the City of New Department;  Westminster's Planning  low-  11 2. information supplied by the City of New  Westminster's  Planning Department upon request; 3. census data from S t a t i s t i c s Canada; 4. interviews with municipal planners, community workers, l o c a l p o l i t i c i a n s , low-rise apartment building owners and developers, Federal and Provincial Housing o f f i c i a l s , as well as one public housing developer and manager; 5. newspaper a r t i c l e s ; 6. information on a sample of low-rise apartment buildings including B r i t i s h Columbia Assessment Authority data, Land T i t l e s data, and Vancouver Real Estate Board data; and 7. journal a r t i c l e s and books on the topics of real estate investment,  property management, neighborhood  r e v i t a l i z a t i o n and displacement, and construction of rental accommodat ion.  Chapter Two  provides a brief history of apartment building  construction in Canada, Greater Vancouver, and most s p e c i f i c a l l y New  Westminster.  The reasons for construction of rental units,  and more s p e c i f i c a l l y low-rise market rental units i s provided from 1910  through  1985.  Chapter Three provides a description of low-rise building c h a r a c t e r i s t i c s in the study area of New  Westminster.  These  c h a r a c t e r i s t i c s include size, age, design, physical condition, and rental rates.  In addition, neighborhood quality i s  12 addressed  using several c r i t e r i a .  Government programs affecting  the low-rise stock i s b r i e f l y examined.  Chapter Four looks at the residents of low-rise apartment buildings in the study area from the point of view of their  age,  size of household, family configuration, education, labour force p a r t i c i p a t i o n , income, and mobility.  Chapter Five presents ownership c h a r a c t e r i s t i c s of a sample of 20 low-rise apartment buildings in the study area. Characteristics such as ownership form, degree of leverage, length of holding period, assessed and market values of properties, rental rates, and returns on investment  are  determined.  Chapter Six brings the chapters on the existing state of a f f a i r s in buildings, tenants and owners together by how  each meets the needs of the others.  determining  This chapter deals with  the s u i t a b i l i t y or f i t of buildings to tenant and owner needs. Where problems exist they are noted for later  treatment.  Chapter Seven begins with a brief look at the future of the low-rise apartment stock in the study area, and notes situations threatening the longevity of the stock.  any  The majority  of this chapter deals with solutions to the threats to low-rise apartment buildings in the study area.  13 CHAPTER  TWO  HISTORY This chapter discusses changing supply of and demand for apartment rental accommodation in New 1910  to 1986  Westminster for the years  in order to discover the reasons why  apartment buildings were constructed.  low-rise  Frequent reference i s  made to Canadian and Vancouver figures on apartment unit s t a r t s because national and regional issues determined growth in apartment construction in New The  Westminster to a great  extent.  1960s receive the most attention because this decade saw  construction of the greatest number of New  Westminster's  the  low-  r i s e rental buildings. Any analysis of apartment construction trends over many years is hampered by the a v a i l a b i l i t y of data in a disaggregated  form.  For instance, some reports on housing s t a r t s include data on apartments in the same category with row and duplex housing. Therefore,  in the following discussion, care i s taken in  specifying whether starts and completions are of multiple dwellings, apartments, or low-rise units.  2.1 Before World War  II  Increasing Demand for Apartments.  Single family detached  dwelling units have outnumbered multiple dwelling units throughout the course of Canadian h i s t o r y .  However, the  proportion of single as opposed to multiple unit structures b u i l t at any p a r t i c u l a r time has changed.  For  instance,  14 dwelling units completed in multiple structures increased from 24.45 percent of a l l completions in 1921 percent  of a l l completions in 1940  in Canada, to  (Buckley  1965,  63.5  Series  R133-  139). In most areas of Canada apartment construction was i n s i g n i f i c a n t prior to the 1920s.  For instance, there were only  35,095 apartments in Canada in 1921, 2  .  of a l l dwelling units.  relatively  comprising  only 2 percent  .  In B r i t i s h Columbia there were  2,175  apartments making up only 1.8 percent of a l l dwelling units. New  Westminster had 46 apartment units in i t s t o t a l stock of  2,991  dwelling units.  accommodation was (1921  Unquestionably, the most popular  form of  the single detached dwelling unit  Census of Canada).  Apartment growth, as a part of the overall growth in multiple structures, occurred in two expansion periods between 1926 1940.  The  f i r s t occurred  increase in the population to rent.  By 1931  making up 15.54  and  in the mid-1920s through a large in age groups with a high  propensity  there were 342,659 apartments in Canada's  percent of a l l 2,205,228 dwelling units  (1931  Census of Canada). In Vancouver, apartment construction made up 30 percent of a l l r e s i d e n t i a l construction between 1926  and  1929,  and by  1931  Table 1 provides information on the number of apartments in the dwelling stock from 1921 through 1981 for Canada, Vancouver, and New Westminster. In addition, the percentage of t o t a l dwelling units that are apartments i s given by decade.  15 there were 9,160 apartments in the c i t y (City of Vancouver Building Inspector Records and 1931 Census of Canada).  This  represented 16 percent of the t o t a l housing stock of Vancouver. In comparison, Montreal had 149,154 apartments at this time, which represented 87.8 percent of i t s housing stock (1931 Census of Canada).  New Westminster had 444 apartment units by 1931,  and this represented 10.8 percent of i t s t o t a l dwelling stock. A much slower expansion  in the apartment stock, generated by  the r i s i n g p r o f i t a b i l i t y of apartment construction, began in 1933, but ended a couple of years l a t e r .  Out of a t o t a l of  438,200 dwelling units completed between 1929 and 1939 in Canada, one hundred and ninety thousand or 43.5 percent were urban apartment completions, and by 1941 twenty-one percent of Canada's dwelling stock was c l a s s i f i e d as apartments (1941 Census of Canada).  By 1941 21.6 percent of Vancouver's 71,116  dwelling units were apartments. During the course of the two decades from 1921 to 1941 i t i s estimated that the incidence of home ownership in urban areas declined somewhat.  Increased popularity of the apartment  was  the result of growing urbanism and r i s i n g land values leading to a lack of a f f o r d a b i l i t y of single family accommodation. However, even though apartment l i v i n g got a boost between 1920 and 1940, by the end of 1940, 54 percent of the urban housing stock, and 94 percent of rural housing stock were single family dwellings (1941 Census of Canada)  TABLE 1 APARTMENT STOCK BY DECADE FOR CANADA, VANCOUVER, AND NEW WESTMINSTER Decade  Canada  Vancouver  New Westminster  1921  35,095 (2)*  1 ,380 (6)  46  342,659 (16)  9,160  444  533,034 (21)  15,361  885,565 (26)  28,420  1,151,098 (25)  37,520  1 ,699,045 (28)  72,800  1931 1 941 1 951 1 961 1 971 1981  2,586,570 (32)  (16)  (2) (11) not available  (22) (28) (32) (48) not available  1 ,705 (21 ) 2,738 (30) 8,900 (58) not available  Source: S t a t i s t i c s Canada. Census reports from 1921 through 1981 . *Figures in brackets represent the percentage of an areas dwelling unit stock that are apartments.  For most census years apartments are found in the apartment and f l a t category. The 1981 census referred to t h i s category as other multiple dwellings. The majority of accommodation included in t h i s category i s high and low-rise apartments, but there i s a minority made up of other multiple types(e.g. duplexes, basement s u i t e s ) . More recent census reports disaggregate t h i s general category into types of apartments(e.g. high and low-rise). However, in order to make comparison between decades the more encompassing category i s used.  1 7  2.2 Post War 1940 II  Construction  t o 1955, D e c r e a s i n g A p a r t m e n t  a l l residential  multiple  completions,  i n 1946.  dwelling 1965,  Series  Between  reaching  family  Firstly,  home o w n e r s h i p a f f o r d a b l e ,  instance, stimulated Builder  favorable  favored  National  the construction  1965,  Structural  of t o t a l  unit o f new  27). construction,  factors  construction in  (Steele  1983, S e r i e s  incomes made  and s e c o n d l y ,  single family  single  the introduction  accommodation.  Housing A c t mortgage of s i n g l e family  For  terms  dwellings  (Canadian  41).  Type o f A p a r t m e n t  i n other  Vancouver apartment suites  construction  dwelling  of r e s i d e n t i a l  Buildings  Although medium-rise apartment  more p o p u l a r  of a l l  20 p e r c e n t  1968,  i n c r e a s i n g average  o f 18.8  structures(Buckley  detached dwelling  o f 74.24 p e r c e n t  government programs  thirty  portion  c a n be a t t r i b u t e d t o s e v e r a l  S190-194).  t h e war,  26 p e r c e n t  in multiple  (Wheeler  i n single family  a high  t o a low p o i n t  1949 a n d 1959 o n l y  were a p a r t m e n t s  Increases  After  I n t h e 1950s a p a r t m e n t  t o assume a s m a l l  dwellings  1955.  decreased  were  D u r i n g W o r l d War  as a percentage of a l l  1940 t o 1949 o n l y  RI33-139).  construction.  of  From  u n i t s completed  continued  1951,  decreased.  structure completions,  residential percent  construction  Supply.  (Watts  parts  Built  blocks  Locally  might  o f Canada, b e f o r e  have  been'  1955, t h e t y p i c a l  was a frame w a l k - u p b u i l d i n g w i t h 1964, B - 1 ) . A p a r t m e n t  Before  buildings  fewer  than  built for  18 rental purposes in New  Westminster before 1955 were also the  frame walk-up type, except that the low-rise apartment buildings b u i l t in New  Westminster tended to have fewer than 16 suites.  Only 6 of 34 low-rise apartment buildings standing today, b u i l t prior to 1960,  have more than 16 suites (City of New  Westminster  Planning Department 1989). Few apartment buildings constructed in the New study area have been demolished.  Since 1976 only two  buildings have been demolished (City of New Department 1989).  Westminster  Westminster Planning  Therefore, we can assume that most of the  low-rise stock b u i l t in the study area prior to 1960 standing.  low-rise  is s t i l l  Of these 34 buildings containing 447 apartment units,  four were b u i l t between 1910 and 1949,  1919,  3 were constructed  between 1940  and  and 27 were b u i l t between 1950 and  (City of New  Westminster Planning Department 1989).  1959  The greatest concentration of these older low-rise buildings in the study area are in the western Brow-of-the-Hill neighborhood (9 b u i l d i n g s ) , along the east side of Eighth Street (9 buildings) in the Uptown neighborhood, and in the 400 and  500  block of Seventh Street in the Uptown area.  Increasing Apartment Construction in the Mid-1950s.  In the  mid-1950s the number of multiple dwelling units, as a percentage of a l l dwelling unit completions, 1955,  began to increase again.  the number of dwelling units completed in multiple  structures in Canada, as a percentage of a l l dwelling units  In  19 completed, was percent  in 1959  30 percent, and the percentage increased to 35 (Steele 1983,  Series S190-194).  In addition, apartment unit share of multiple unit construction began to increase. unit starts in 1959  Of the 49,167 multiple  dwelling  in Canada, 36,791 or 74.83 percent were  apartments(low and h i g h - r i s e ) , up from 1951  when 63.3  percent  a l l multiple unit s t a r t s were apartment s t a r t s (Wheeler 37).  The apartment form of multiple dwelling unit had  of  1968, clearly  become the dominant form. In B r i t i s h Columbia, the apartment captured the multiple dwelling starts in 1959.  of  However, multiple  dwelling unit starts comprised only 17.1 lower than the 26 percent  78.98 percent  percent  of a l l starts,  of a l l dwelling unit s t a r t s in the  whole of Canada (Steele 1983,  Series S190-194).  Multiple family dwelling unit starts increased in Metropolitan Vancouver from just under 1500 3000 units per year in 1958. had 89.26 percent  units per year in 1954 In 1959,  Metropolitan  to over  Vancouver  of i t s multiple dwelling unit s t a r t s in  apartments (Steele 1983,  Reasons for Increased  Series S190-194).  Apartment Demand After 1955.  Reasons  for increased demand for apartment rental units beginning in the 1950s were increasing urban concentration,  undoubling of shared  households brought about by increasing housing supply,  increases  in non-traditional family households such as young people in their early twenties and people over 65, and  increases in  20 employment income. The proportion of Canada's population l i v i n g in urban areas increased from 56 percent in 1941 (Watts 1964, B-1).  to almost 70 percent in 1961  This increase in urban populations due to  in-migration during the war years and immigration after the war, created greater demands for housing, especially in our larger Canadian  cities.  Government i n i t i a t i v e s , designed to provide employment for returning s o l d i e r s , helped to increase the supply of accommodation which allowed persons who had been l i v i n g together because of no alternate accommodation to find other housing. Demand for new housing attributed to this 'undoubling' of shared households increased from an average of 7,100  per annum from  1951-1956 to 10,000 from 1956-1961 (Canadian Builder 1965, 41). Although average net family formation remained about the same between 1951 and 1961, non-family household formation increased. Between 1956 and 1961, net non-family household formation in Canada accounted for 23 percent of t o t a l net household formation (Canadian Builder 1965, 41).  These non-family households were  mainly composed of young single people, those over 65 years of age, and increasing numbers of divorced and separated persons. Higher incomes played an important role as well in creating increased demand for apartments, by enabling the formation of non-family households.  Of course, the type of accommodation  that young and senior persons would be demanding was smaller and cheaper forms of housing that could be rented.  21  Market Conditions  (Supply).  The factors producing  an increase  in supply of rental apartments in the l a t t e r half of the 1950s were changing market conditions and new government programs. The s h i f t to urban l i v i n g , increasing incomes, and consequent increases in non-family households put pressure on the supply of urban land. skyrocket  In the 1950's r e s i d e n t i a l land prices began to  in urban centers.  Developers found that increased  costs due to high land prices, when added to the general increase in construction costs, priced the single-family residence out of the reach of a large proportion of potential buyers.  For those individuals who wished to remain in urban  centers the only option was to rent, and builders responded by constructing more apartment buildings. Increasing land costs not only forced a change in building from single family to multi-family, but also put pressure on developers buildings.  to change the location of their multi-family Building costs could be decreased, and p r o f i t s  increased by finding less expensive building s i t e s away from the central areas of Vancouver, in either the more outlying areas of Vancouver such as Marpole, or in the neighboring  suburbs of New  Westminster, Burnaby, and to a lesser extent North Vancouver (Watts 1964, B-1) . Government P o l i c i e s and Programs.  The increase in supply of  housing, both single family and multiple, couldn't have occurred without federal housing programs.  Parliament  created a new  22 Crown agency, the Central Mortgage and Housing  Corporation(CMHC)  which commenced operations in 1946 to carry out the federal government's housing r e s p o n s i b i l i t i e s .  National Housing Act  mortgages were introduced. In addition, the Veterans' Rental Housing Program, which aimed at building 10,000 homes per year, became the primary program for rental housing, supplemented by the Limited Dividend Housing Program.  Under the Limited Dividend Program rental housing  developers, who agreed to l i m i t their p r o f i t s and to l i m i t occupancy to persons whose incomes f e l l within guidelines established by the CMHC, received mortgage loans from the CMHC.  2.3 The 1960s Increasing Demand for Apartments  in Canada.  The increased  demand for rental housing in the 1960s was an accentuation of some of the factors that had begun to emerge in the 1950s, including increasing urbanization, the undoubling of households, the increase in marriages, the beginnings of growth in nonfamily households, and the increase in home ownership costs. The biggest boost to rental housing in the 1960s was given by the rapid increase in non-family households, the result of the coming of age of postwar babies, and the sharp r i s e in the divorce rate.  Non-family household formation in Canada  increased from annual averages of 12,400 from 1951-1956, 28,600 from 1956-1961, and 41,000 from 1961-1966 (Smith 1971, 13). In the early 1960s rental housing became more and more  23 a t t r a c t i v e to many Canadians as the cost of single family accommodation increased, the result of increasing land and construction costs ( D i s t r i c t of Burnaby Planning Department 1969, 8). In Vancouver average area house prices increased 20 percent between 1965 and 1968 (Metro Trends 1969). As house prices increased, required down payments  increased,  making i t more d i f f i c u l t for people to purchase homes.  Vendor  financing emerged as a response to t h i s problem, but c e r t a i n l y was only a p a r t i a l solution. On top of monetary increases in house prices and downpayments, there were also increases in mortgage lending rates from 6 1/4 to 9 1/8 percent l960s(Metro Trends 1968).  in the l a t t e r half of the Therefore,  increasing home ownership  costs made rental accommodation more and more a t t r a c t i v e .  Increasing Demand in Vancouver.  In Metropolitan Vancouver the  increase in non-family households was f u e l l e d in part by an average annual increase of seven percent  i n young adults of  apartment renting age from 1961 to 1966 (1961 and 1966 Census of Canada).  Increased  non-family growth was also the result of an  increase in the number of divorces. In Vancouver marriages rose in 1965 to 6431 per annum after having remained r e l a t i v e l y stable in the early 1960s, varying between 5318 to 5683 per annum between 1960 and 1964 (Wheeler 1968, 28). More Vancouver marriages increased the demand for apartments by young, newly married couples who couldn't afford  24 to buy in an increasingly expensive single family detached housing market.  Increased Demand in New Westminster.  New Westminster's  population increased 20 percent from 1961 to 1971, due in no small measure to apartment construction a c t i v i t y that had ' s p i l l e d over' from Vancouver and Burnaby (City of New Westminster Planning Department  1989).  Apartments in New  Westminster provided affordable accommodation  to young men and  women whose incomes allowed them to leave their families to set up their own households. In addition to young adults, a rapidly expanding group of persons over 40 years of age (often empty nesters or r e t i r e e s ) , and young married couples, were attracted to the c e n t r a l i t y to jobs, f a c i l i t i e s , good transportation, and s o c i a l services that New Westminster provided. Many people, including the elderly, single parent families, and low income households found that the suburbs did not provide them with good transportation and s o c i a l services that they needed.  The development of such services takes time.  instance, in an A p r i l ,  For  1969 newspaper a r t i c l e the then Social  Service Administrator for New Westminster, Mr. Jones, indicated that people were attracted to the apartments of New Westminster because of the c i t y ' s c e n t r a l i t y , and i t s compactness allowing a c c e s s i b i l i t y to services l i k e hospitals, Canada Manpower o f f i c e s , and welfare services (Leech 1969).  25 Supply in Canada, Vancouver, and New Westminster in the 1960s. The private sector, with substantial government  assistance,  responded to increased demand for affordable rental housing in a s i g n i f i c a n t way.  The vigor of the private sector in producing  rental apartments in the 1960s in Canada i s evidenced by the fact that such accommodation  accounted for 47 percent  housing s t a r t s between 1963 and 1970.  of a l l  Eighty-five percent of  Canadian rental apartment s t a r t s , in the period between 1963 and 1970, were private nongovernment assisted s t a r t s .  Apartment  dwelling starts in Canada amounted to 648,022 between 1960 and 1970 (Steele 1983, Series  S190-194).  In New Westminster there were approximately 4800 apartment starts between 1960 and 1970, and most of these were low-rise units b u i l t for the rental market Planning Department  1989).  (City of New Westminster  The busiest years for apartment  construction in New Westminster were from 1965 to 1970. During this period apartment units represented  95 percent  of a l l  r e s i d e n t i a l starts in New Westminster (New Westminster Department  1989).  Planning  During the 1960s, 3247 apartment units in  low-rise buildings were constructed  in the study area  New Westminster Planning Department  1989).  (City of  But what kind of low  rises were b u i l t ? Most apartments in low-rise rental buildings constructed in the 1960s were one bedroom u n i t s . that there were 64.9 percent percent  bachelor  Figures for 1969 indicate  one bedroom apartments, 12.2  units, and 22.9 two or more bedroom apartments  26 in low-rise buildings in New Westminster (Metro Trends 1970, B11) Builder's decisions to construct primarily bachelor  and one  bedroom units tended to discourage tenants with children from l i v i n g in, low-rise buildings.  As a result, the predominance of  small apartments had implications for age and family structure d i s t r i b u t i o n within the population of the study area.  In  addition to the l i m i t i n g factor of apartment size, many owners consciously chose to r e s t r i c t apartment rentals to persons without children. A newspaper a r t i c l e in the 1960s reported: Unless there i s a change in policy to the effect that provision i s made for family accommodation in multiple dwellings, the present trend could r a d i c a l l y change the age-mix of the City's residents... If the present trend continues this would result in a reduction in the number of residents within the age range of 35-50 years as they move out in search of family accommodation, and an increase in the number of persons in the 19-24 and 65+ age groups. Any disproportionate growth in these age groups would further skew the City's age-sex pyramid (New Westminster Columbian, July 16, 1970). Government P o l i c i e s and Programs Encourage Supply.  The  increase in demand from households unable to buy single family accommodation due to increases in land, construction, and finance costs were, of course, important factors in bringing on rental apartment construction.  However, i t was the involvement  of the federal government, with i t s subsidies through the income tax system, and l o c a l government through i t s encouragement of multi-family development that r e a l l y paved the way for the rapid construction of apartments.  27  Local Government Programs.  In the 1960s, central areas of the  Lower Mainland, such as Vancouver, Burnaby and New had l i t t l e vacant r e s i d e n t i a l land for development.  Westminster, Land costs  were high, making single family detached accommodation expensive.  In the suburbs land costs, and therefore housing  costs, were lower making these areas more a t t r a c t i v e to families in the 1950s.  A great deal of development was bypassing inner  c i t y suburbs for the newer suburbs of Surrey, Delta and Coquitlam. In addition, some single family neighborhoods New  of Vancouver and  Westminster had deteriorated by the 1960s, with the result  that municipal treasuries were suffering.  The Federal  government's perception of the need to meet the housing needs of 'baby boomers' and the e l d e r l y , combined with the need for inner c i t y areas to be r e v i t a l i z e d to increase tax revenues, incentives for government involvement  produced  in apartment development.  In the early 1960s, the net worth of the City of Westminster,  New  as measured by the assessed value of i t s buildings,  was actually decreasing, according to former Director of Planning, Barry Chaster.  Although there i s some evidence that  the City of New Westminster would have preferred several of the areas i d e n t i f i e d in the urban renewal study of 1965 developed as single family neighborhoods,  to.be  c i t y o f f i c i a l s could  see that developers were not interested in single family detached housing because of high land costs.  The City of New  28 Westminster, therefore, decided to accept and encourage apartment development, and in 1965 adopted regulations to control the location and development of apartment areas.  Two of  these areas were the Brow-of-the-Hill and Uptown neighborhoods (New Westminster Columbian, October 8, 1965). The designation of neighborhoods for apartment development had i t s desired e f f e c t .  For instance, one a r t i c l e in the l o c a l New  Westminster paper recounted how 15 apartment buildings had replaced 48 single family houses, bringing far greater d o l l a r s to the l o c a l tax r o l l s and providing accommodation  for many more  people (The New Westminster Columbian, January 20, 1967). However, the demolition of single family housing was not without i t s problems. One New Westminster newspaper a r t i c l e states: Much of the City's housing stock which accommodates residents of the lower income group i s presently in such a state of obsolescence that i t should be replaced. Some i s already being replaced by new multiple accommodation, but because of the high rents on completion, t h i s new accommodation prohibits the displaced persons from occupying the units. These displaced people must either migrate to other lowrental accommodation within the City or seek housing in other parts of the Lower Mainland (New Westminster Columbian, January 20, 1967) Local government also provided speedy development application processing for developers in New Westminster in the 1960s, according to Barry Chaster, Planning Director for the City of New Westminster at the time.  In addition, at least in the  beginnings of low-rise development in the study area, the City was prepared to accept apartments of a quality and design that  29 other m u n i c i p a l i t i e s might have not been too interested in accepting, according to Mr. New  Chaster.  Westminster's floor area ratio at 1.2  frame construction, was  for three-floor  among the highest of any municipality in  the lower mainland in the 1960s, and would have been a t t r a c t i v e to developers  of apartment buildings.  At the time FARs for  medium density three story frame construction was Burnaby, .60 in Coquitlam, 1.0  .90 in  in North Vancouver City, and  1.0  in Delta (Corporation of the D i s t r i c t of Burnaby Planning Department 1969,  Appendix I I ) .  In addition to tax advantages, and a favorable treatment from local government, builders were also attracted to  New  Westminster because of i t s other advantages. The Director of the New  Westminster Planning department during  the 1960s, Barry Chaster, states: New Westminster had a lot of infrastructure that other places didn't have. Burnaby was just a place between Vancouver and New Westminster. New Westminster had an urban f e e l , urban f a c i l i t i e s , schools, park, shopping, everything close by. One could get to anything you needed in three minutes, and the City promoted those things to get development, because there was negative growth at that time (Chaster 1989). Federal Government Programs.  However, favorable l o c a l  government treatment alone would not have attracted the builders.  Rental housing  benefited substantially from tax  incentives during the 1960s. allowances(depreciation)  For instance, c a p i t a l cost  were in excess of true economic  depreciation, r o l l o v e r provisions enabled the postponement of  recaptured  depreciation on the sale of an investment  property,  c a p i t a l gains were not taxed, book losses were deductible against other  income which enabled a tax sheltering of other  income, and special tax treatment was  provided  on death.  Such  favorable tax treatment meant that an investment in rental property  to earn income could bring returns to an investor which  were far in excess of returns he could receive from an . . . 4 investment of similar r i s k . Of special value to the investor was  the tax regulation that  enabled the investor to write off losses from the investment, which are quite common for a rental building carrying a high mortgage, against other  income.  Often the investor in  Westminster low-rise buildings was doctor, who  New  a professional, such as a  could f i n a n c i a l l y handle the amount of cash  necessary to have the building constructed.  He,  of course,  could write any losses off against his professional income. Who New  Built Low-Rise Buildings?  According  to B i l l Racinello, a  Westminster builder and low-rise apartment building owner,  the builders who  constructed  low-rises in the study area were in  the beginning stages of their business careers.  For  instance,  Wall and Redekopp, a firm that became f a i r l y large in the real  To realize how good these tax incentives were, i t was estimated that when these incentives were removed in 1972 the after-tax rate of return for individuals investing in a sample of rental apartments f e l l prom a pre-1972 average of 57 percent to 13 percent (Clayton Research Associates 1984, 35).  31 estate industry in the Lower Mainland, were just s t a r t i n g out. The majority of builders were small time contractors, rather than large development companies, who would b u i l d only two or three buildings and usually s e l l them.  A few builders would  keep some of their buildings, while s e l l i n g others to investors. Furthermore, most of the builders had some past experience with wood frame construction, while very few had any experience with concrete  construction.  Since they were small builders, the amount of cash they could invest was l i m i t e d .  New Westminster apartment building s i t e s  were r e l a t i v e l y inexpensive.  For instance in 1969, price per  square foot for land was $4.70 to $6.00 in the Marpole d i s t r i c t of Vancouver, $3.35 to $6.00 a square foot in the Lower Lonsdale area of North Vancouver C i t y , and $3.75 to $4.50 a square foot in the New Westminster study area  (Metro Trends 1970, B-4).  With a willingness on the part of City Hall to accept developments that some other municipalities might not find too a t t r a c t i v e , less expensive buildings could also be erected in New Westminster.  For instance, in 1969 the average cost to  build an apartment unit of average quality was $2800 to $3500 in Marpole, $2400 to $4000 in Lower Lonsdale, and only $2000 to $2300 in the New Westminster study area  (Metro Trends 1970, B-  4).  Building Location.  According  to B i l l Racinello, apartment  construction in the study area f i r s t began in the northern  part  32 of the Uptown neighborhood near Woodwards Department Store. reason for i n i t i a l construction in t h i s location was mortgage companies favored this area, and  The  that  i f builders  intended  on building an apartment outside t h i s general area, they might not get a mortgage.  Mortgage companies in the early 1960s were  not too interested in financing projects in the eastern Brow-oft h e - H i l l area.  Quality of Low-rise Buildings Constructed. buildings constructed designed, and  in the 1960s and  The  low-rise  1970s were architect  in the opinion of both builders and  o f f i c i a l s , were f a i r l y well b u i l t for their time.  city Improvements  in building materials and methods of construction have occurred since these buildings were erected. insulation was now  For instance, in the 1960s  placed between floors for soundproofing, whereas  floors are of concrete. In addition, f i r e safety standards  have improved since the time of the construction of many of these buildings, so that older low-rise buildings in Westminster must now  New  bring their f i r e alarm systems up to modern  standards.  Concerns Regarding Adherence to Building Plans Lax  inspection of buildings under construction was  by the New  Westminster Advisory  Planning Commission on a number  of occasions during the 1960s (New 5, 1966,  and July 20,  1969).  criticized  Westminster Columbian, August  The complaints involved the  f a i l u r e of builders to adhere to the plans they submitted to the City before they began construction. fencing of new  Parking,  landscaping,  and  apartment blocks were often severely altered  between the time the plans were submitted and the building completed.  Unfortunately,  when the infractions were not  up by inspectors, they were not corrected.  picked  As a result,  low-  r i s e buildings were often not provided with the prescribed number of parking  2.4  spaces.  The 1970s  Demand.  The demographic forces that pushed for purpose-  designed apartment building construction in the 1960s continued into the 1970s, although with diminishing  intensity.  For  instance, the net change in the number of households in the 34 age bracket,  15-  the primary group for rental housing demand,  declined from an annual average of 116,500 in 1971-1976 to 90,100 in 1976-1980 in Canada (Clayton Research Associates  1984,  B-3) . Decreasing Supply.  Between 1970  and  1973  apartment dwelling  s t a r t s averaged around 100,000 per year in Canada (Steele Series S190-194).  The  forces maintaining  t h i s high level of  multiple rental starts included the long planning preconstruction  1983  and  lags, r i s i n g i n f l a t i o n a r y expectations,  and a  low real mortgage rate. However, in 1974, 1983  only 74,025 starts were recorded  Series 190-194).  The  (Steele  same pattern holds true for  New  34 Westminster, although there i s some indication that starts actually f e l l several years e a r l i e r .  Causes of Decreased Supply.  The forces leading to a decline  in apartment building construction beginning in 1973 include decreasing  rental rates brought about by the late 1960s boom in  rental apartment construction, lower incomes of people renting apartments and thus lowered a b i l i t y to pay, movement of renters to ownership, changes in government deductions, and government  p o l i c i e s around income tax  regulation of the rental housing  industry which led to decreased investment.  Although there  was  a slowdown in apartment construction, i t was short-lived. The most s i g n i f i c a n t factor leading to decreases in apartment unit supply was the changes in income tax regulations in 1972, referred to above, that removed the incentives to invest in rental apartment construction.  As a r e s u l t , apartment  construction slowed down dramatically in 1974 in Canada, and led to shortages of rental apartment units in major Canadian c i t i e s in the mid-1970s.  New Programs to Encourage Apartment Construction. federal government  When the  realized that rental apartment shortages  existed, they introduced a number of programs in the mid-1970s to encourage rental apartment construction. the Federal government  reversed  In December  i t s position and  allowed losses from apartment operation  1974,  temporarily  to be deducted from  35 other  income on new multi-unit r e s i d e n t i a l buildings (MURBs) for  which construction was started within a s p e c i f i e d period. MURB provision was extended annually u n t i l the end of 1979, i t was terminated for new construction.  This when  It reappeared for one  year i n 1981. The MURB provisions are referred to as tax expenditures as opposed to the Assisted Rental Program (ARP)  and the Canada  Rental Supply Program (CRSP) which are referred to as expenditure subsidies.  Under MURB the federal government did  not a l l o c a t e a s p e c i f i c amount of money for the program, but rather allowed certain income tax deductions.  Under ARP and  CRSP s p e c i f i c amounts of money, in the form of grants or loans, were set aside as subsidies for rental construction. Between 1975 and 1979,  approximately 19,000 units of rental  housing in the Lower Mainland received assistance through MURB provisions.  In New Westminster, for the same period, 1,052  units received benefits under the MURB program(Kamenz 1989, 36) Another 1970s rental supply program to encourage apartment construction was the 1975 i n i t i a t e d Assisted Rental Program (ARP).  This program at f i r s t provided d i r e c t annual subsidies  to p r i v a t e l y i n i t i a t e d rental projects.  Program d e t a i l s changed  over i t s four years of operation, but e s s e n t i a l l y i t provided a 5 to 15 year subsidy  stream which decreased annually.  There  were r e s t r i c t i o n s on rents, unit size, and unit cost.  Those  formulating  the program wanted regulations that ensured that the  stock remained as rental for a period of time and that i t be of  36 moderate price and In 1976  ARP  size.  changed from a grant to an interest free loan  which increased the attractiveness of stacking MURB and Between 1976  and  1979,  seven thousand eight hundred and  ARP. eighty-  three rental units received assistance under the ARP program in the Lower-Mainland of B r i t i s h Columbia , while 609 rental units in New 39).  Westminster received help under this program(Kamenz New  government commitments to the program ceased in  1989, 1978.  As a result of these government i n i t i a t i v e s , apartment starts surged in 1976 and improved.  1977,  and conditions in the rental market  Average rent increases declined and vacancy rates  increased.  Over 40 percent of a l l apartments b u i l t in the 1970s  received d i r e c t assistance in one  form or another from the  federal government, and of these, over 51 percent were projects sponsored by private developers  (Clayton Research Associates  1984b, 9). In 1978  Federal government subsidies were reduced, and market  rental apartment construction declined steadily throughout the remaining 1970s in Canada.  By 1980,  starts had f a l l e n to 10 percent  private market rental  of t o t a l starts (Clayton  Research Associates 1984b, 10). By the end of the 1970s eight hundred and seventy thousand apartment units had been constructed  in Canada which was  s l i g h t l y more than had been b u i l t in the 1960s. area of New  In the study  Westminster, apartment construction was down to  units, considerably less than the 3247 units produced in the  1220  37 1960s (City of New  Westminster Planning Department 1989).  2.5 The 1980s Demand.  Recovery in rental construction was  increasingly unfavorable  tempered by  demographics in the 1980s.  annual net household formation  in the 15-34  Average  age bracket  was  expected to decline from 103,250 households in 1971-81 to 62,100 households in 1981-86, and only 13,700 households in 1986-91. In addition, l i t t l e change was  expected in net household  formation aged 65 and over (Clayton Research Associates, 1984b, B-3). Growth in rental construction was also hampered by the continued  i n a b i l i t y of the rental population to pay  increased  rents and a lack of government programs to attract investors into the rental apartment construction industry. c i t i e s experienced  Although some  increases in rental demand due to i n -  migration, o v e r a l l , the net demand for rental housing  was  unlikely to grow substantially, although there would in the age composition replacement demand. numbers of in-migrants 1980s.  be a s h i f t  of this demand and an increase in The lower-mainland experienced  large  during the early and later parts of the  This led to increased rents in a l l areas including the  study area of New  Supply.  Westminster.  Construction of apartment units dropped off  considerably in Canada in the 1980s, and averaged only about  38 15,000 units per year during the f i r s t half of the decade. private sectors share of new  The  apartment construction in  comparison to the public sectors dropped appreciably.  Few  of  the units constructed by the private sector were for rental purposes, and in fact were strata t i t l e d so they could be sold to individual owners.  Owners would often rent them out after  they had purchased them from  developers.  In the study area the number of low-rise apartment units increased by 426 between 1980 Planning Department 1989).  and  1988  (City of New  Westminster  This represents only an 8 percent  addition to the e x i s t i n g stock.  Government.  The government introduced the Canada Rental  Supply Plan (CRSP) in November, 1981. developers  of new  free loans.  This program provided  private rental housing with 15-year interest  Funding for the program was  in tight rental markets.  limited to 30,000 units  Loans of up to $15,000 per unit were  approved. Under CRSP regulations, developers  were required to offer  one-  t h i r d of the units in each development for p r o v i n c i a l rent subsidy.  Another regulation ensured that the development had to  be physically accessible to the disabled, and that a minimum of 5 percent of the units had to be designed for the disabled. CRSP loans could not be used in conjunction with MURB or provincial assistance s i m i l a r to CRSP. B r i t i s h Columbia in  1984.  CRSP came to and end in  39 In the Lower Mainland, 3,970 rental units received assistance under the CRSP program from 1982 to 1984.  In New Westminster  531 rental units were constructed under the program. Kamenz (1989, 52) concluded that market-welfare programs such as MURB, ARP, and CRSP "overwhelmingly concentrated in the established areas l i k e Burnaby, New Westminster, North Vancouver City, Richmond and Vancouver".  He found that 79 percent of, MURB  units, 83 percent of ARP units, and 70 percent of CRSP units were constructed in these Lower-Mainland areas(Kamenz  1989, 52).  In 1989 Provincial and, in the case of Vancouver, Municipal programs have been i n i t i a t e d to encourage the building of apartment rental units.  2.6 Summary This chapter i d e n t i f i e s  some of the reasons why low-rise  apartment buildings were b u i l t in New Westminster during the years 1910 through 1986.  The demand factors causing the  increase in apartment construction were found to be increasing urbanization, increases in the number of those in the apartment renting ages of 15 to 34, especially during the 1960s and 1970s, and increases in other forms of non-family households such as the divorced, separated, and widowed. Supply factors encouraging the construction of apartment units, especially in the 1960s and 1970s, were found to be increasing land costs in c i t i e s that make higher density r e s i d e n t i a l construction more economical and government  programs  40  that both make apartment  construction more f i n a n c i a l l y rewarding  and easier to undertake. F i n a l l y , the analysis of apartment construction  in the 1980s  indicates that when e f f e c t i v e demand i s lacking, because those demanding rental housing do not have the a b i l i t y to pay, and government w i l l i s lacking in providing  incentives to the  private sector to b u i l d rental housing, then very l i t t l e market rental housing gets b u i l t .  41 CHAPTER THREE BUILDINGS, NEIGHBORHOOD, AND LOCAL GOVERNMENT This chapter describes the existing stock of low-rise market rental buildings in the study area in terms of the numbers and location of buildings within the study area, age of the present stock, size of buildings and apartment units, building and s i t e design, rental price, and present building condition. In addition, neighborhood conditions are considered, followed by a description of local government i n i t i a t i v e s in dealing with the stock.  3.1 BUILDINGS Number and Location of Low-rise Buildings Most Dwelling Units are Low-rises.  The 1986 Census of Canada  indicates that there were 6920 dwelling units in the study area. There were 4880 dwelling units in the ' a l l other dwelling types' category, which includes low-rise buildings, and t h i s category 5 represents 71 percent of a l l dwelling units i n the study area. Apartments over 5 stories account for 22 percent of a l l dwelling units in the study area, and single detached dwellings account for 7 percent.^  The 1981 Census of Canada data on the study area suggests that 95 percent of the ' a l l other dwelling types' are made up of units in low-rise buildings. ^ Figures supplied by the New Westminster Planning Department in.1989 suggest that there were 4864 apartments in 160 low-rise buildings in the study area.  42  Eastern Brow-of-the-Hill  has the Largest Number of Low-rises.  Sixty percent of apartments in the study area's low-rise buildings are located in the eastern neighborhood.  Brow-of-the-Hi11  City of New Westminster Planning Department  figures for 1989 indicate that there are 2891 apartments in 87 low-rise buildings in t h i s area.  The Uptown neighborhood has  1682 (34%) low-rise apartments in 59 buildings, while the western Brow-of-the-Hill  area has 291 (6%) low-rise apartments  in 14 buildings.  Nature of Tenure Most Low-rise units are Purpose Designed Rental Units.  In  1986, eighty-seven percent of the dwelling units in the study area were rentals (1986 Census of Canada).  Of the existing 4864  apartments in low-rise buildings, 4337 apartments making up 89 percent of the t o t a l , were b u i l t by the private sector for rental purposes according  to figures supplied by the City of New  Westminster's Planning Department. contained  in 146 low-rise buildings.  These apartments are In addition there are 222  (5%) units in 5 low-rise coops, and 305 (6%) dwelling units in 9 low-rise condominiums.  There are l i k e l y a number of condominium  units that are rented, but they were not b u i l t for the rental market.  43 Building and Apartment Size Almost One-half of Low-rise Buildings Contain More than 32 7  Suites Each.  Forty-seven percent (68 buildings) of the 146  low-rises b u i l t for rental purposes in the study area contain more than 32 dwelling units each.  This group of low-rise  buildings vary in size from 32 to 117 dwelling units.  Only  three of these larger buildings were b u i l t p r i o r to 1960, with the majority b u i l t in the 1960s and 1970s. Thirty-two percent(47 buildings) of the purpose designed lowrise rental buildings in the study area have between 16 and 32 units.  F i n a l l y , 31 buildings representing 21 percent of the  purpose-designed, low-rise rental stock have less than 16 dwelling units.  The majority of these smaller buildings were  b u i l t prior to 1960.  Seven of the 14 low-rises in the western  Brow-of-the-Hill area are of t h i s s i z e . The Majority of Apartments in Low-rises are One Bedroom.  Sixty percent of low-rise apartments  have one bedroom.  In addition, there are another 10 percent  that are bachelor units. apartments  in the study area  Therefore, 70 percent of a l l  in low r i s e rental buildings are smaller units,  suitable for small households.  Two and three bedroom units make  Buildings with 32 or more apartments are defined as large buildings, while those with between 16 and 32 apartments are defined as medium sized buildings. Small buildings are defined as having less than 16 apartments.  44 up only 30 percent of the low-rise rental stock in the study area (City of New Westminster Planning Department 1989). Building Design Typical Appearance.  The t y p i c a l low-rise in the study area i s  a f l a t roofed, wood frame building of either 3 or 4 f l o o r s , with the f i r s t f l o o r , at times, below grade.  In the early 1960s the  City allowed 20 percent of the area of one floor for a penthouse, so that some low-rises have a small box-like structure forming the uppermost floor of the building.  Exterior  cladding i s usually stucco, or cedar, or a combination of the two. Access to individual dwelling units i s by means of a central c o r r i d o r , usually running across the s i t e , in the case of buildings s i t e d on lots with s u f f i c i e n t frontage.  The  i n d i v i d u a l units are accessed by stairwells at each end. In the case of narrower lots with smaller buildings, the corridor runs from front to back, with stairwells down both the front and rear of the building. Parking i s either underground, at grade under a portion of the building, or at the rear, accessible from the lane or from a driveway down one side of the building.  Landscaping  i s usually  sparse.  Standard Interior Layouts.  Most low-rise buildings contain a  mix of bachelor, one, and two bedroom units, with the most popular size being the one bedroom unit.  The bachelor units  45 have one  large room for sleeping, eating and entertaining.  one end,  often separated by a p a r t i a l d i v i d e r , is a kitchen with  stove, sink, and bathroom. One  refrigerator.  At  These units have a private  Bachelor units are usually around 600  square feet.  bedroom units usually have a combination l i v i n g and  dining  room, with a kitchen separated by a p a r t i a l or f u l l wall. Kitchens are always near the front door of the apartment to provide some privacy by separating areas of the unit. well.  the entrance from the  living  There i s a bedroom and private bathroom as  Most of these units would be about 750  square feet.  bedrooms units are similar except for the extra bedroom. bedroom units are around 900  Two Two  square feet.  Monotonous S i t i n g C r i t e r i a .  City of New  Westminster  development regulations pertaining to building size and  site  coverage, when f u l l y taken advantage of by builders, led to monotonous s i t i n g of buildings.  In the 1960s and  1970s,  buildings were designed to contain the maximum number of square feet allowed under the Zoning Bylaw for the RM-3 years, building size was 1.2,  and an allowable  Zone.  In those  controlled by a floor area ratio of  site coverage of 40 percent.  These two  development controls ensured that the building constructed be no more than three f l o o r s , according City of New  would  to Percey Perry of the  Westminster's Planning Department.  In addition, the  National Building Code r e s t r i c t e d wood frame construction to a maximum of three  floors.  46 Attempts to provide some open space around buildings resulted in s i t i n g monotony as well.  Front setback regulations  of 25 feet and side yard setbacks of 50 percent of building height, ensured that buildings would be f a i r l y close together, and a l l be set back a monotonous 25 feet from the front property line.  Of course they wouldn't go further back as they often had  to use the 25 foot rear setback for parking.  Taken together,  the development controls referred to above produced buildings of uniform height that seemed to be cramped together in long monotonous rows, so that they were often described as a row of 'cracker boxes'.  Landscaping  was  kept at a minimum on most  s i t e s , l i k e l y for economic reasons, thereby adding to the dreariness of the area.  Parking a Problem.  For the 3312 dwelling units in low-rise  buildings in the study area, there are 3170 on-site parking Q  spaces(City of New  Westminster Planning Department 1989).  provides .95 parking spaces per dwelling unit.  This  This compares to  Figures concerning on-site parking, presence of elevators and period of construction of low-rise buildings in the Brow-oft h e - H i l l and Uptown neighborhoods were obtained from the City of New Westminster Planning Department. The Planning Department's boundaries for these two neighborhoods d i f f e r s s l i g h t l y from the boundaries of the study area used in t h i s thesis. The City uses a base of 182 buildings and 5340 apartments, while the study area's base i s 160 buildings and 4854 dwelling units. It was not possible to correct the City's figures for c h a r a c t e r i s t i c s such as parking, elevators and age to apply to the study area, so that in the following discussion of these c h a r a c t e r i s t i c s the City's base i s used in referring to the study area.  47 .96 on-site parking spaces per dwelling unit in the Uptown area. In the 1960s developers  were expected to provide only .4 parking  spaces per apartment, but t h i s was  gradually increased so that  comtemporary zoning bylaw regulations c a l l for 1.2 off street parking spaces for each one bedroom apartment(City Westminster Planning Department 1989).  of  New  However, the area i s  s t i l l l e f t with less off street spaces than there are apartments. residents who  Many seniors do not drive or own do drive own  several vehicles.  cars, but many  As a result  there  is inadequate off street parking for apartments as i s evidenced by the succession of cars parked down both sides of streets in the study area.  Elevators a Plus.  One  hundred and forty-two  buildings in the study area containing 4819 equipped with elevators (City of New Department 1989). percent  low-rise  dwelling units are  Westminster Planning  These 142 low-rise buildings represent  78  of the buildings and 90 percent of the dwelling units in  a l l low-rises in the study area.  Such a large number of  apartments serviced by elevators i s important considering the large number of seniors in the study area who problems i f there were no elevator service.  would face real The Uptown area is  s l i g h t l y ahead of the Brow-of-the-Hill neighborhood in the proportion of i t s buildings and dwelling units serviced by elevators. elevators.  Buildings constructed p r i o r to 1960  do not have  48  Open Space Lacking.  Open space i s a problem with s i t e s in the  study area that are covered by so much building and parking. There i s simply no room for private outdoor on-site areas for tenants.  Patios for ground level apartments are a r a r i t y in  1960s construction, although some were provided in buildings of 1970s vintage.  Balconies Abound.  In order to meet tenant demands for some  open areas, most dwelling units are provided with balconies.  In  f a c t , 146 low-rise buildings in the study area, containing 4984 dwelling units, have balconies (City of New Department 1989).  Westminster Planning  Eighty percent of a l l low-rise buildings, and  93 percent of a l l low-rise dwelling units in the study area have balconies.  Low-rise buildings that predate 1960 were usually  b u i l t without balconies.  Social and Recreational Spaces.  There are no figures  available on the provision of s o c i a l and recreational  facilities  in low-rise buildings. Personal observation would suggest that most post-1960 low-rises would have laundry f a c i l i t i e s .  A good  number had social/recreational rooms for the use of tenants.  A  minority would have had swimming pools and/or saunas since t h i s would have been uneconomical for buildings of medium density. The provision of these f a c i l i t i e s was much more common in highrises.  It i s unlikely that any f a c i l i t i e s , other than laundry,  49 was provided low-rise apartment tenants prior to the 1950s.  Limited Storage C a p a b i l i t y . The  in-suite storage capacity of  purpose designed low-rise units i s generally poor, with only one or two small closets for c l o t h i n g . However, there i s usually provision for storage in a basement locker area. unit i s given a small(6' x 6') Although  Each apartment  locker for the storage of goods.  useful for storage, these lockers are seldom secure,  and often the objects of thefts, according to City Police. Period of Construction One-fifth Over 30 Years Old.  City of New  Westminster data on  the age of existing low-rises in the Brow-of-the-Hi11 and Uptown neighborhoods suggest  that 34 buildings containing 447 g  apartments were b u i l t p r i o r to 1960.  These 34 buildings  represent 19 percent of low-rise buildings in two neighborhoods, but only 8 percent of the dwelling units.  The reason for t h i s  discrepancy i s that buildings constructed before 1960  tended to  contain fewer dwelling units than buildings constructed after 1960. Fifty-one percent of the low-rise buildings constructed prior to 1960 were b u i l t in the Uptown neighborhood, while 18 percent were b u i l t in the eastern Brow-of-the-Hill area, and 31 percent  Table 2 provides information on number of apartments and low-rise buildings constructed before 1960, and during the 1960s, 1970s and 1980s in the study area.  in the western Brow-of-the-Hill area.  For the western Brow-of-  t h e - H i l l area, 10 of i t s 14 low-rises were b u i l t before  1960.  Sixty-four percent of the western Brow-of-the-Hi11's low-rise building stock is over 30 years of age. TABLE 2 NUMBER OF APARTMENT UNITS AND LOW-RISE BUILDINGS IN THE STUDY AREA BY PERIOD OF CONSTRUCTION Period of Construction  Number of Apartment Units 447  Pre 1960s 1960s  3247  1970s  1 220  1980s  426  Total  5340  (8.3)* (60.8) (22.8) (8.1 ) (100)  Number of Buildings 34 98 34 16 182  (18.7) (53.8) (18.7) (8.8) (100)  Source: City of New Westminster Planning Department 1989 •Figures in brackets represent the percentage of a l l apartments or a l l low-rise buildings in each period of construction.  Most B u i l t  in the 1960s.  Ninety-eight low-rise buildings  containing 3247 apartments were constructed in the 1960s in the Brow-of-the-Hill and Uptown neighborhoods.  These 98 low-rise  buildings represent 54 percent of a l l low-rise buildings in these neighborhoods.  Sixty percent of the apartments in low-  r i s e buildings in these neighborhoods were b u i l t during the 1 960s. Sixty percent of low-rise buildings constructed in the 1960s  51 were b u i l t in the eastern Brow-of-the-Hill neighborhood, followed by the Uptown area with 35 percent of the low-rises b u i l t during this period.  Only 3 percent of 1960s b u i l t  low-  rise stock was constructed in the western Brow-of-the-Hi11 neighborhood. Only 34 low-rise buildings representing 19 percent of a l l lowrise stock in the two New in the 1970s.  Westminster neighborhoods were b u i l t  These 34 buildings contain 1220 dwelling units or  23 percent of the dwelling units in low-rises.  The majority of  these low-rise .buildings were b u i l t in the eastern Brow-of-theH i l l neighborhood, while the rest were constructed in the Uptown area. In the 1980s only 426 dwelling units in 16 low-rise buildings were constructed in the two neighborhoods.  This represents only  9 percent of a l l low-rise buildings, and only 8 percent of the dwelling units in low-rises.  In recent years many more  apartments in high-rises have been constructed in the study area than apartments in low r i s e s .  In addition, a few townhouse  projects and stacked townhouse projects have been undertaken in the study area.  By 2010, Years Old.  75 percent of Low-rises Will be Over 40 Within 20 years, three-quarters of the low-rise  buildings in the study area w i l l be more than 40 years old, i f present stock remains standing. rehabilitation  of housing  The benchmark age for major  stock i s 50 years and 25 years for  52  repair work (Canada Mortgage and Housing 1980). may  Some buildings  last longer, while others require this type of attention  sooner. The  reason for differences in building longevity i s that  there  is no d e f i n i t e , c r i t i c a l age at which a building must be r e h a b i l i t a t e d because deterioration of building components is a function of the causes of deterioration to which they are exposed (weather, wear and tear, etc.), and the q u a l i t y of construction and maintenance of these components.  With proper  maintenance and modernization of a building's components, i t s l i f e is virtually i n f i n i t e .  As low-rise buildings become older,  issues of proper maintenance, repair, and updating become c r u c i a l for the longevity of the Building  stock.  Condition  L i t t l e Information Available. Very l i t t l e  information  is  available on the physical condition of low-rise buildings in B r i t i s h Columbia, and e s p e c i a l l y on the stock  in the study area.  The Government of the Province of Ontario did commission a study of i t s low-rise buildings, and one of the areas the commission looked at was  the physical condition of the low-rise  stock.  Information on building condition in the study area i s contained  within the 1981  Census of Canada.  the questions asked of respondents was dwelling they were l i v i n g in was including desirable remodelling  At that time one of  whether or not  the  in need of repairs, not or additions.  asked to answer in one of the following ways:  Respondents were  53 No, only regular maintenance i s needed such as painting, furnace cleaning, e t c ) ; Yes, minor repairs are needed(missing or loose floor t i l e s , bricks of shingles, defective steps, r a i l i n g or siding, e t c ) ; or Yes, major repairs are needed (defective plumbing or e l e c t r i c a l wiring, structural repairs to walls, f l o o r s or c e i l i n g s , etc) (1981 Census of Canada). Although the question represents  on building condition in the 1981  census  the tenants assessment of building condition, and i s  therefore not as accurate as, for instance, the use of expert appraisal of building condition u t i l i z e d in the Ontario the 1981  census question  does give some indication of  condition of dwelling units in the study area.  study,  the  Condition  of  building by s t r u c t u r a l type, such as low-rise, single detached, and so on i s not given.  However, the assumption made here i s  that since approximately 70 percent of dwelling units in the study area are in low rise buildings, that the aggregated figures on building condition are indicative of the condition of low-rise buildings. ^* 1  Only 7 Percent Need Major Repairs, Are Rentals.  But Most  Only 460 owned and rented dwelling units out of a  base of 6579 dwelling units in the study area required major repairs.  This represents  about 7% of the dwelling units with  serious s t r u c t u r a l and/or mechanical problems.  However, 435  Table 3 provides information on condition of dwelling units in the study area by neighborhood.  rented  54 units of this stock requiring major repair, or 95 percent of i t are rental units (1981  Census of Canada).  Some areas of the study area have more units in need of major repairs than others.  For instance, the western Brow-of-the-Hill  neighborhood, which does have a high percentage  of pre-1946 low-  rise stock, i s very much over represented with dwelling units requiring major repair.  It has 9 percent of the dwelling units  in the study area base of dwelling units, but has 21 percent of a l l dwelling units in the study area requiring major repair. Both the eastern Brow-of-the-Hill and the Uptown neighborhoods are under represented with less units requiring major repairs than might be expected considering there respective proportion of a l l dwelling units.  Are Major Repairs Being Undertaken?  Major repairs to  e l e c t r i c a l or s t r u c t u r a l systems in buildings require a building permit to undertake the r e h a b i l i t a t i v e work. of New  According to City  Westminster figures taken from building permit records,  only $33,500 was  spent on r e h a b i l i t a t i o n to the low-rise stock  in the Brow-of-the-Hill area in 1987, and only $23,000 was in the Uptown Area.  spent  The figures for the two areas for 1988 were  $102,100 and $87,849 respectively.  Does t h i s represent an  adequate expenditure of money for repairs? If one assumes that each dwelling unit in a low-rise produces, on an average,  $5000 of income per year, then the combined  income from a l l market rental low-rise apartments in the study  55 area i s approximately $22 m i l l i o n per annum.  The t o t a l amount  invested in r e h a b i l i t a t i o n of low-rises was $246,449 in 1987 and 1988.  This expenditure on major repair represents only .6  percent  per annum of revenue generated by low-rises in the study  area.  An industry 'rule of thumb' i s that maintenance and  repair usually account for between 5 and 10 percent  of building  revenue ( e f f e c t i v e gross income) depending on the age of the building.  Certainly the .6 percent  expenditure on major repairs  seems very low when industry 'rules of thumb' are considered.  The  17% That Require Minor Repairs Are Mostly  Rentals.  Minor repairs are important because they solve the  problems that i f l e f t unattended over time, w i l l produce major s t r u c t u r a l problems in the future.  For instance,  missing  bricks, shingles, and siding w i l l allow water to penetrate, eventually leading to wood rot and weakening the s t r u c t u r a l i n t e g r i t y of the building.  It i s of concern that 17 percent of  the eastern and western Brow-of-the-Hill's percent  dwelling units and 15  of the Uptown neighborhood's dwelling units are in need  of minor repair, considering that a majority of units in these neighborhoods were b u i l t after 1960.  One-fifth of the dwelling  units of both neighborhoods require either minor or major repairs, and between 80 and 90 percent of those units are rental units (1981 Census of Canada). What i s even more disconcerting, i s that 50 percent units in the western Brow-of-the-Hill  of the  neighborhood require  56 either minor or major repairs, and are rental.  90 percent of those units  F i n a l l y , one quarter of a l l dwelling units in the  study area require minor or major repair (1981 Census of Canada). The Good News. The good news i s that 75 percent of the stock in the study area seems to be in good shape, requiring only regular maintenance (1981 Census of Canada).  A discussion on  maintenance practices w i l l be taken up in Chapter Six. TABLE 3 CONDITION OF RENTED DWELLING UNITS BY STUDY AREA NEIGHBORHOOD, 1981 Neighborhood  Needs Regular Maintenance Only  Needs Minor Repai r  Needs Major Repair  Western Brow-of-the-Hill  235  1 60  1 20  Eastern Brow-of-the-Hill  2330  530  195  Uptown  1 795  280  1 20  Total  4360  970  435  Source: 1981 Census of Canada  Rent Per Month Supply and demand for rental units interact to produce a price per rental unit in the absence of any sort of rent controls.  Lowest Rents in the Lower-Mainland.  Figures supplied by  Canada Mortgage and Housing suggest that as of October, 1989,  57 New  Westminster  had the lowest average rental rates of any area  in the Lower Mainland (CMHC Rental Market Survey Report October, 1989).  Average rental rates for a bachelor suite at that time  was $373 per month and compares to $486 in Burnaby and $374 in Delta.  These figures suggest that average rents in New  Westminster's  bachelor apartments are 24 percent lower than  Burnaby's bachelor unit rates. Lower rents are also noted for New Westminster's  one bedroom  apartments.  Average rents for one bedroom units are $470 in New  Westminster,  $554 in Burnaby, and $517  in Surrey.  One bedroom  units, the most common type of unit in low-rises in New Westminster,  are 15 percent less expensive than comparable units  in Burnaby.  Average rents for two and three bedroom units in  New Westminster  are not as low as comparable units in some of  the outlying municipalities such as Maple Ridge and Coquitlam, but are s t i l l lower than more central areas l i k e Burnaby. However, only 25 percent of the study area's low-rise stock are two and three bedroom units.  The Bad News.  Although rents for bachelor and one bedroom  units are the lowest in the area, they have been r i s i n g s i g n i f i c a n t l y in New Westminster have been in every other centre.  over the past two years as they The average price of a  bachelor suite rose from $322 in October, 1988 to $373 in October, 1989, and for a one bedroom unit from $413 to $470 (CMHC Rental Market Survey Report October, 1989).  This  58 represents a 16 percent bachelor  increase in the average price of a  unit, and a 14 percent  a one bedroom unit.  increase in the average price of  This i s of p a r t i c u l a r importance to the  large number of low income renters in the study area. Although there has been continuous rent increases over the past 30 years in New  Westminster, they have generally been under  10 percent per annum.  The only exception was  in 1981-82 when  increased demand for rental accommodation, the result of a bouyant P r o v i n c i a l economy and r e s u l t i n g inmigration, produced a 22 percent  increase.  From 1984  to 1988  the City averaged a 5  percent per annum increase in rents (City of New  Westminster  Planning Department 1989). Despite h i s t o r i c a l l y low rent increases in New  Westminster,  the l a t e s t round of increases i s amongst the highest in the lower mainland.  The  16 percent  apartment rates i s t h i r d highest Burnaby's 30 percent are higher.  New  increase in average bachelor in the lower mainland.  increase and Delta's 21 percent  Only  increase  Westminster i s sixth highest in terms of  average rental increases for one bedroom apartments (CMHC Rental Market Survey Report October 1989).  It Can Get Worse. New 1989  Rental rates have continued  to increase in  Westminster, and in the study area since CMHC's October, survey.  A sample of low-rise apartment buildings selected  for analysis on ownership c h a r a c t e r i s t i c s in Chapter Five reveals rent increases since October, 1989.  One  reason for t h i s  59 increase i s that New Westminster has one of the lowest vacancy rates for private market rental apartments in the lowermainland.  The vacancy rate for bachelor units, as of October,  1989 was zero, and for one bedroom units, i t was 0.4 percent (CMHC Rental Market Survey Report October, 1989).  Such low  vacancy rates place a continued upward pressure on rents.  Terms of Tenancy.  Typically, the terms of tenancy in market  rental apartments i s on a month-to-month basis.  Very few  buildings would follow any longer term leasing p o l i c y .  3.2 NEIGHBORHOOD QUALITY Neighborhood quality i s usually determined by such c h a r a c t e r i s t i c s as external appearance of buildings, parking and t r a f f i c congestion, condition of infrastructure such as roads and sidewalks,  incidence of crime and poverty, as well as l o c a l  amenities, including shopping, recreational, medical, and s o c i a l amenities.  Appearance of Buildings Observations made while driving through the study area, as well as information from the sample of apartment  buildings  selected for ownership analysis, suggest that many low-rise buildings have a poor exterior appearance.  Faded and peeling  paint, stains on stucco, rotting wood in building trim, rusted r a i l i n g s , and paper strewn yards contribute towards poor  60  building  appearance.  The poor exterior appearance of some low-rise builings has also been noted by others in the community.  For instance, some  of the seniors that Val MacDonald of the Seniors Bureau works with complain of the poor appearance of the low-rise buildings in which they l i v e .  Parking and T r a f f i c Congestion There are more vehicles requiring parking than there are o f f street parking spaces.  The reason for the lack of parking i s  that zoning regulations applicable at the time low-rises were b u i l t , d i d not require developers to provide s u f f i c i e n t parking. In addition, individuals now own more vehicles than they used to when these buildings were constructed.  V i s i t o r s to the area  require parking spaces for their cars.  As a result of these  demands, streets are usually congested with cars l i n i n g both sides of neighbourhood Furthermore,  the medium density development produces a great  deal of t r a f f i c 'rat  streets.  for the area, and when this i s combined with the  running' by people cutting through this r e s i d e n t i a l  neighborhood,  t r a f f i c becomes a problem.  Crime According to the New Westminster City Police, numbers of some types of crimes committed are higher in the study area than they are in other areas of the C i t y .  City constables are required to  61 respond to complaints in the study area somewhat more than in other neighborhoods. available.  However, exact s t a t i s t i c s were not  When interviewed, Corporal Donnelly of the  New  Westminster Police Department was quick to point out that no other area of the City has a greater concentration of population than the study area. The most common crime committed in the study area i s theft from automobiles.  This i s not surprising given the number of  cars l e f t on the street with their contents open to public view. Other crimes committed in the area include breaking and entering with theft, vandalism involving automobiles and buildings, as well as family relations disputes usually involving alcohol. Sixteen to twenty-four year olds are most often the perpetrators of crimes and most often the victims of crime. They are most often the victims because they are usually out later in the evenings and are most often in areas were crime occurs (night c l u b s , e t c ) . Seniors are not often victims of crime, according to Constable Donnelly. publicized.  However, when they are victimized i t tends to be more Val MacDonald of the Seniors Bureau, states that  some seniors l i v i n g in the study area may  feel a l i t t l e  apprehensive about being victimized, and won't go out at night, but that this i s not a general complaint among the seniors.  Incidence of Poverty In 1982 the Planning Department of the City of New  Westminster  62 did a study on the special need r e s i d e n t i a l f a c i l i t i e s in New Westminster.  The study addressed the question of whether or not  the housing stock in the City adequately met the shelter needs of those in the community with an a f f o r d a b i l i t y  problem.  Individuals having a housing a f f o r d a b i l i t y problem where described as those receiving income assistance from the then Ministry of Human Resources(now the Ministry of Social Services and Housing), and those receiving help through G.A.I.N. for seniors. They discovered that 17.3 percent of the t o t a l households in the City of New  Westminster  were in receipt of assistance  through one of these programs.  Furthermore, they found that 53  percent of those in need of f i n a n c i a l help with housing l i v e ' i n purpose designed apartment  units.  They also found that the eastern and western Brow-of-the-Hill neighborhoods  had the highest numbers of those receiving  f i n a n c i a l help (22%), while the Uptown neighborhood had the t h i r d highest number (13.3%) in the City.  However, when those  in need of help with housing are expressed as a percentage of their own population, the Brow-of-the-Hill neighborhood drops to fourth place and the Uptown area drops to seventh.  There i s a  great deal of poverty in the study area in comparison to other areas of New Westminster,  but that i s due, to some extent, to  the fact that more people l i v e in these areas. It i s unlikely that anything has changed since 1982 to a l t e r the d i s t r i b u t i o n of poverty in New Westminster, and that  63  neighborhoods in the study area s t i l l contain s i g n i f i c a n t numbers of people l i v i n g in poverty. Condition of Infrastructure Information supplied by the Planning Department, City of New Westminster suggests that many of the services in the study area are very o l d .  E l e c t r i c i t y and water were i n s t a l l e d in 1891,  sewers in 1912, sidewalks in 1912, and storm sewers in 1971. However, the City was not able to provide information on ongoing expenditures on services by geographic area, so that i t i s impossible to know to what extent these services are being rehabilitated.  It i s safe to say that probably very l i t t l e i s  being spent on improvements in the study area.  Neighborhood Amenities The study area i s central to a l l amenities.  It i s within a  six or seven block distance to l i b r a r i e s , parks, professional and commercial services, a regional college, arts and entertainment centers, and sports and recreational  facilities.  In addition, i t i s extremely well served by bus that l i n k s the area to a l l areas of the lower mainland as well as to the two ALRT stations.  3.3  Local Government P o l i c i e s Zoning  There are a number of d i f f e r e n t zoning designations for land in the Brow-of-the-Hill and Uptown neighborhoods.  In the study  64 area, a l l parcels that are not zoned for commercial or multifamily uses are zoned RS-2 One Family D i s t r i c t .  In fact, multi-  family s i t e s were a l l RS-2 prior to an application for rezoning being successfully applied for.  For some time, the City has had  a policy of entertaining applications for rezoning  from RS-2 to  multiple family and judges each application on i t s merits. Within the study area there are a number of multiple d i s t r i c t s that d i f f e r in terms of the density of dwelling units and the type of structure allowed.  U n t i l recently, low-rise apartment  buildings were zoned RM-3.  Regulation  under this designation  allowed for the construction of a low-rise or high-rise building.  However, in September of 1989, the New Westminster  City Council passed a bylaw that rezoned 205 low-rise buildings, predominantly in the Brow-of-the-Hill 2(low-rise only).  and Uptown areas, to RM-  The rezoning was p a r t i a l l y undertaken to  remove the threat of low-rises being demolished to make room for high-rise buildings without f i r s t having to go through the rezoning process.  E x i s t i n g high-rises were rezoned to RM-4.  O f f i c i a l Community Plans for Neighborhoods New Westminster has an O f f i c i a l Community Plan that outlines the d i r e c t i o n of development in the City over the course of future years.  A number of neighborhoods have O f f i c i a l Community  Plans for their neighborhood that dictate what residents would l i k e to see in terms of future development in the neighborhood. There are no O f f i c i a l Community Plans, at present,  for the  65 eastern and western Brow-of-the-Hill or Uptown neighborhoods.  Demolitions According to the New  Westminster Planning Department there  were no apartment demolitions from 1976 to 1988.  In  1989,  demolition permits for two pre-1950s low-rise apartment buildings in the eastern Brow-of-the-Hill, one a 36 unit building and another  48 unit building, were granted in order to  erect a 108 unit condominium high-rise building. Conversion to Condominiums There have been only 10 applications for conversions to condominiums.  These a l l occurred in 1973-74.  Only 1 of these,  a 33 unit low-rise was approved before a moratorium on conversions was approved in 1975 Planning Department). place at the present  (City of New  Westminster  The moratorium on conversions i s s t i l l in time.  3.4 Summary The market rental low-rise stock in the study area can be characterized as being substantially large in number, providing f a i r l y good accommodation to small households at competitive but increasing rents.  Most of the stock i s r e l a t i v e l y new,  and  while the majority of the buildings are in good condition, a s i g n i f i c a n t number are not being kept in a s a t i s f a c t o r y state of repair.  While units are large enough, building design, physical  appearance, and landscaping leave something to be desired in many cases.  Although neighborhoods are central with good  f a c i l i t i e s , they are suffering from some deterioration as evidenced by higher than desirable rates of poverty and crime, and t r a f f i c congestion.  67  CHAPTER  FOUR  TENANTS  Building and neighborhood  neglect and deterioration often  result when such buildings and neighborhoods f a i l to s a t i s f y the needs of their inhabitants. Buildings should meet the shelter needs of their occupants.  Such needs would include appropriate  unit size, affordabi1ity, cleanliness and safety, attractiveness, and i n t e r i o r comfort.  Chapter Three presented  building c h a r a c t e r i s t i c s which serve as factors capable of s a t i s f y i n g or frustrating tenant needs.  This chapter examines  tenant c h a r a c t e r i s t i c s in order to determine  i f the f i t between  low-rise building and tenant c h a r a c t e r i s t i c s i s suitable. The chapter begins by looking at tenant crowding(density). This i s followed by an examination of tenant age, household  and  family c h a r a c t e r i s t i c s , education, labour force conditions, income, and m o b i l i t y .  11  The chapter concludes with a review of  the local l i t e r a t u r e on tenant s a t i s f a c t i o n with the low-rise building form.  Data on these c h a r a c t e r i s t i c s was obtained from the 1986 Census of Canada, and provides the data source for a l l discussion on tenant c h a r a c t e r i s t i c s in t h i s chapter. Such data is not disaggregated by dwelling tenure(owned or rented), or type of structure(single detached, low-rise) for most c h a r a c t e r i s t i c s . However, because 87 percent of dwellings are rented, and because 70 percent of dwelling units are in low-rise buildings, i t i s f e l t that conclusions arrived at from an analysis of this data are applicable to tenants of low-rise market rental apartment buildings.  68  4.1  Density  Crowding of Dwelling Units i s S i g n i f i c a n t l y Greater. are several ways to describe density in an area.  There  Persons per  acre and dwellings per acre provide us with two measures of crowding within a neighborhood.  If persons per acre i s used as  a measure, density i s 33 persons per acre (81.63 persons per hectare), given a population of 11,510 and a t o t a l area of 348.41 acres (141 hectares) in the study area (Census of Canada 1986).  This compares to the City of New  Westminster's  persons per acre (26 persons per hectare).  10.52  On the other hand,  i f dwelling units per acre are used as a measure, density i s 20 dwelling units per acre (49 per hectare) in an area containing 6920 dwelling units (Census of Canada 1986). Westminster has 5.11  units per acre or 12.63  Less Crowding Within Dwelling Units.  The City of  New  per hectare.  Density^ can also be  expressed as persons per dwelling unit, and can give us a means of assessing crowding within a dwelling unit. has 1.64  The study area  persons per dwelling unit, compared to 1.98  dwelling unit in New  Westminster, and 2.54  unit in the Vancouver CMA  persons per  persons per dwelling  (Census of Canada 1986).  This measure  of density indicates much less crowding within households for the study area in comparison to some other d i s t r i c t s .  Differences Within the Study Area.  There are differences in  69 density within the study area.  For instance, the western Brow-  o f - t h e - H i l l area, the smallest area in size (37 acres), has a density of 12.5 dwellings and 26 persons per acre. neighborhood t e r r i t o r i a l l y  The largest  i s the Uptown area (163 acres) and i t  has 16.96 dwelling units and 27 persons per acre.  The highest  density in the study area occurs in the eastern Brow-of-the-Hill neighborhood where densities approach 25 dwellings and 41 persons per acre in this 148 acre area. There are also differences in household density between neighborhoods within the study area.  The Uptown area i s lowest  with 1.56 persons per private household, followed by the eastern Brow-of-the-Hill neighborhood with 1.66 persons per private household.  The western Brow-of-the-Hill neighborhood had the  highest number of persons per private household with 2.01.  4.2 Age of Residents Fewer Children in the Study Area.  Children from 0 to 14  years of age represent only nine percent of the study population.  area's  This compares to 12 percent of the City of New  Westminster's, and 19 percent of the Vancouver CMA's populations in t h i s age group.  The largest age group in the study  population of children i s the 0 to 4 age group.  area's  The 0 to 4 age  group has four percent of the population of the study area, while the percentage of children in each subsequent age range (e.g. 5-9, 10-14) i s less than the percentage of the 0 to 4 age group.  Table 4 provides information on the age d i s t r i b u t i o n of  70 the study area's population in comparison to the age d i s t r i b u t i o n in the Vancouver CMA's population. There are differences within the study area.  For instance,  the western Brow-of-the-Hill neighborhood has approximately percent of i t s t o t a l population in the 0 to 14 age group.  19 The  Uptown neighborhood on the eastern side of the study area has only 7 percent of i t s population in the 0 to 14 age group.  Young Adults, Especially Young Males Predominate.  Over one-  t h i r d of the study area's population (38%) i s between the ages of 20 and 34. This compares to 32 percent of New Westminster City's population in this age group, and only 27 percent of the Vancouver CMA's population between 20 and 34. Forty percent of the study area's population of males are young men in the 20 to 34 age group.  The Vancouver CMA has only  27 percent of i t s male population in the 20 to 34 age range. There are differences between geographical areas of the study area in regard to this heavy concentration of young males.  The  western Brow-of-the H i l l neighborhood has the highest concentration, with 45 percent young men between 20 and 34 in i t s population of males, whereas the Uptown neighborhood has only 34 percent young men from 20 to 34 years of age in i t s male population.  Less in the 35 to 65 Year Group.  The Vancouver CMA has 37  percent of i t s population in the 35 to 65 age group.  In the  71 Vancouver CMA  these 'middle agers' outnumber the young adult  population (27%) by 10 percent.  The City of New  Westminster has  an even s p l i t with 32 percent in each of i t s 'young ' and middle age adult populations.  However, the study area has 38 percent  young adults and only 30 percent 'middle agers'.  TABLE 4 AGE DISTRIBUTION IN STUDY AREA AND VANCOUVER POPULATIONS BY PERCENT, 1986 Age  Study Area  years 0-4 5-9 years 1 0 - 1 4 years 15 - 19 years 20 - 24 years 25 - 34 years 35 - 44 years 45 - 54 years 55 - 64 years 65 - 74 years 75 years + Total  Vancouver  3.95 2.73 2.30 5.03 13.51 24. 19 12.51 8.21 9.94 9.94 7.64  6.58 5.93 5.87 6.81 8.60 18.59 1 5.38 10.52 9.58 7.26 4.81  100.00  100.00  CMA  CMA  Source: 1986 Census of Canada More Seniors.  There are s i g n i f i c a n t l y more seniors, as  percentage of the t o t a l population, in both New Westminster City and in the study area, than there are in the Vancouver Eighteen percent of both New  CMA.  Westminster's population, and of  the study area's population, i s made up of persons 65 and over. This compares to 12 percent of the Vancouver CMA's population over 65 years of age. The Uptown neighborhood  has one half of the 2025 persons over  72 65 in the study area, while the eastern Brow-of-the-Hill has the other half, with only a handful of seniors l i v i n g in the western Brow-of-the-Hill. Twenty-three percent of the study area's female population i s 65 and over age group, while only 12 percent of the male population of the study area i s in t h i s age category.  Females  outnumber males almost two to one in the over 65 age group in the study area.  4.3 Household and Family Characteristics According to 1986 Census of Canada data, the study area had a 12 private household base of 6915.  This represents 36 percent of  the City of New Westminster's 19,415 households.  The eastern  Brow-of-the H i l l area had the highest number of households in the study area with 53 percent(3680), followed by Uptown with 40 percent(2770)  and the western Brow-of-the-Hill area with 7  percent(465). Over 50 Percent One Person Households.  In the study area, 55  percent (3810) of households are one person households. compares to 43 percent and 28 percent for the City of  This New  . The 1986 Census of Canada defines a household as a person or group of persons(other than foreign residents) who occupy a dwelling and do not have a usual place of residence elsewhere in Canada. It usually consists of a family group with or without lodgers, employees, etc. However, i t may consist of two or more families sharing a dwelling, a group of unrelated persons, or one person l i v i n g alone.  73 Westminster, and the Vancouver CMA respectively.  The  predominance of the one person household in the study area i s s i g n i f i c a n t , but i t i s only when one considers the additional 2265 two person households, representing 33 percent of t o t a l households, that the f u l l importance of the small household in the study area i s made c l e a r . While the study area has 88 percent of i t s households as one and two person households, New Westminster the Vancouver CMA has 59 percent.  has 77 percent, and  The 12 percent three or more  person households in the study area i s far less than the 38 percent three or more person households in the Vancouver CMA. The importance of the low-rise housing form for single and two person households i s c l e a r .  Households Are Overwhelmingly  Renters.  There are 5905 tenant  occupied households in the study area, and these make up 85 13 percent of a l l the households in the study area.  The  Vancouver CMA has 43 percent of i t s households as tenant occupied households. Over one-half or 51 percent (3025) of tenant-occupied households in the study area pay rent that i s equal to or greater than 30 percent of their household income, while the comparable figure in the Vancouver CMA i s 19 percent.  Housing  According to the 1986 Census of Canada, a tenantoccupied household would be a household occupying a private dwelling which i s not owned by some member of the household.  74 a f f o r d a b i l i t y i s a s i g n i f i c a n t problem in the study area. The remaining 15 percent (800) of households in the study area are  owner-occupied households, and only 9 percent of these  owner-occupied households pay expenses that are equal to or greater than 30 percent of their household income.  Majority of Households Are Non-family  The majority of  households in the study area are not families, as defined by the 14 census . Of the 6915 private households, 4370 or 63 percent 15 are  non-family households.  This compares with New  Westminster's 51 percent and Vancouver CMA's 34 percent nonfamily households.  Forty-four percent of New Westminster's non-  family households l i v e in the study area. The remaining 37 percent (2545) of households in the study area are one and two census family households.  New Westminster  City has 49 percent and Vancouver CMA has 66 percent of their private households as census family households. . The western and eastern Brow-of-the-Hill neighborhoods are A census family refers to a husband and a wife(with or without children who have never married, regardless of age), or a lone parent of any marital status, with one or more children who have never married, regardless of age, l i v i n g in the same dwelling. 15 Non-family households refers to a person or persons who do not belong to a census family. They may be related to the household reference person(e.g., cousin, grandparent) or unrelated(e.g., room-mate, lodger). A person l i v i n g alone i s always a non-family person. Eighty-seven percent of the nonfamily households are made up of one person households in the study area  75 s l i g h t l y over represented in comparison to their populations with census family households, while the Uptown neighborhood i s somewhat under represented.  Two Person  (husband-wife) Families, Without Children, Most  Common Census Family Form.  The two person census family makes  up 75 percent of the t o t a l 2545 census families in the study area.  The study area's percentage of two person census families  in i t s census family population i s much higher than New Westminster's 61 percent, and the Vancouver CMA's 45 percent two person census families in their respective census family populations.  The most dominant family structure in the two  person census family form i s the husband and wife family, with or without kids.  The study area has 77 percent of i t s census  families as husband and wife. Most husband and wife census families l i v i n g in the study area have no children at home.  Seventy-five percent of the study  area's husband and wife census families do not have children at home, and t h i s compares to New Westminster's 59 percent and the Vancouver CMA's 43 percent of their husband and wife populations that have no children at home.  Of the 25 percent of husband and  wife census families that did have children at home, over half had only one c h i l d (51%), while another 32 percent had two children at home.  Therefore, 84 percent of the families with  children had two or l e s s .  76 More Lone-parents.  The study area has 560 lone-parent  families which represents 22 percent of i t s census families. New Westminster has 17 percent and the Vancouver CMA has 13 percent of their census families that are lone-parent families. The lone-parent family i s more prevalent in the eastern Brow-oft h e - H i l l area where 60 percent of the lone parent families reside.  The most common lone-parent family i s the female lone-  parent making up 87 percent of a l l lone parent f a m i l i e s .  Three  quarters of lone-parent families have only one c h i l d .  Fewer Children at Home. home in the study area.  There are 1575 children l i v i n g at  This represents 14 percent of the  population of the study area and compares to 20 percent for New Westminster, and 30 percent for the Vancouver CMA.  4.4 MARITAL STATUS Marital Status More Nontraditional.  Seventeen percent of the  population 15 years and over in the study area are either divorced or separated.  This compares to the Vancouver CMA's  eight percent of t o t a l population that are divorced or separated.  Widowed persons make up ten percent of the study  area population, but only seven percent of the Vancouver CMA population.  T h i r t y - f i v e percent of the study area population  over 15 years of age are single, while only 28 percent of the Vancouver CMA population would be singles over 15 years old.  77 Married Persons in a Minority.  Only thirty-eight percent of  the study area population are married.  This i s s i g n i f i c a n t l y  less than the 57 percent of the Vancouver CMA population that are married.  15 years and older  There are some differences within  the study area in terms of the percentage of population that are married.  For instance, while the eastern Brow-of-the-Hill and  the Uptown neighborhoods have 39 and 36 percent respectively of their populations that are married, the western Brow-of-the-Hill has 48 percent of i t s population over 15 years old who  are  married.  4.5 EDUCATION More of the Lowest Educated.  If a secondary c e r t i f i c a t e i s  taken as a necessary basic level of education in Canadian society, then the 4515  individuals in the study area without  secondary c e r t i f i c a t i o n are educationally disadvantaged. Persons without secondary c e r t i f i c a t i o n represent 44 percent of the study area's 10,320 persons over 15 years of age.  This  compares to 37 percent of persons over 15 years of age in the Vancouver CMA  with less than secondary  education.  Forty percent of the population of the study area have what might be c a l l e d an adequate education.  These individuals have  either a secondary c e r t i f i c a t e and/or trade c e r t i f i c a t i o n , diplomas, or other non university education.  This i s s l i g h t l y  better than the Vancouver CMA's 39 percent of i t s population  78 having The  this  level  of  education.  study  area,  with  16 p e r c e n t  university  education  lower  t h e V a n c o u v e r CMA's 25  than  having  this  proportion  higher of  The  i t s 15 y e a r s  standards  study a  area.  of  significantly  less  4.6  i s no  of  Vancouver  over  some  is significantly  i t s population CMA  has  twice  population having  the  university  area. show l i t t l e  neighborhood  greater percentage  variation  that  of  stands  within out  i t s population  as  the. having  more o r  educated.  Labour Force A n a l y s i s  More Out  of  the  Labour F o r c e .  highly  significant,  out  the  of  labour  participating years  of age  CMA's 32  make up i n the  percent  percentage  of  In t h e the  due study  labour  study  37  Although  area  has  of  area.  their  study  area  populations  the  and  not  study  area's  area,  there  i s almost  f o r c e as m a l e s , and i s out  of  the  Those over  category.  greater twice  labour  15  The in  f o r c e may  be  numbers of s e n i o r s . a s many f e m a l e s  a greater percentage  labour  not  Vancouver  t h e V a n c o u v e r CMA  i n the  not  i t s population  10,350 p e r s o n s  in this  t o the  female p o p u l a t i o n  more o f  T h i s c o m p a r e s to- t h e  i t s population the  i t i s probably  d o e s t h e V a n c o u v e r CMA.  percent  study  of  between  partially  the  f o r c e than  difference  of  study  degrees),  percent  The  and  education  There  i t s population having  ( w i t h or w i t h o u t  education.  d e g r e e s as d o e s t h e  of  force  (45%)  out  of i t s  when compared  79 to the Vancouver CMA (41%).  The study area also has a higher  portion of i t s male population out of the labour force (27%) than has the Vancouver CMA (22%). Of course the p a r t i c i p a t i o n rate, the percentage derived by d i v i d i n g those in the labour force over 15 years old by those 15 years and over in the population, i s lower in the study area. The p a r t i c i p a t i o n rate in the study area i s 64 percent compared to the Vancouver CMA's 69 percent.  This difference i s l i k e l y  due to the greater number of seniors in the study area, and perhaps to the greater number of single parents remaining home to care for dependent children.  in the  This small difference  between the two areas in work force p a r t i c i p a t i o n dispels the b e l i e f , expressed by some New Westminster residents, that study area residents lacked motivation to work. S i g n i f i c a n t l y Higher Unemployment in 1986. Although 5405 of a t o t a l 6575 persons  in the labour force were working  part or  f u l l time in 1985 (82%) in the study area, t h i s s t i l l l e f t an unemployment rate of 18 percent.  This compares to a 13 percent  unemployment rate in New Westminster City as a whole, and an 11 percent unemployment rate in the Vancouver CMA.  The western  Brow-of-the-Hill area showed the highest percentage  of i t s  population being unemployed with almost one-quarter  of i t s  labour force out of work.  The eastern Brow-of-the-Hill was  s l i g h t l y below the study area The percentage  average.  of males in the labour force that were  unemployed in 1985 was 20 percent.  This compares to 12 percent  80 for the Vancouver CMA,  and represents a s i g n i f i c a n t difference  in male unemployment between the two areas.  The difference  between the two areas i s not quite as great for females, where the 1985 rate of unemployment for females was  15 percent in the  study area and 11 percent in the Vancouver CMA.  Males in the  western Brow-of-the-Hill and Uptown neighborhoods had a s l i g h t l y higher unemployment rate than the study area male unemployment rate, while females l i v i n g in the western Brow-of-the-Hill area showed a s i g n i f i c a n t l y greater unemployment rate (26%) than did females in the rest of the study area. The unemployment rate w i l l be lower at the present time, since unemployment levels in the lower mainland area of B r i t i s h Columbia have decreased.  However, s i g n i f i c a n t difference  between the study area and the Vancouver CMA  are s t i l l to be  expected because of the poorer education and training of study area residents.  4.7  Income  The analysis of income was conducted on a base of 9430 males (48%) and females (52%), with income, who were over 15 years of age and l i v i n g in the study area in 1985.  S i g n i f i c a n t l y Lower Income on Average.  The average yearly  income received by males and females in the study area in 1985 was $14,975.  This compares to a $17,946 average yearly income  for New Westminster  males and females, and a $19,670 average  81 yearly income for Vancouver CMA males and females.  The average  yearly income was 25 percent higher in the Vancouver CMA than in the study area. The average yearly income in the Uptown neighborhood was about 9 percent less than the average yearly income yearly income in the other two study area neighborhoods.  This may be due to the  higher percentage of income in the Uptown neighborhood coming from government transfer payments.  Income from transfer  payments i s usually less than income from  employment.  Female Income S i g n i f i c a n t l y Less than Male Income.  Women  receive s i g n i f i c a n t l y less income than men on average.  The  average income for women i s 22 percent less than the average income for males in the study area  This discrepancy in income  received i s the result of the higher wages paid to men, and the greater numbers of men receiving employment  Median Income i s Even Lower.  income.  Average income can be deceptive  i f there i s a skewed d i s t r i b u t i o n of incomes in a population. Unfortunately, figures on median incomes were not available for the study area, but analysis of unadjusted study area data reveal that the median income for males was approximately $14,000, and for females approximately $10,400.  Combined median  income for males and females i s approximately $12,200.  There i s  every reason to believe that the study area, which would contain a lower percentage of persons with employment  income than would  82 the unadjusted study area, might even have a s l i g h t l y lower median income than the unadjusted study area.  Most Income i s Employment Income.  Unfortunately, the data for  source of income i s not available for the study area, and therefore unadjusted study area data i s used.  The data suggests  that for both the eastern and western Brow-of-the-Hill neighborhoods, the primary source of income i s employment income.  In fact, about 75 percent of the income i s employment  income, while only about payments.  16 percent i s from government transfer  The remaining 9 percent of income comes from 'other  income sources' such as private pensions, investments, etc. The Uptown neighborhood neighborhoods  i s d i f f e r e n t from the other two  in regard to source of income.  Fifty-eight  percent of i t s income, in 1985, came from employment, and 22 percent came from government transfer payments.  The remaining  20 percent of income came from 'other income sources'.  The  differences between the Uptown neighborhood and the other two neighborhoods  in source of income i s l i k e l y the greater number  of seniors in the Uptown neighborhood  receiving old age pension  monies(transfer payments), and pensions and money from investments (other income sources). The Vancouver CMA  receives much more of i t s income from  employment income (78%), and less from government transfer payments (10%) and other income (12%) when compared to the study area.  83  50 Percent of Those Employed Work Part Time or Part Year.  F i f t y percent of the study area's 8055 males and  females reporting income from employment in 1985 worked f u l l year, f u l l time, while the other 50 percent worked part year or part time.  This same 50/50 d i s t r i b u t i o n of part and f u l l  work seems to hold for males in the City of New However females in New Westminster  time  Westminster.  had less f u l l year f u l l time  work (46%) and more part year or part time work (54%).  More  Vancouver CMA males (56%) worked f u l l year f u l l time, and less Vancouver CMA  females (46%) worked f u l l time.  S l i g h t l y more  males than females in a l l areas seem to be employed f u l l year f u l l time. The average income from employment for males and females i s lower at $16810.16 in the study area than i t i s in the Vancouver CMA  ($21,530).  Study area income from employment i s 22 percent  lower than employment income in the Vancouver  CMA.  People in the study area getting income from f u l l and part time employment make up 30 percent of a l l people in New Westminster  getting employment income.  The percentage of study  area residents getting employment income i s s l i g h t l y higher than the study area's percentage of the New Westminster population, and suggests that the people in the study area are a f a i r l y productive group.  Family Income Low as Well.  There were 2485 census  families  84 reporting  income in the study area in 1985.  This compares to"  9735 census families in New Westminster as a whole reporting income.  The study area's census families comprise 26 percent of  a l l census families in New Westminster reporting The average census family $26,874.  income in 1985.  income in the study area was  This compares to $34,160 for New Westminster as a  whole, and $41,351 for the Vancouver CMA.  Census families in  the study area get along, on an average, with 22 percent less income than the average census family in the City of New Westminster, and 35 percent less than the average census family in the Vancouver CMA.  The incidence of low income amongst  census families in the study area i s not available, but 1986 Census of Canada figures for the unadjusted study area indicate that 36 percent of i t s census families are low income census 16 families.  The Vancouver CMA has only 18.8 percent of i t s  census families as low income census families. An economic family, as defined in the 1986 census, i s a group of two or more persons who l i v e in the same dwelling and are related to each other by blood, marriage (including common-law) or adoption.  There are no figures available on the incidence of  low income economic  families in the study area.  However,  there are figures available for the unadjusted study area, and  The incidence of low income, obtained from the 1986 Census of Canada, i s given for unattached individuals and census families as well as economic families. The incidence of low income i s based on the numbers of these households f a l l i n g below the low income cutoffs established by S t a t i s t i c s Canada for 1985.  85 they indicate that out of 3910 economic families in the unadjusted study area, 1110, or 28 percent of them, are low income economic families.  This compares to 21 percent of New  Westminster City's, and 15 percent of the Vancouver CMA's economic families being low income economic f a m i l i e s .  Clearly,  the study area has a large percentage of i t s economic families as low income economic families.  Unattached  Persons the Worst Off.  Unattached  individuals,  according the 1986 census, are household members who are not members of an economic family.  They may be persons  living  alone, but also could be made up of several persons not related by blood or marriage  l i v i n g together.  The study area had 4950  unattached persons reporting income in 1985. This represents 45 percent of a l l unattached persons reporting income in the City of New Westminster in 1985, and yet the study area had only 28 percent of the population of New Westminster.  C l e a r l y the  unattached person reporting income i s a s i g n i f i c a n t proportion of the study area, and of New Westminster in general! The average income of the unattached  individual i s low at only  $14,155.15 per annum in the study area.  Unfortunately, there i s  no data available on the incidence of low income among unattached  individuals in the study area.  study area 47 percent of unattached where of low income.  In the unadjusted  individuals reporting income  This compares to 45 percent for New  Westminster City, and 41 percent for the Vancouver CMA.  86  The Majority of Households Are of Low Income.  Out of 6868  households in the study area, 3859 or 56 percent of them have income of under $20,000 per annum.  This compares with 35  percent for the C i t y of New Westminster, and 33 percent for the Vancouver CMA.  C l e a r l y the low-rise rental stock i s home to low  income households!  The western Brow-of-the-Hill neighborhood  had 58 percent of i t s households reporting low income.  However,  the other two neighborhoods did not make out much better, averaging around 55 percent of their t o t a l households having income under $20,000.  The study area has 70 percent of i t s  households with income under $30,000 per annum. TABLE 5 INCIDENCE OF LOW INCOME IN THE UNADJUSTED STUDY AREA AND THE VANCOUVER CMA BY hOUSEHOLD TYPE, 1985 Household Type  Unadjusted Study Area  Vancouver  Economic Families  28.38%  14.8%  Unattached Persons  46.89%  40.7%  36.31%  18.8%  CMA  Persons in Low Income Family Units Source: 1986 Census of Canada 4.8 Mobility Most Residents Canadian Born B r i t i s h Columbians.  Of the  11,500 residents in the study area, 9,415 or eighty-two percent of the t o t a l population were born in Canada.  This leaves 2085  87 residents or eighteen percent born outside Canada.  The most  usual place of b i r t h for the non Canadian born was Europe (64%), followed by 17 percent in Asia, and 11 percent in the United States.  Although New  Westminster shows a similar  distribution  of place of b i r t h as does the study area, the Vancouver CMA s l i g h t l y d i f f e r e n t , having fewer Canadian born  is  (71%) and more  persons born in Asia. Of those born in Canada and l i v i n g in the study area, 53 percent were born in B r i t i s h Columbia.  New  Westminster had 60  percent of i t s Canadian born population indicating  that B r i t i s h  Columbia was their place of b i r t h , while the Vancouver CMA  was  s l i g h t l y higher at 63 percent claiming B r i t i s h Columbia as their place of b i r t h .  It appears that study area residents are more  l i k e l y to be born out of province than either New residents, or Vancouver CMA surprising  residents.  Westminster  However, this i s not  considering that rental apartment units are well  suited to the needs of a population moving into the lower mainland area.  A Highly Mobile Population.  According to the 1986 Census of  Canada, 'movers' are persons who,  on Census Day,  were l i v i n g in  a different dwelling than the one they occupied five years earlier.  Under this d e f i n i t i o n , 7990 or almost  the study areas population are movers.  70 percent of  This represents 39  percent of the 20,610 movers in the City of New  Westminster, and  yet the study area has only 28 percent of the population in the  88 City. New  Movers are very much over represented in the study area.  Westminster had 52 percent of i t s population as movers,  while the Vancouver CMA  had 51 percent.  The western Brow-of-the-Hill neighborhood has the most highly mobile population of any of the neighborhoods in the study area. Almost 80 percent of i t s residents have moved within the past 5 years.  The eastern Brow-of-the-Hill neighborhood i s also very  high (75%), with the Uptown area showing the greatest s t a b i l i t y of population within the study area, having 65 percent of their population as movers. Uptown area may  This lower figure for movers in the  r e f l e c t the greater s t a b i l i t y of older  population groups in this area.  Most Study Area Residents Are Migrants. defines migrants as movers who,  The Census of Canada  on Census Day,  were residing in  a d i f f e r e n t CSD within Canada five years e a r l i e r migrants) or who  (internal  were l i v i n g outside Canada five years e a r l i e r  (external migrants).  They may  have come from other areas of the  lower mainland, other d i s t r i c t s in the province of B r i t i s h Columbia, or from other places in Canada. According to t h i s d e f i n i t i o n ,  3135 persons or 39 percent of  study area residents are non-migrants from within the CSD,  and  4855 or 61 percent of the movers in the study area were migrants.  F i f t y - n i n e percent of the City of New  Westminster's,  and 50 percent of the Vancouver CMA's movers are migrants.  The  western Brow-of-the-Hill neighborhood has the highest portion of  89  i t s movers in the migrant class (72%).  The Uptown area has only  56 percent of i t s movers as migrants.  Study Area Migrants Mainly Locals or B r i t i s h Columbians.  Of  those migrating to the study area, 75 percent come from either another area in the Census Metropolitan Area (lower mainland) or from other parts of B r i t i s h Columbia.  Although figures on  migration into the study area are not disaggregated into those coming from within the same CMA and those from other parts of B r i t i s h Columbia,  i t i s l i k e l y that the percentage of each  compares c l o s e l y to the unadjusted study area.  In the  unadjusted study area, 72 percent of those migrating to the unadjusted study area come from the same CMA. It appears that most of the inhabitants of low-rise buildings are Canadians, and that although i t i s a highly mobile population, most of those moving in are from other parts of the lower mainland followed by those from other areas of the province.  4.9 Summary The study area provides accommodation at medium density levels, to a population that d i f f e r s in a variety of ways from mainstream society.  Household composition i s more non-  t r a d i t i o n a l , with the majority of people l i v i n g in one person households.  Those that have families are l i k e l y to be marital  pairs with no children, and i f they do have children, there i s  90 l i k e l y only one c h i l d per family.  Incidence of single parent  families i s also higher than in New Westminster or the Vancouver CMA. The study area seems to be a t r a n s i t i o n a l place for a highly mobile population.  Large numbers of young adults are biding  their time u n t i l they make decisions about l i f e d i r e c t i o n . Recently widowed, separated and divorced persons are waiting, pending decisions about new directions for their l i v e s .  Young  families may be waiting u n t i l they get enough money for the down payment on a house, and seniors want a place that they can spend the last few years of their l i v e s with some sense of independence and dignity.  Its a t r a n s i t i o n a l area in many  respects, and i t provides a very unique service, by providing a stopping off space for people while they determine new d i r e c t i o n s for their  lives.  The economic v u l n e r a b i l i t y of what must be at least one-half of the residents of the study area i s most s i g n i f i c a n t .  Over  one-half of workers are dependent on income from part year or part time jobs, over one-half have less than a grade 12 education, and over one half are considered to be l i v i n g at low income l e v e l s .  Although some individuals in the area seem to be  doing f a i r l y well f i n a n c i a l l y , almost three-quarters of the population are l i v i n g on less that $30,000 per annum.  Therefore  t h i s number of people have only low or moderate incomes. Before examining  the f i t between tenant needs, based on tenant  c h a r a c t e r i s t i c s , and building c h a r a c t e r i s t i c s , the  91  c h a r a c t e r i s t i c s of owners should be examined.  Since the  majority of low-rise buildings in the study area are privately owned and operated, i t i s most important to understand the needs and motives of this group.  92  CHAPTER FIVE  THE OWNERS This chapter analyzes a sample of 20 market rental low-rise buildings in the study area from the following points of view: ownership form and goals; holding periods; incidence of leveraging; assessed and market values; land component portion of property values; rental rates; and returns on investment. This i s not a random sample, but some e f f o r t was made to select buildings that would be representative of the age,  size, and  location of buildings in the study area's low-rise rental stock. A description of the buildings used in this analysis can  be  found in Appendix D. 5.1 Ownership Form Ownership form refers to the entity holding t i t l e to the property  such as a corporation, general or limited partnership,  or sole proprietorship (e.g., marital couple or lone individual).  The  following discussion considers ownership form,  place of residence of the owner (e.g. l o c a l , lower mainland, or out of the area or out of province), and size of the ownership entity as evidenced by the number of apartments owned.  The Corporate and Partnership Forms are the 17 Most Popular.  Twelve out of twenty buildings in the sample  were owned by corporations or partnerships in 1990,  and  twelve buildings represents 60 percent of the sample. remaining  these The  eight buildings, representing 40 percent of the  sample, are held as sole proprietorships.  Six of the eight  buildings held as sole proprietorships were owned by marital pairs, while two were owned by  individuals.  Ownership goals d i f f e r between the different types of ownership forms, although d i r e c t evidence of this from owners of the sample buildings was  not obtained.  Marital pairs and  individuals are l i k e l y holding the property because i t either provides them with a job managing the buildings, or as Peter Barnard Associates (1985) found in their study of low-rise rental buildings in Ontario, i t provides them with increased equity over the long-term as a form of pension plan. Corporate  and partnership goals in holding these properties  can be more complex.  These owners/investors  may  be looking for  slow, long term growth of a f a i r l y risk free asset. other hand, the corporation or partnership may  On the  just be holding  and managing the property at minimal expense with the expectation of redevelopment of the property in the future (Peter Barnard Associates 1985,  1.7).  F i n a l l y , the owner,  The corporate and partnership forms of ownership are placed in one category here because of d i f f i c u l t i e s in separating them.  94 whether i t be the sole proprietorhip, corporate, forms, may be speculating, by buying property  or partnership  with below market  rental rates, increasing rents in a tight market, and s e l l i n g the building for a good p r o f i t .  Ownership Form and Size of Building are Related. four small  Three of the  (under 16 unit) buildings are owned by sole  proprietorships  (marital pairs or individuals), while only one  of these small buildings are owned by corporations or partnerships.  However, twelve of the 16 medium (16-32 unit) and  large sized buildings (32+ units) are owned by corporations or partnerships.  Three out of eight medium sized buildings are  owned by sole proprietorships, while only one out of eight  large  buildings are owned by sole proprietorships. The  low number of large and medium sized buildings owned by  sole proprietorships i s not surprising considering that sole proprietorships would have d i f f i c u l t y getting the c a p i t a l required to buy buildings with 16 or more apartments. One of the reasons larger apartment buildings are a t t r a c t i v e to the corporate and partnership  forms of ownership i s because  of the economies of scale that exist in the operation of apartment buildings.  Gau (1982) found that larger apartment  properties have lower average operating expenses per d o l l a r of gross income, and therefore savings that increase returns on investment can be realized with these larger low-rise buildings.  95 Incidence of Multiple Building Ownership D i f f i c u l t to Determine.  Although no cases of multiple building ownership  were found in the sample,  a few cases of multiple ownership of  low-rise buildings in New Westminster were observed. Discussions with several owners of low-rise buildings revealed that one owner could register h i s buildings under a number of d i f f e r e n t company names.  It i s almost impossible, unless one  wishes to go to a great deal of expense, to determine the extent of multiple ownership of low-rises in the study area.  Owners are Usually Non-residents.  There were three  instances  in the sample where the low-rise building i t s e l f was given as the address of the registered owner.  Further investigation  revealed that in only one instance did the registered owner l i v e in the low-rise b u i l d i n g . owner's addresses appearing  It was found that for a l l properties, on B r i t i s h Columbia Assessment  Authority records were lower mainland addresses.  5.2 Long Holding  Periods  Holding periods were determined on 10 of the 20 properties in the sample.  The length of time owners held t i t l e to their  property varied from seven to nineteen years, with the mean holding period being  10 years.  Surprisingly, some of the larger properties owned by corporations and partnerships, had been held the longest. well known that 50 percent  of the c a p i t a l cost allowance  It i s  96 available on a building has been taken by the end of the year, and therefore one  15th  incentive for holding these properties  is no longer very important.  One  would think that the ownership  of these properties would change more often because of the reduced value of c a p i t a l cost allowances.  5.3  Incidence of Leveraging  Information on the state of t i t l e was properties in the sample.  One  obtained  on 16 of the 20  half of the properties had at  least a f i r s t mortgage on them, and on three properties was  both a f i r s t and second mortgage in place.  half of the cases there was  there  However, in one-  no leveraging and the properties  had  clear t i t l e . Of the eight buildings that had some form of mortgage on them, five were large buildings (32 + units), two were medium sized (16-32), and one was  small (under 16 u n i t s ) .  This would be as  one would expect since buildings costing more would require more financing at the time of purchase.  There was  only one  large  building among the eight buildings carrying no debt financing. Six of the eight buildings carrying f i r s t and/or second mortgages were owned by corporations or partnerships, while were owned by sole proprietorships.  two  The higher number of  corporations and partnerships with debt financing may  be the  result of these ownership forms owning the larger, more expensive buildings.  On the other hand, greater use of  leveraging among corporations and partnerships may  be due to the  97 greater  f i n a n c i a l sophistication of these investors who realize  that i t i s possible to increase returns on investment through increased use of debt financing (Gau 1982, 11). The amount of debt financing employed varied between three and 72 percent of property  market value.  Five of the eight  properties with mortgages in place used debt to finance 38 or more percent of property  market value.  Three of the eight clear t i t l e d properties were small buildings, while four were medium sized buildings, and only one was a large b u i l d i n g .  Six of the eight buildings without  mortgages were owned by sole proprietorships.  5.4 Property Values Market Values, Determined From Property Sales.  Not a l l  apartment buildings sold appear as l i s t i n g s through the multiple l i s t i n g service of the Vancouver Real Estate Board. 1989,  However, in  ten low-rise apartment buildings in the study area appear  as sales on the records of the Vancouver Real Estate Board. Sales prices range from $342,000 to $3,000,000, and a l l sales prices were within price was $545,000.  14 percent of asking p r i c e .  The median sales  The average sales price per apartment unit  was $52,750. Of the ten properties sold, six were small properties under 16 units each, while two were medium sized properties (16-32 units), and two were large properties  (32 + u n i t s ) .  The average  sales price per apartment unit was $43,151 for small buildings,  98 $76,167 for medium sized buildings, and $58,132 for large buildings. The over representation of small apartment building sales in the study area may be the result of more small property l i s t i n g s on the Vancouver Real Estate Board.  Large apartment buildings,  instead of being l i s t e d , may be sold by the promotional e f f o r t s of property brokers in the investment community.  5.5 Assessed Values Assessed values, in the sample, varied from a low of $267,800 for a 9 unit apartment building to $2,585,500 for a 98 unit 18 complex. $27,662.  The average assessed value per apartment unit was The average assessed value per apartment unit was  $28,295 in small buildings, $26,267 in medium sized buildings, and $28,566 for large buildings. However, i t i s interesting to note how much assessed values are less than market values.  For instance, Property #2 in the  western Brow-of-the-Hill area was assessed in 1988 at $29,666 per apartment unit, but sold for $43,877 per apartment unit in the l a t t e r part of that year.  S i m i l a r l y , Property #5 was  assessed in 1989 for $34,735 per apartment unit, but the same building was up for sale in 1988 with an asking price of $61,764 per apartment unit.  There are other instances in the sample  A l l information on assessed values of low-rise buildings was obtained from B r i t i s h Columbia Assessment Authority records.  99 were assessed values were far lower than asking market prices. The difference between market and assessed values means considerable revenue loss for the City of New  Westminster from  under assessed apartment property.  Land Component Portion of Total Property Value. component portion of property values, as determined  The land from B r i t i s h  Columbia Assessment Authority records, varies from 22 to 46 percent of assessed value.  There i s a relationship between the  location of property and the proportion of t o t a l assessed value taken up by land values.  In the Uptown area, land value i s  between 40 and 50 percent of t o t a l assessed value.  The land  component portion of t o t a l assessed value varies between 30 and 40 percent in the eastern Brow-of-the H i l l , while in the western Brow-of-the-Hill land values vary between 20 and 30 percent of t o t a l assessed value.  Differences in land to t o t a l property  value r a t i o s i s undoubtedly due to the fact that land values decrease as you move west from the Uptown area to the western Brow-of-the-Hill area.  5.6 Rental Rates Average rental rates for low-rise units in the sample seemed to be somewhat higher for bachelor and one bedroom units than those found in the October, Chapter Three.  1989 CMHC survey referred to in  For instance, the average rent for a one bedroom  unit in the sample was  $483 per month as compared to CMHC's  $470.  Average rents in the sample for two bedroom units were  somewhat lower at $568 per month than CMHC's average for New  Westminster.  $620 per month  Average rents for a l l sizes of  units are higher in the Uptown area, and become cheaper as you move toward the western Brow-of-the-Hill area. 19 5.7 Expense Ratios Declared expense ratios were obtained from multiple l i s t i n g service data on seven of twenty properties in the sample. Expense ratios varied from a low of 20 percent to a high of percent.  The most common quoted expense r a t i o was  50.1  31 percent.  Rule of thumb expense ratios in the apartment rental industry are between 30 and 35 percent.  However, when interviewed, one  owner of a number of apartment buildings in the study area suggested  that  35 percent was more r e a l i s t i c , and that lesser  ratios, especially in the case of older buildings, meant that owners were deferring maintenance items or cutting corners by not paying for good on-site managers.  One B r i t i s h Columbia  Assessment Authority appraiser suggested expense ratios of between 40 and 45 percent were common in low-rise buildings in the study area. The differences in declared expense r a t i o s i s l i k e l y due to a  Expense ratios refer to the percentage of gross rental property income less vacancies and bad debts, that goes towards operating expenses such as u t i l i t i e s , property taxes, management, repairs and maintenance, and so on.  101 number of factors.  F i r s t l y , differences can be due  differences in building management s k i l l . due  to differences between owners who  Secondly, they can  be  wish to keep their  buildings in good condition, and those who maintenance and repair.  to the  F i n a l l y , as Gau  differences in expense ratios can be due  defer building (1982) points  out,  to building size, where  larger buildings show economies of scale.  5.8  Returns on Investment  Eleven of twenty properties in the sample were analyzed for returns on investment u t i l i z i n g a Lotus 123 developed s p e c i f i c a l l y for this purpose.  spreadsheet  A copy of the  input  and output on Property #6 in the sample appears in Appendix E. The  return on investment determined for each property  in the  sample does not measure the returns to the present owners of apartment buildings in the sample, since i t was obtain information  not possible to  on financing, owner's tax bracket, and other  necessary information  for each property.  Instead, the  arrived at are those for a scenario in which one  returns  investor,  interested in purchasing a low-rise building, s p e c i f i e s the financing arrangements he wants and his tax bracket, and asks a real estate analyst to provide him with returns on a number of low-rise buildings. Assumptions (1) An investor wishes to purchase a property 1990,  and  as of January 1,  in making his decision he needs to know what rate of  1 02 return the property w i l l provide him given his own particular constraints in terms of financing and tax bracket. (2) He wishes to know rates of return for both a situation in which he has (a) 100 percent equity, and (b) 60 percent equity. The 40 percent(of purchase price) mortgage w i l l be a 12.5 percent mortgage compounded annually, but payments w i l l be made monthly.  The amortization period w i l l be 25 years, and the term  w i l l be for 5 years to match his holding period. (3) The acquisition price of the property w i l l be determined by c a p i t a l i z i n g the f i r s t years Net Operating Income at market determined  c a p i t a l i z a t i o n rates.  The investor wishes to hold  the property five years and then s e l l the property. price of the property w i l l be determined  The sales  by c a p i t a l i z i n g the 6th  year Net Operating Income at the a c q u i s i t i o n c a p i t a l i z a t i o n rate. (4) There w i l l be a seven percent sales commission on the f i r s t $100,000 of sales price, and 2 percent on the remaining portion of the sales price when the property i s sold. (5) Gross revenue i s simply the yearly rental received from properties at current (1990). rental rates in the study area. Income from other sources i s not considered. (6) An average h i s t o r i c a l rental rate increase for New Westminster of 6.5 percent per annum i s used. (7) An average h i s t o r i c a l vacancy rate of 2.4 percent per annum for New Westminster i s used and a bad debt rate of .6 percent per annum i s added to the vacancy figure for a t o t a l of  1 03 3 percent vacancy and bad debts per annum. (8) A 35 percent expense ratio i s u t i l i z e d for buildings constructed prior to 1970, and a 32 percent expense r a t i o i s used for buildings constructed after 1970. These percentages are generally accepted by the industry.  A larger expense r a t i o  is expected from an older building because of greater maintenance and repair expenses as well as greater heating expenses due to poorer construction. of  An escalation in expenses  5 percent per annum i s used for a l l buildings. . (9) Capital Cost Allowance depreciable base i s determined  from  the r a t i o of building to t o t a l property values established by the B r i t i s h Columbia Assessment Authority records for a p a r t i c u l a r property.  The Capital Cost Allowance i s 4 percent on  the undepreciated balance for wood frame apartments(Class 1). There i s f u l l recapture of Capital Cost Allowance upon sale of the property. (10) It i s assumed that the investor i s in the 50 percent income tax bracket. (11) Capital gains of 75 percent i s applicable, and i t i s assumed that the investor i s not e l i g i b l e for any reduction of c a p i t a l gains  liability.  The eleven properties were analyzed from the point of view of both an a l l equity investment,  in which the investor pays a l l  cash, as well as a situation, in which t h i s same investor, pays 60 percent of the value of the property, and finances 40 percent through a conventional f i r s t mortgage.  Both single period  1 04 measures and multi-year measures were derived for each property.  Measures of Single Year Returns The equity dividend rate i s a single period measure, and i s determined by dividing the amount of cash flow a property generates--after expenses, vacancy losses, and mortgage interest are deducted in one year--by the amount of equity an investor has in the property. measure of return.  This i s an a f t e r - f i n a n c i n g and  before-tax  In an a l l equity investment this measure i s  the same as the c a p i t a l i z a t i o n rate(a rate used to determine the market value of the property).  The equity dividend rate does  not take into account increases in the market value of the property. The equity dividend rate for properties analyzed using no debt financing varied between 7.2  and  10.5 percent.  This is not  p a r t i c u l a r l y high when one considers that alternate, less risky investments such as bonds and one year term deposits paid as 20 . . . high or higher rates.  The equity dividend rate drops even  lower when 40 percent financing i s used to between 3.06 percent.  and  8.77  Equity dividend rates were found to be larger on  smaller (under 16 unit) low-rise buildings, and smaller on the larger, more expensive apartment buildings in the sample.  A five year term deposit currently pays 11.25 per annum.  percent  105 The equity y i e l d measure of return i s a one year measure which does not consider c a p i t a l appreciation of the property.  This i s  an after-financing and after-tax rate of return, a r r i v e d at by dividing the after-tax and after-financing cash flow in one year by the equity invested in the property.  For sample properties,  the equity y i e l d rate in an a l l equity situation varied between 4.1 percent and 5.97 percent.  These returns are even less than  after tax returns for a person in the 50 percent tax bracket who invests his money in almost risk free bank savings accounts or 21 . . . three month treasury b i l l s . When 40 percent debt financing i s entered into the equation, the equity y i e l d rates drop from a low of 2.33 percent to a high of 5.38 percent.  When only cash  flow i s taken into account the returns on investment for lowr i s e buildings i s lower than other investments of similar  risk.  This i s especially true when some form of debt financing i s used.  Multi-year measures Eleven of the 20 properties in the sample were analyzed for their internal rate of return on investment(IRR).  This return  is found by discounting the operating flows during the holding  Bank savings accounts are currently paying in the 12 percent range, while three month treasury b i l l s are currently producing a 13 percent before tax return. The after tax return for an investor in the 50 percent tax bracket would be 6 percent for a bank savings account and 6.5 percent for treasury b i l l s . These returns would exceed the equity y i e l d rate for low-rise rental buildings.  106 period and the c a p i t a l appreciation flow at the time of sale. The IRR i s an after-financing and after-tax measure of return. The IRR was computed on each property on the basis of both an a l l equity investment and a 60 percent equity investment. On an a f t e r - f i n a n c i n g and after-tax basis, returns varied from 8.11 percent to 10.25 percent for an a l l equity investment, and from 9.17 percent to 12.56 percent on a 40 percent equity investment.  Eight of the eleven properties analyzed showed  increased IRRs when debt financing was used and confirms Gau's (1982) assertions regarding the positive effects of leverage on property returns.  The average internal rate of return after  tax and after financing for an unleveraged investment was 9.11 percent,  and 10.81 percent for a 40 percent leveraged  investment.  The mean IRR for an unlevered investment was 8.91  percent. In a study of internal rates of return on apartment properties in Vancouver i n the early 1980s Gau (1982) found that the mean after-tax IRR for unlevered investments to be 10.3 percent. This i s very close to the mean of 8.91 percent found in the study area sample. Gau and Wicks (1982) determined before-financing IRRs on nine MURB and non-MURB apartment buildings in Vancouver in the early 1980s.  The mean before-financing IRR was 11.9 percent on non-  MURB properties.  The reasons for the difference between the  mean returns of t h i s sample and the study area sample are not known, but undoubtedly the greater i n f l a t i o n in the late 1970s  107 and early 1980s might be one answer. Multi-year rates of return are much higher than single year returns on properties in the study area sample because the increase in the market value of properties over the f i v e year holding period was  taken into account.  Returns, e s p e c i a l l y on  an after tax basis, become far more competitive  with  other  investments of a similar risk when c a p i t a l appreciation i s taken into account.  For instance, a five year term deposit at  percent per annum is only a 5.62 in the 50 percent bracket.  The  apartment building scenario who  percent  11.25  return to an investor  investor, in the low-rise was also in the 50  percent  bracket, received a return of almost 9 percent per annum.  The  dependence of owners, desiring to obtain competitive returns, on 22 c a p i t a l appreciation i s brought home most f o r c i b l y . Some patterns emerged in terms of size of property location of property and returns on investment.  and  Surprisingly,  internal rates of return on investment were as high or higher in smaller and older buildings in less desirable locations of the study area.  For instance, average 60 percent  Uptown were 10.03 10.77  percent,  for the eastern  equity IRRs for  Brow-of-the-Hill  percent, and for the western Brow-of-the-Hill  12.46  Another comparable investment to low-rise apartment buildings would be 5 year mortgage backed s e c u r i t i e s which are currently returning a before-tax rate of 11.74 percent. On an after-tax basis mortgage backed s e c u r i t i e s , which are not e l i g i b l e for c a p i t a l cost allowance as are low-rise apartment buildings, would have a similar rate of return to the average 9.11 percent before-financing IRR for low-rise buildings.  108 percent.  However, the higher IRRs in the western Brow-of-the-  H i l l may have resulted from the i n a b i l i t y of the spreadsheet program to make deductions from end of holding period market values for important  repair and modernization expenses.  In  terms of internal rates of return on smaller buildings Gau (1982) found that these returns could be just as high as returns on larger b u i l d i n g s . One of the l i m i t a t i o n s of the assumption used in the analysis of returns on study area properties--that properties are a l l purchased  i n 1990 and held five years--is that i t f a i l s to take  into account the p o s s i b i l i t y that property was purchased to the l a t e s t escalations of rents. in the sample, was purchased  prior  If for example Property #6,  just before rents were increased 25  percent in 1989, then held five years, the IRR with no leveraging would be 15 percent.  This i s far better than the  8.71 i t would receive in 1990 when rent increases had been c a p i t a l i z e d into the purchase price of the property.  Therefore,  there are higher returns available to investors who want to speculate on rental property in the study area. An analysis of returns on investment  suggest that they are low  when only one year measures using cash flow are used.  Low cash  flow can be a problem for some low-rise building owners in the study area.  Property #2, a nine unit low-rise building in the  western Brow-of-the-Hill neighborhood, i s carrying a $259,000 mortgage that represents 61 percent of this property's market value.  The payment to service t h i s debt, assuming an 11 percent  109 interest rate, plus expenses of 35 percent of gross e f f e c t i v e income, would be as much as the gross rental income of the building.  In such as situation the owner has no money to use  for his/her own  needs or for improvements to the b u i l d i n g .  Therefore, although  internal rates of return on low-rise  buildings are as good as or superior to returns from  investments  of similar r i s k s , there are problems for some owners because of low yearly cash flow. TABLE 6 AVERAGES OF SELECTED OWNERSHIP CHARACTERISTICS Characteristic  Average  Sales Price Per Apartment $52,750 Assessed Value Per Apartment $27,662 Rents(per month) One Bedroom $483 Two Bedroom $563 Returns on Investment Equity y i e l d rate ( a l l equity) 4.72% Equity y i l e rate (60% equity) 3.34% IRR-before tax ( a l l equity) 13.00% IRR-before tax (60% equity) 13.33% IRR-after tax ( a l l equity) 9.11% IRR-after tax (60% equity) 10.81% Source: Sample of 20 low-rise buildings drawn from the Study Area 5.9 Summary This chapter analyzed some c h a r a c t e r i s t i c s of ownership of a sample of low-rise rental apartment buildings in the study area, It was  found that the corporate and partnership forms are the  most popular forms of ownership. periods suggest  The r e l a t i v e l y long holding  that corporate and partnership owners are  110 probably interested in getting a f a i r l y steady rate of return over a long period. the property  It i s also possible that they are holding  for some time, pending redevelopment.  Although the sole proprietorship was a less common ownership form in the sample, i t was a s i g n i f i c a n t portion of the sample(40%).  Sole proprietorships, including marital pairs and  singles, also hold their property reasons that l i k e l y d i f f e r forms of ownership.  for a long time, but for  from the corporate and partnership  The corporate and partnership  form of  ownership tend to have the larger apartment buildings, while the smaller ones are owned by sole proprietorships. Owners of apartment buildings in the study area tend to be nonresident owners who usually l i v e in areas of the lower mainland other than New Westminster.  It i s d i f f i c u l t to  determine i f they own many apartment buildings, since one owner may own several buildings under different names. One-half of the owners in the sample used some degree of debt financing, and the other half used no debt financing.  Owners of  larger buildings more often c a r r i e d one or more mortgages. Apartment building sales in the study area indicated that more smaller buildings were sold in 1989 than the medium or larger sized buildings.  Differences  in sales may be due to larger  buildings being sold by means other than through the Vancouver Real Estate Board.  Assessed values on sample buildings were  found to be much lower than market values of buildings. land component portion of property  The  values was found to be the  111 highest  in the Uptown neighborhood and to decrease as one moved  west towards the western Brow-of-the-Hill  neighborhood.  Rental rates in the sample were found generally to be higher than the October, 1989 survey of rental rates conducted by CMHC. Concern was expressed that this makes apartments area even less affordable than they had been.  in the study  An analysis was  made of returns of investment on 11 of the 20 properties in the sample.  It was found that although returns based on one year  measures were lower than returns on investments of comparable or less risk, when multi-year measures were used to include c a p i t a l appreciation of properties, the returns on an after financing and after tax basis were as high or higher than comparable investments.  11 2  CHAPTER SIX COMPLEMENTARITY By complementarity  i s meant the satisfactory f i t between  tenant and owner/investor needs on the one hand, and the c h a r a c t e r i s t i c s of buildings and neighborhoods on the other. For instance, does i n t e r i o r and exterior design of buildings as well as apartment population?  size meet the requirements of the tenant  Are returns on investment s a t i s f a c t o r y to  owners/investors of low-rise rental buildings?  F i n a l l y , are  government programs to deal with this housing form satisfactory to tenants, owners, and to the integrity of the buildings themselves?  This chapter examines indications of both good and  bad f i t , and some of the solutions to poor f i t being considered, or a c t u a l l y undertaken, by owners, tenants advocates, neighborhood groups, and local government.  6.1 Indications of Adequate F i t Owner/Investor  satisfaction  Although s u i t a b i l i t y of rental accommodation may not be e n t i r e l y satisfactory to renters because of income problems, ' private market rental buildings also may not be suitable to owners because of inadequate returns on investment.  If the  person renting i s faced with the r e a l i t y of low income, and  1 13 therefore a need to keep his shelter expenses to a minimum, the owner/investor i s faced with a need to keep his returns equal to or greater than other investment returns of similar r i s k . The rate of return that i s considered is open to some debate.  suitable to an investor  Some real estate analysts have  suggested that the individual investor w i l l be w i l l i n g to continue to invest in rental property as long as h i s after-tax rate of return on the property  i s equal to or greater than the  after-tax rate of return on a r i s k l e s s asset plus a risk factor associated with rental housing (Crone 1988, 39). The size of the risk factor associated with rental housing i s not exactly clear.  Five year term deposit rates, which currently  provide a 11.25 percent  before-tax  return, might be considered  as a comparable investment to apartment building investment. an investor in the 50 percent of 11.25 percent after-tax basis.  tax bracket, a before-tax  would provide a 5.63 percent  To  return  return on an  The reason for t h i s reduction in rate of  return from a 11 percent  before-tax  return to a 5.63 percent  after-tax return i s that a l l interest earned on term deposits are subject to f u l l tax at the investors tax rate. return of 5.63 percent  i s considerably  An after-tax  lower than the rates of  return found on rental properties in the study area and reported in Chapter Five. Investments with less risk such as treasury b i l l s and 10 year bonds y i e l d 13.15 percent present  and 11 percent  time on a before-tax  basis.  respectively at the  However these returns  1 14 represent only a 6.58 percent return after-tax for treasury b i l l s and 5.5 percent after-tax for 10 year bonds to an investor in the 50 percent bracket. These returns, once again, are less than was seen on rental properties in the study area. Another comparable investment  to low-rise rental property  might be 5 year mortgage backed s e c u r i t i e s .  Presently, the  returns on these 5 year investments are 12 percent per annum before-tax. treatment  This type of investment q u a l i f i e s for favorable tax  in the sense that interest on loans made to purchase  these s e c u r i t i e s are deductible from income tax payable. However, there i s no provision for favorable c a p i t a l gains treatment. If no loans are made to purchase this sort of investment,  a 12 percent before-tax return i s only a 6 percent  return after-tax. After reviewing alternate investments average after-tax return on unleveraged  of similar r i s k , the low-rise rental property  of 9.11 percent per annum i s superior to any of these other investments. The analysis of returns on investment  in Chapter Five  suggested that returns were low when single year measures using only cash flow were used.  Low cash flow can be a problem for  some low-rise building owners in the study area.  In Chapter  Five, i t was pointed out that Property #2, a nine unit low-rise building in the western Brow-of-the-Hill neighborhood, i s carrying a $259,000 mortgage that represents 61 percent of t h i s property's market value.  The payment to service this debt,  1 15 assuming an 11 percent percent  interest rate, plus expenses of 35  of gross e f f e c t i v e income, would be as much as the gross  rental income of the b u i l d i n g .  In such as s i t u a t i o n the owner  has no money to use for h i s own needs or for improvements to the building.  Therefore,  although internal rates of return on low-  r i s e buildings are as good as or superior to returns from investments of similar r i s k s when c a p i t a l appreciation of the building i s taken into account, there are problems for some owners because of low yearly cash flow. Capital appreciation of property, which i s an important contributor to the good returns on investment to owners already referred to, i s dependent upon increased rental rates, and i t i s on this point that the contradiction within the private rental market i s based.  This e s s e n t i a l contradiction and c o n f l i c t i s  made more dramatic when one side(the renter) i s facing greater and greater poverty. Clearly owners and tenants have not been able to manage the inherent c o n f l i c t between them, and government has become involved, at various times, to manage the c o n f l i c t .  Presently,  renters and owners, in B r i t i s h Columbia, are subject to the regulations of the Residential Tenancy Act, and in the past there were rent controls.  However, rent controls proved to be  unpopular with owners since they r e s t r i c t e d the c a p i t a l appreciation of rental buildings.  Rent controls were removed,  and now we have tenants complaining as rents escalate.  If the  inherent c o n f l i c t i s to be managed, new solutions must be found.  1 16  Terms of Tenancy The month-to-month term of tenancy offered by owners of  low-  r i s e buildings i s most functional for a population in which 70 percent of the people, as was pointed out in Chapter Four, were classed as movers in the 1986 Census of Canada.  The low-rise  structures provide accommodation for many who are in a state of t r a n s i t i o n in their l i v e s .  These would include, for instance,  recent a r r i v a l s from out of province, uncertain about job location, and needing temporary housing u n t i l they become more settled.  In addition, students, divorced or separated  persons,  as well as widowed persons, a l l require temporary accommodation that i s unencumbered by long term leases. On the other hand, the uncertainty of short term rental agreements can prove problematic for seniors on fixed incomes who must constantly face rental increases beyond their means.  Household Size and Apartment Size Eighty-eight percent of households in the study area are either one or two person households. household  Of course, the one  person  i s most popular in that there are 55 percent of a l l  households in t h i s category.  These small households f i t very  well with the 70 percent bachelor and one bedroom apartments in the study area's low-rise stock.  In addition to numbers of  bedrooms, apartment size and i n t e r i o r layout seems to be functional for low-rise tenants.  If present trends to smaller  11 7 households continues, these small apartments  w i l l continue to be  suitable into the future.  Accessibility The study area i s well serviced by buses, and in addition by two ALRT stations.  This i s very important to a low income  population who are very dependent on public transportation for work and recreation.  Community f a c i l i t i e s Good community f a c i l i t i e s are especially important to seniors in the study area, and include easy access to shopping, medical care, recreational centers (Century House), and parks.  The fact  that the grade i s f a i r l y l e v e l , and that these f a c i l i t i e s are within a 5 to 10 block radius of where seniors l i v e i s of special importance  to seniors.  Building amenities The large number of low-rises with elevators and balconies seem to meet tenants needs for ease of access in buildings, and desire for some open space.  6.2  Indications of Poor F i t  A f f o r d a b i l i t y a Problem The Low  Income Tenant.  Although low-rise rents in the study  area are the cheapest in the lower mainland, there i s a very  118 real a f f o r d a b i l i t y problem because the income of tenants i s also very low.  Chapter Four indicated that 55 percent of study area  households are one person households, and 47 percent of those unattached individuals are below S t a t i s t i c s Canada's 1985 23 income cutoffs for unattached individuals.  low  Average income for  males and females over 15 years of age was low in 1985 at $15,000 per annum, and median income was only $12,200 per annum. The reason for such low income i s that over half of the households in the study area have only one income, many individuals are part time workers, and there i s a large contingent (16%) of tenants dependent on government transfers. If a maximum of 30 percent of income devoted to shelter i s considered as being an appropriate indication of housing a f f o r d a b i l i t y , then low-rise accommodation in the study area i s unaffordable to most of i t s tenants.  Fifty-one percent of the  tenants were paying rent equal to or in excess of 30 percent of their household income in 1985  (1986 Census of Canada).  Val MacDonald of the Seniors Bureau in New Westminster makes the point that, at present, a minimum pension for those over 65 is $750 per month.  At t h i s income, pensioners should be paying  Figures on incidence of low income among unattached individuals and family units are not available in the 1986 census for the study area, but are available for the unadjusted study area. The incidence of low income, as determined by the number of persons below the low income cutoffs established by S t a t i s t i c s Canada for 1985, are 47 percent for unattached i n d i v i d u a l s , 36 percent for census family units, and 28 percent for a l l economic families.  1 19 no more than $225 per month for rent i f the 30 percent of income for rent test of a f f o r d a b i l i t y i s used.  However, present rent  levels in the study area are twice this amount, and therefore pensioners require further government subsidies. The study area has a higher percentage of i t s population showing a housing a f f o r d a b i l i t y problem than the percentage of population with a housing affordabi1ity problem in either the City of New Westminster, or the Vancouver CMA.  The reason for  the greater a f f o r d a b i l i t y problem in the study area i s that there i s a greater percentage of low income people in the study area's population in comparison to the percentage of low income people in the populations of New Westminster or the Vancouver CMA  The Moderate Income Tenant.  Moderate income tenants, here  defined as households with an income between $20,000 and $30,000, made up 18 percent of the households in 1985 (1986 Census of Canada).  in the study area  Bachelor and one bedroom  apartments would be affordable for this group in that rent would take 30 percent or less of income.  However, two and three  bedroom apartments in the study area would not be affordable for many of the moderate income group.  Apartments Becoming Increasingly Unaffordable.  Recent rent  increases make the low-rise stock increasingly unaffordable to low and moderate income renters.  Tenants are caught  in a bind  1 20 in that they cannot afford existing low-rise rents, but since these rates are the lowest in the lower mainland, they have l i t t l e choice but to pay. Val MacDonald of the Seniors Bureau indicates that 10 percent of the telephone c a l l s her agency received between January and March, 1989, were from seniors looking for help in finding alternate housing.  The reason most often given for looking for  d i f f e r e n t accommodation was rent increases that exceeded their a b i l i t y to pay. According  to Ms. MacDonald, i f seniors cannot  find cheaper accommodation, they either reduce their  food  purchases or go to food banks in order to pay for rent increases. Mary B i l l i c k of the Lower Mainland Community Housing Registry Society deals with many low income persons looking for rental accommodation, and she echoes the concerns expressed by Val MacDonald regarding  rent increases and displacement.  In regards  to displacement, she complains that landlords are, by excessively increasing rents, throwing out people who b u i l t the community, and by their actions are saying that these people aren't needed any more. Although buildings are most suitable to tenants and owners in many ways, there are problems in f i t as well.  These include low  maintenance and repair standards in some buildings, poor design, higher crime rates, and t r a f f i c and parking problems a l l leading to poor neighborhood image.  121 Maintenance and Repair Reasons for Concern About Building Maintenance and Repair.  Poor maintenance leads to greater and greater  deterioration of building components. mechanical  Increased structural and  problems are more expensive to repair, thereby  decreasing an owner's interest in maintaining the property. Neglect of maintenance and repair often lead to poorer maintenance practices in neighboring buildings, and t h i s can produce a vicious cycle of neighborhood deterioration.  Poorly  kept buildings cannot draw higher rents, which leads to increasing rounds of disinvestment by owners.  The end result i s  continued deterioration and f i n a l l y demolition.  During the  period of d e t e r i o r a t i o n , tenant needs for a t t r a c t i v e and well functioning housing are not met,  and therefore poor maintenance  and repair practices are indications of poor f i t . Sternlieb and Hughes (1981) state that 73 percent of Canada's housing stock in the year 2001  i s already b u i l t , so the  importance of the existing stock i s readily  apparent.  Discussion of buildings in the study area in Chapter Two out that by 2010,  pointed  75 percent of the buildings in the study area  w i l l be over 40 years o l d .  A building's ' l i f e '  i s very long i f  i t i s properly maintained, and i f i t s components are modernized. The question i s whether the existing stock of low-rises i s properly maintained,  repaired, and modernized so that as i t  approaches i t s 50th birthday i t continues as viable rental stock.  1 22  What i s Good Maintenance Practice?  There are two types of  maintenance that concern good property managers.  The  first,  preventive maintenance, involves continuous corrective action, and i s taken to minimize deterioration to building  components.  Preventive maintenance can be divided into structural and mechanical.  For instance, a s t r u c t u r a l program should include  repainting at regular intervals, repointing joints in brick and block work, replacement of worn floor coverings and so on. Mechanical preventive maintenance relates to heating, v e n t i l a t i o n and a i r conditioning units, sump pumps, compressors and any other mechanical equipment. The second type of maintenance, corrective maintenance, involves repairing an item  after i t has broken.  This type of  repair w i l l occur despite the best preventive programs, and i s usually more costly, as damage i s l i k e l y to be greater. Sometimes, the expression 'deferred maintenance' may be used, as  i f i t were a t h i r d type.  In e f f e c t , i t i s putting off u n t i l  tomorrow what should have been done yesterday.  It i s indicative  of poor management, as i t usually means maintenance has been put off  in the hope that i t w i l l not become necessary.  The  physical l i f e of a property depends to a great extent on the quality of i t s maintenance and repair, and i f these are not undertaken on time, more expensive r e h a b i l i t a t i o n i s required in future years.  1 23 Actual Maintenance and Repair Practices.  Although good  maintenance i s advocated by the property management industry, preventive  and corrective maintenance are often not followed in  practice.  The  reason for this i s that in the short run deferred  maintenance, which i s usually none or i n f e r i o r maintenance, w i l l produce higher cash flows and returns on investments.  If the  percentage of expenses for maintenance or repair can be reduced, cash flow w i l l be increased, thereby recovering equity sooner. Maintenance expenditures are often the easiest to cut. other area  i s management expenditures.  cut costs on property  The  An owner cannot easily  taxes, u t i l i t y expenses, financing costs,  and so on. Some property management professionals a c t u a l l y counsel some of these poorer maintenance practices.  For instance, in his  a r t i c l e on turning around troubled multi-family properties, Ronald C. Jackson (1987) writes "concentrate  on only  improvements you need to rent units and generate cash...If  you  have to make c a p i t a l improvements, only make those needed to f i l l vacancies".  The message contained  in t h i s statement is  that as long as a l l units are f i l l e d , an owner's decision to spend money on maintenance and repair i s somewhat discretionary.  Low  vacancy rates are f a i r l y t y p i c a l for the lower mainland of  B r i t i s h Columbia.  For instance, over the past 30 years the  average vacancy rate for New percent(City of New  Westminster has been  2.4  Westminster Planning Department).  When  1 24 vacancy rates are low there i s less motivation for building management to keep a building well maintained and repaired. Since his/her vacancy l e v e l i s already low, an owner can't ensure higher levels of occupancy by better maintenance and repair.  In addition, since the tenant population of low-rise  apartments have limited incomes, an owner can't get higher rents just by keeping a well maintained and repaired building.  Evidence on Current Maintenance and Repair Practices in Lowrises in Canada and B r i t i s h Columbia.  In 1986 CMHC conducted a  national survey of homeowners, landlords, and tenants, and the resulting National Housing Study provides owners'/occupants' assessments of the condition of their dwellings(CMHC 1988, i ) . The low-rise stock, defined by t h i s study as a l l structures under 5 s t o r i e s (including single family houses),  accounted for  91 percent of occupied private dwellings in 1986. Just over one third(35%) of the low-rise stock was estimated to be in need of repairs.  Twenty-five percent of the low-rise stock required  minor repair, and 10 percent required major repairs.  The  incidence of low-rise dwellings in need of major repairs i s highest in rural areas and in the A t l a n t i c region, in the rental stock, and among dwellings constructed prior to 1941. Despite the markedly higher incidence of repair needed in the older housing stock, the incidence of repair requirements among the stock constructed during the 1960s, 1970s and 1980s revealed that housing maintenance and repairs were important  1 25 considerations  for newer dwellings as well.  constructed after 1960  Dwellings  accounted for 27 per cent of the stock in  need of major repair, and 42 percent  of the minor repair  requirements (CMHC 1986). Data obtained  from S t a t i s t i c s Canada's Survey of Household  F a c i l i t i e s and Equipment(HFE) indicate that roughly of the housing stock repairs in 1985.  (2.4 m i l l i o n dwellings) was  26  percent  in need of  Just under half of these units (1.1 m i l l i o n )  f e l l into the category requiring major repair(CMHC 1988,  3).  Current Maintenance and Repair Practices in the Study Area. 75 percent  Although the 1981  Census of Canada indicated that  of tenants f e l t that their buildings in the study  area required only regular maintenance, 25 percent  of the  tenants f e l t that the buildings needed major or minor repairs. According  to CMHC, surveying occupant ratings of building  condition is a r e l i a b l e means of gauging the condition of the whole housing stock  (CMHC 1985).  census's disconcerting information  In addition to the  1981  that a large segment of the  study area's low-rise stock required repair, there i s other information  leading to concern about present and future levels  of maintenance and repair of low-rise buildings in the study area. From Owners and Managers of Apartment Buildings.  A number of  persons active in building and management of housing in the lower mainland stated that many buildings are being  poorly  1 26 maintained, and kept in a poor state of repair.  One manager of  apartment buildings, when interviewed, wondered what the lowr i s e stock would look l i k e in seven or eight years since so many buildings were poorly maintained.  According to him, owners are  not setting aside reserves to cover maintenance and repairs, and must be doing other things with the money that should be going for these necessary items of expense. Insight into how some owners of low-rise buildings in the study area view their property, and i t s longevity i s obtained from an interview conducted  by a local newspaper, and reported  in i t s August 16, 1989 e d i t i o n .  In the a r t i c l e , Bob Scragg, of  Wall Financial Corporation, gave h i s opinion of New Westminster City Council's intention of rezoning his apartment on Howay Street in New Westminster from RM-3 to RM-2.  The former  designation permitted the erection of a high rise building or a low-rise building, while the proposed rezoning would only permit a low-rise building. Mr. Scragg said his company had no intention of tearing the low-rise building down now and putting up a high-rise.  In  speaking of h i s 1970 constructed building, he suggested that this building wouldn't be affected for another  20-25 years.  "But when the buildings' l i f e runs out i t w i l l be in a neighborhood of slum b u i l d i n g s .  It won't be economically  feasible to repair or renovate the buildings" ( New Westminster Now, August 16, 1989).  Mr. Scragg goes on to state that  owners won't bother replacing or keeping up the building because  1 27  of the high costs involved.  The New  Westminster Now  reported  Mr. Scragg's comments regrading other low-rise building owners: It w i l l reach a point when the owners won't bother with any upgrading. There's no economic j u s t i f i c a t i o n to do i t . They'll l e t the building degenerate and wait for someone to buy the property on speculation. The new owner w i l l then try to have the property rezoned to allow a high-rise, said Scragg. Mr. Scragg's candid remarks suggest that many owners are seeing a 45 to 50 year l i f e for their low-rises, but that at the end of t h i s l i f e the buildings w i l l be in such poor shape that they won't be worth f i x i n g up, so that they w i l l have to be torn down.  Apparently  maintained,  the prospect of keeping the building well  and in a good state of repair so that they are  functional past the 45-50 year mark doesn't enter into Mr. Scraggs thinking.  From Community Leaders.  Several community leaders, who have  contact with tenants of some of the low-rises in the study, hear about poor maintenance practices from these tenants.  Kathleen  Langstroth of the Brow-of-the-Hill Residents Council states that some landlords are not maintaining their buildings.  She  obtained her information from talking to renters in the area complain  who  about poor appearance of low-rise buildings as well as  heating and plumbing problems.  She was especially c r i t i c a l of  some of the low-rise buildings in the western Brow-of-the-Hill area, and pointed to such things as poor standards of cleanliness with trash l i t t e r e d hallways and lack of vacuuming  1 28  and  cleaning.  Val MacDonald of the Seniors Bureau also hears complaints regarding maintenance from her seniors c l i e n t s .  The  seniors  would l i k e to move because of the rental increases and  the  decrease in apartment maintenance and services, but they are unable to because there  i s nowhere to go.  Their complaints are  usually around the lack of cleaning, painting, and tardiness in f i x i n g things that need repair.  Mary B i l l i c k of the Lower  Mainland Housing r e g i s t r y echoes Val's concerns  regarding  maintenance and repair. In addition to some owners and managers, as well as community a c t i v i s t s , government employees and elected o f f i c i a l s are also aware of a problem in lack of maintenance and repair in study area low-rise buildings.  Corporal Donnelly, of the  New  Westminster Police Department, pointed to the p o s s i b i l i t y that poor maintenance and management practices in some low-rises to more deterioration of these buildings. Alderman in the City of New  lead  Yvonne Cocke,  Westminster, also expressed concern  about some owners l e t t i n g their buildings deteriorate, and saying that the buildings need to be torn down so that  later  new  buildings of higher density could be b u i l t .  From Declared Expense Ratios of Low-rises For Sale.  A review  of properties offered for sale in the last two years in the study area indicated that declared expense ratios were well below market expense r a t i o s in several cases.  When one owner of  1 29 a low-rise building that was constructed  in the study area in  the 1950s professes to have an expense r a t i o of 20 percent,  one  must conclude that some needed item of building expense i s being cut. The  item of expense to be cut to reduce expenses i s often  building maintenance and repair.  From a Drive-by Inspection.  A brief s i t e inspection of  low-  r i s e buildings included in the sample chosen for analysis on ownership found some buildings with poor external appearance and poor landscaping  maintenance.  From Building Permit Records. New  Figures supplied by the City of  Westminster's Planning Department suggest that a small  sum  of money was  spent by owners on low-rise building r e h a b i l i t a t i o n  in 1988  1989.  and  Poor Building Design There i s l i t t l e doubt that the low-rise buildings in the study area do not meet the present day  standards for a t t r a c t i v e and  functional low-rise apartments buildings.  Study area apartment  buildings were b u i l t quickly and cheaply for a rapidly expanding rental market.  Certainly design  improved in these buildings as  time moved on.  Purpose designed, low-rise buildings of the late  1970s and early 1980s incorporated such things as ground l e v e l patios, more private balconies, more functional i n t e r i o r and so on.  However, design problems common to most older  layouts low-  1 30  r i s e structures such as overlooking, inadequate off s i t e parking,  long dungeon-like i n t e r i o r corridors, inadequate i n -  suite storage, poor soundproofing, cannot be easily corrected. These problems, by decreasing tenant s a t i s f a c t i o n , are indications of poor  Neighborhood  fit.  Problems  There are a number of possible causes for the neighborhood problems that detract from the l i v a b i l i t y of study area neighborhoods.  Low  rental rates, in comparison  to less central  municipalities such as Surrey or Delta, suggest that the study area neighborhoods may may  be valued less highly by renters.  This  be due to higher incidence of poverty, crime, t r a f f i c and  noise, deteriorating buildings, and poor design in these neighborhoods.  In addition, there i s a skewed d i s t r i b u t i o n of  age and family structures resulting in a low proportion of middle aged, family persons in the study area, and that contribute to neighborhood  instability.  may  A vicious cycle may  be  at work here whereby factors contribute to lower rental rates, and these lower rental rates, in turn, attract persons with lower education, income, and more s o c i a l  problems.  Social, economic, and demographic forces interact to produce the problems noted in study area neighborhoods.  For instance,  crime in the area i s l i k e l y related to the high numbers of younger males l i v i n g in the area with poor education, and low income due to dependence on part time jobs.  131  When the low-rise buildings were f i r s t b u i l t they represented a temporary stopping off point for young single adults, and young married couples on their way up to better futures.  The  question now i s whether or not, in the absence of any direction from government, these neighborhoods have become just another stopping off point for the old, the poor, and the uneducated, who are not going anyplace.  Further Neighborhood Deterioration?  Pointing out neighborhood  problems in the study area i s not to deny that in many ways these neighborhoods meets the needs of many of their residents. Central location, excellent transportation, easy access to shopping and medical care, lower comparable rental rates, compatible apartment size, are of great s a t i s f a c t i o n to residents.  However, i f decreased investment in the maintenance  and repair of low-rise buildings continues, leading to increasing neighborhood unattractiveness and increased s o c i a l problems, the consequence may be demolition and redevelopment of existing low-rise buildings.  Demolitions and redevelopment w i l l  start with older buildings in the beginning, but could move to newer buildings given certain favorable market  forces.  Owner's attempts to Improve Complementarity Although owners are concerned about their buildings meeting the  needs of tenants, they must be concerned about the  p r o f i t a b i l i t y of their business.  Some measures currently  132 considered by lower mainland and study area owners of low-rise apartment buildings to improve p r o f i t a b i l i t y  include  r e h a b i l i t a t i o n , renovation, and redevelopment.  Renovation or Redevelopment to Increase Returns?  The central  concern of most apartment building owners i s to maximize returns.  This i s not the only ownership goal.  For  instance,  some owners view the management of their apartment buildings as their job. profit.  However, they are s t i l l concerned about making a  If they are not making suitable returns, often measured  by the percentage of return they could get on alternate investments of similar r i s k , they must make decisions to increase returns. One  of the steps a p r o f i t maximizing manager of real estate  takes in assessing his property alternatives.  i s to study the economics of  This i s a study to determine the highest, best  and most productive use of the property  including a review of  a l t e r n a t i v e uses, and the projected income after r e h a b i l i t a t i o n , modernization,  change of use or conversion or demolition  and  reconstruction. The a l t e r n a t i v e s a manager of rental apartment property might consider are as follows: (1) Leave the building as i t i s , except for normal maintenance requirements. (2) Renovate the building by giving i t a f a c e - l i f t ; painting, cleaning, new  carpet, new  e.g  fixtures, and so on.  1 33 This could be referred to as moderate r e h a b i l i t a t i o n to increase rent l e v e l s . (3) Modernize the building; i n s t a l l new  elevators, replace  outmoded heating units, i n s t a l l a i r - c o n d i t i o n i n g an so on, remove one or more s t o r i e s .  or  This could be referred to as  luxury renovation and would be undertaken to appeal to a much more affluent renter. (4) Change in use: (a) by conversion;  for example, from apartments to  motor hotel, or from r e t a i l use to o f f i c e  use.  (b) by demolition of an obsolete building and construction of a new  modern structure that could either be  rented or units sold to owner-investors.  Do These Options Pose Threats to Study Area Low-rise Buildings?  The question  i s whether options two through four are  viable, and i f they are, do they pose threats to tenant needs, and to existing low-rise rental buildings in the study area? Of course option number two maintenance.  i s just correcting deferred  It i s l i k e l y that such improvements would s t i l l  attract people from the same income c l a s s .  If the rental levels  in the building were lower than the l o c a l market levels, then some rent increase would be possible. The general industry rule of thumb i s that as long as increases in rent are at least 13.5 improvements, the renovation  percent of expenses for  i s f i n a n c i a l l y worthwhile(Eshleman  1 34 1987,  38).  For instance, a $2,000 per suite renovation could be  j u s t i f i e d by a minimum of $22.50 per month rent increase. However, the point to be made is that in a tight rental market a $22.50 per month rent increase could be obtained renovating.  without  In a tight rental market there i s no competition,  and therefore the need to renovate  is removed.  Vacancy levels  are generally low in the study area, and therefore the f i n a n c i a l reward for moderate renovation i s low. A luxury renovation would require that people of medium or high income move into the area.  However, individuals with this  kind of income are usually more interested in buying, but i f they do rent they want a t t r a c t i v e , modern buildings.  According  to Carman, J r . and Smith (1986) medium and upper income renters w i l l seek housing which provides the amenities and sense of l i v a b i l i t y of single family homes.  Apartments for medium and  upper income renters must give a sense of privacy, security, landscaping, recreational amenities, energy e f f i c i e n c y , location, and an overall image (Carman J r . and Smith 1986,  46).  To bring, an existing low-rise in the study area up to these standards would cost so much that i t would not be feasible.  economically  For this reason there i s only one apartment building  in the study area that has been upgraded so that i t might be c a l l e d a modest 'luxury renovation . 1  In addition to the reasons outlined above, existing low-rise buildings in the study area are unlikely candidates for luxury  1 35  renovation  for the following reasons.  F i r s t l y , the study area  neighborhoods would unlikely be seen as a t t r a c t i v e for medium and upper income renters.  Secondly, cases reported  l i t e r a t u r e on successful renovation  in the  of rental apartment  buildings usually involve buildings that have high vacancy rates and/or below market rental rate structures.  But what about the  p o s s i b i l i t y for redevelopment of e x i s t i n g low-rise properties? If redevelopment would be for rental use, before an ownerinvestor would demolish the building and b u i l d new,  he/she would  have to make sure that the annual income on the new  building,  minus the annual c a p i t a l charge of constructing the  new  building, equaled or exceeded the annual income on the existing structure.  It i s unlikely that the study area could support  higher rental levels for reasons that have already been discussed.  Therefore,  i t would not be economical to tear down  an e x i s t i n g rental to b u i l d one that would take in the same gross rent.  But what would make demolition and redevelopment  for rental possible? The only way new  to keep rents at e x i s t i n g l e v e l s , and yet build a  structure on the s i t e of a demolished low-rise, would be to  develope at higher densities.  This means the construction of  high-rises, and as has been already  stated, New  Council has rezoned low-rise s i t e s to RM-2  Westminster City  which only permits  the construction of low-rise buildings. Another a l t e r n a t i v e would be to demolish the existing lowrise building, and build a new  low-rise, strata t i t l i n g  the  1 36 units to s e l l as condominiums.  The market seems to have been  very good for such low-rise condominiums over the past several years.  Two bedroom units in modern low-rise buildings in the  study area have been s e l l i n g in the $120,000 price range. instance, there are two 24 unit low-rise buildings being  For erected  in the western Brow-of-the-Hill neighborhood at the present time.  In one low-rise building, 800 square foot apartments are  being sold for $120,000.  Would i t be viable to demolish a low-  r i s e rental apartment building, and construct low-rise apartment condominiums on the s i t e such as the condominiums that are currently being b u i l t in the western  Brow-of-the-Hill?  When the units are b u i l t and are sold out, l i k e l y over a two year period, the t o t a l s e l l i n g price for the building's 24 condominiums w i l l be approximately $2,880,000.  Current building  costs for apartment buildings(low-rise) are approximately $70 a square foot(hard and soft costs).  For a 22,000 square foot  building, containing 24 condominiums, the costs would be approximately $1,540,000. percent  In addition, one must add on 20  of building costs for a developer's  expected p r o f i t of  $308,000, and financing costs of $323,400(10% simple interest over 2 years). t h i s new building.  accruing  The t o t a l costs would be $2,171,400 for  This leaves a residual to land of  approximately ($2,880,000 - 2,171,400) $708,600. The developer,  in t h i s example, to earn his 20 percent on  building costs, can only pay about $700,000 for the land.  The  only e x i s t i n g low-rise sites obtainable for less than $700,000  1 37 in the study area would be the older buildings b u i l t prior to the 1960s having  less than 16 u n i t s .  However, none of these  buildings are b u i l t on l o t s large enough to put a 24 unit building.  Most of these low-rise s i t e s couldn't accommodate  more than the units they already have. present  Therefore, at the  time i t i s u n l i k e l y that low-rise buildings in the study  area would be demolished to b u i l d new condominium apartment units.  If demolition and redevelopment of low-rise sites i s not  feasible now, could this happen in the future? If the market value of a $120,000 condominium in a newly b u i l t 24 unit low-rise buildings were to increase to $210,000 over the next five years (a 12% per annum increase), the market value of the project would be $5,040,000. increase by six percent  Assuming construction costs  to $2,060,867, developers  p r o f i t to  $412,000 (20%), and finance charges to $430,000 (assuming 10% simple  interest over 2 years), the t o t a l project cost would be  $2,902,000.  This would leave a land residual of $2,138,000.  The market value of Property  #6, referred to in Appendix A,  given a 6 percent per annum rent escalation in i t s units, would be around $1,622,000 in 5 years.  The land residual, at  $2,138,000 i s larger than the market value of Property #6 making i t feasible to demolish Property  #6 and build a 24 unit  condominium development. The key factors in the above scenario i s market value of condominiums escalating faster than construction costs and rents.  This increase in the price of condominiums i s the result  1 38  of increased demand for such units.  In addition, for such rapid  price increases to occur, there would have to be lack of zoned land  available at a suitable price to build on.  If these  factors occur at once, the existing low-rise buildings in  two New  Westminster might be at risk for demolition.  Attempts to Improve Complementarity (Neighborhood Improvement) A residents association has formed in the eastern Brow-oft h e - H i l l area that wishes to retain the Brow-of-the-Hill  as a  single family neighborhood, and to increase the number of families with children in the neighborhood.  These goals  are  positive for the neighborhood in that they address the skewed age and family structure of the Brow-of-the-Hill  neighborhood by  increasing the numbers of f a m i l i e s . The  residents association prefer the construction of single  family detached housing in the Brow-of-the-Hill  area.  This  association wants to keep out high-rise developers as well as developers of low-rise condominiums who  are building for the  singles or 'empty nester' markets, because these developers are not building for families with c h i l d r e n . The Brow-of-the-Hill  resident association says i t would accept  multi-family housing i f i t were for f a m i l i e s . at developing  multi-family cooperative  housing in the area would  not meet with the association's approval recent proposals  However, attempts  because i t f e e l s that  for coops place too many units on a s i t e ,  139  making the proposals unworkable for families with c h i l d r e n .  In  June, 1989 New Westminster City Council, in response to the wishes of the eastern Brow-of-the-Hill residents, adopted a policy that would encourage developments that provide low density family-oriented housing  instead of multi-story, medium  density developments including low-rise apartments.  The  RS-2  zoned area in which t h i s policy would be implemented would be an area bounded by Fourth Avenue, Eighth Street, Queens Avenue, Eleventh Street, Third Avenue and Louellen Street.  Multiple  family(high-rise) development and redevelopment would be encouraged, in the future according to t h i s new policy, in the downtown area, south of the study area. Although New Westminster City Council and the eastern Browo f - t h e - H i l l resident's association may want low density family development, land values have increased so high in the area that low density development i s impractical.  The policy r e s t r i c t i n g  development to low density family development has the effect of producing  no development.  children, and thereby  The goal of adding more families with  improving  the neighborhood i s frustrated  by an unworkable p o l i c y . Although New Westminster City Council indicated in the past that they wanted an O f f i c i a l Community Plan for the Brow-of-theH i l l neighborhood, there i s no intention now to have such a plan prepared.  Without such a plan providing future d i r e c t i o n ,  problems a f f e c t i n g neighborhood s u i t a b i l i t y cannot be properly addressed, and ad hoc, poorly conceived p o l i c i e s , such as the  1 40  one  l i m i t i n g development to low-density  achieve  family housing, w i l l  nothing.  Other E f f o r t s by Local Government (Low-rise Preservation).  New Westminster City Council has rezoned  e x i s t i n g low-rise buildings in the study area so that  proposals  to b u i l d high-rises w i l l f i r s t have to go through a rezoning process.  Although t h i s action i s to be applauded, i t does not  e n t i r e l y remove the threat to low-rise buildings in the future. The downzoning of low-rise sites w i l l remove the threat of demolition  of low-rise units to some extent, but unless  alternate sights for higher density accommodation in the lower mainland are provided through zoning,  the threat of demolition  to low-rise apartment buildings i s a p o s s i b i l i t y in the future. If market prices for condominiums are good, in the absence of appropriately zoned land, existing low-rise buildings with zoning already in place, w i l l be seen as a t t r a c t i v e s i t e s for redevelopment. In addition, pressure on future c i t y councils to accept rezoning of existing low-rise building s i t e s to high-rise use in order to create jobs and expand c i t y tax bases could result in the demolition of low-rises in the future.  6.3  Summary  This chapter has taken a look at indications of adequate and poor f i t of low-rise building c h a r a c t e r i s t i c s , and tenant and  141 owner needs.  Owner needs for adequate returns on their  investments were found to be more than adequately served by rise apartment buildings, although i t was  low-  recognized that low  yearly cash flow might be a problem in some cases.  Tenant needs  for comfortably sized l i v i n g units, for f l e x i b l e leasing periods, and for accommodation that was well served by on-site amenities(e.g. elevators), transportation, and community f a c i l i t i e s , was  found to be adequately met by low-rise buildings  and their neighborhoods. However, a poor f i t was  found between low-rise building rents  and the income of tenants, that seems to be getting more and more problematic.  In addition, indications of poor f i t were  found between building needs for adequate repair and maintenance, and owners desires for higher return on investments.  Concern was expressed that as the stock ages into  the 21st century, both buildings and their neighborhoods may deteriorate at a faster rate unless something i s done to improve repair and maintenance standards. Poor design was pointed to as a problem for tenants, but that nothing much could be done about this problem.  However,  indications of neighborhood deterioration that frustrated the needs of tenants and owners a l i k e should be dealt with, and in fact being addressed, although not always adequately neighborhood associations and l o c a l government.  was  by  Finally,  e f f o r t s of owners to find higher returns through luxury renovation or demolition and redevelopment were considered, and  142  although i t was f e l t that luxury renovation was u n l i k e l y , redevelopment with i t s demolition of low-rise buildings, was considered a p o s s i b i l i t y  in the future.  143 CHAPTER SEVEN CONCLUSION AND RECOMMENDATIONS 7.1 Future Demand • Although there i s a great demand for the low-rise rental stock now, w i l l there be a continuing demand for t h i s stock in future years? population  Demographers have pointed to future decreases in  growth rates and changes in age d i s t r i b u t i o n that  w i l l a f f e c t rates of household formation. formation  Changes in household  w i l l in turn determine the demand for owner occupied  as well as rental housing.  According  to several housing  experts, the future demand for rental housing w i l l decrease s i g n i f i c a n t l y ( G a u and Goldberg 1983).  But what i s the basis for  their concerns? Decreasing population metropolitan  growth rates and a slowing down of  and urban concentration are predicted for the 1990s  and into the early 21st century.  Such declines are attributed  to the d e c l i n i n g f e r t i l i t y rate, a slowing  in survival rate  increases, and lower levels of international immigration. conclusion  The  i s that o v e r a l l housing demand w i l l f a l l , because the  number of people requiring shelter w i l l not be increasing as rapidly as in the past.  There w i l l also be a s h i f t  in the types  of shelter demanded and the tenure preferred (Gau and Goldberg 1983).  But what are the reasons for these l a t t e r changes?  As the large group of baby boomers work their way through their l i f e cycle during the 1990s and into the 21st  century,  there w i l l be a decrease in the percentage of the population in  1 44 the 20 to 34 age group, and an increase in the percentage of the population in the middle and older years.  There changes,  i t is  stated, w i l l reduce the demand for rental accommodation significantly.  But how does this work?  In Chapter One, ,the rapid increase in the percentage of the population in the 20 to 34 age range in the 1960s and early 1970s was given as the main reason for the increased demand that brought on the large supply of rental housing in the Greater Vancouver area.  Of course the 20 to 34 age group has a high  propensity to form households, and a high propensity to rent, and as a consequence a huge demand for rental accommodation realized.  was  Since in the future t h i s group w i l l make up a much  smaller percentage of the population, the argument i s that the demand for rental housing w i l l f a l l considerably. Chapter Four pointed out that 38 percent of the tenants in the study area's low-rise apartments were between 20 and 34 years of age.  If this age group's percentage of the t o t a l population  were to decrease by 50 percent, as has been suggested by Gau and Goldberg, would the demand for apartments  in the study area also  decrease by t h i s amount, and therefore lead to apartment  unit  vacanc ies? There are a number of economic, s o c i a l , and p o l i t i c a l  factors  that might ameliorate the negative e f f e c t s on rental housing demand brought on by the decreasing size of the 20 to 34 age group. factors.  Let us now  turn to an examination of some of these  1 45 F i r s t l y , one of the assumptions upon which forecasts of rapidly d e c l i n i n g demand for rental accommodation are based, i s that households in the 20 to 34 age group w i l l purchase single family houses or condominiums as they move into the next age cohort.  However, increasing costs of ownership,  including  rapidly escalating prices of homes in many markets, as well as high interest rates, have put home ownership out of the reach of many i n d i v i d u a l s .  Increases in income in the 20 to 34 year old  group have not kept pace with increases in ownership costs.  As  a r e s u l t , these people are l i k e l y going to have to continue renting, since they cannot become owners. It i s unlikely that interest rates are going to come down s i g n i f i c a n t l y over the next decade. deficits  This i s related to the high  the United States Government i s running, in addition to  the l i k e l y  increased demand for investment from other countries.  In addition, the Canadian Government i s using high interest rates to fight i n f l a t i o n  which stubbornly refuses to go away.  F i n a l l y , the p o l i t i c a l w i l l that was shown in the past to stimulate home ownership through huge government expenditures seems to be lacking at the present time.  For these economic and  p o l i t i c a l reasons, i t i s unlikely that the large drop in predicted rental demand w i l l be realized. Secondly, demographers are predicting an increase in one and two person households as well as increases in nontraditional household types.  Although many of these new households w i l l be  f i n a n c i a l l y able to own their housing units, many w i l l  still  1 46  require rental accommodation, e s p e c i a l l y single parents and elderly  females.  Thirdly, neither the federal or p r o v i n c i a l governments are making much e f f o r t to increase the supply of rental accommodation, therefore ensuring that whatever rental housing now exists w i l l continue to be i n high demand in the future. In addition to factors operating on a national and international l e v e l , such as those outlined above, that are working to produce a healthy demand for rental accommodation in the future, there are also a number of factors of a local nature that w i l l ensure continued demand for rental accommodation in the study area of New Westminster. Central lower mainland suburbs, l i k e the study area of New Westminster, w i l l continue to be popular places to l i v e in the future.  Good quality services, as well as quick and easy access  to downtown Vancouver, make the study area an a t t r a c t i v e area to l i v e in the future.  Furthermore,  B r i t i s h Columbia, and the  lower mainland area in p a r t i c u l a r , are going to be popular places for people from other countries and other areas of Canada to come to and l i v e .  F i n a l l y , the large numbers of people  inhabiting i n f e r i o r i l l e g a l suites provide a large pool of renters to draw from for any anticipated vacancies in low-rise apartments.  Demand for apartments in low-rise buildings in the  study area i s strong now, and w i l l be well into the future. There i s no threat posed to these units by decreasing demand. If low-rise apartment buildings are suitable, by and large,  1 47 for tenants and owners a l i k e at the present demand for these units w i l l be present  time, and i f the  well into the future,  what can be done to preserve and enhance this most important segment of our rental stock?  7.2 RECOMMENDATIONS Threats Threats to existing low-rise rental stock, described in previous chapters,  include the following:  1. threats to the longevity of the stock coming from building and neighborhood deterioration, demolition, or  luxury  conversion; 2. threats to a f f o r d a b i l i t y for e x i s t i n g tenants; 3. threats to adequate returns on investment for owners r e s u l t i n g from attempts to deal with the a f f o r d a b i l i t y issue; and 4. threats from government inaction to address the threats to the stock.  Goals Measures to deal with threats to the low-rise rental stock in the study area of New Westminster must achieve a number of goals.  F i r s t l y , they must protect and enhance study area low-  r i s e buildings and neighborhoods by stopping both the physical deterioration of buildings, and the market forces leading to demolition.  Measures must ensure that buildings are properly  1 48  maintained, repaired, and modernized to promote building longevity, meet tenant needs, and improve neighborhood image. Neighborhood problems of poor education, low paying part-time work, higher than average crime rates, and age and family structure imbalances a l l must be addressed. Secondly, at the same time as buildings and neighborhoods are improved, e f f o r t s must be made to ensure that rents remain affordable to existing tenants to avoid rounds of tenant displacement in the future.  Measures chosen for neighborhood  improvement must be those that don't make neighborhoods so a t t r a c t i v e as to lead to increased rents in buildings, luxury renovations, or demolitions of e x i s t i n g low-rises. Thirdly, competitive rates of return for investor/owners must be maintained to ensure that disinvestment, in the form of poor maintenance and repair practices, i s not encouraged.  The goal  here should also include a more harmonious relationship between building management and tenants. F i n a l l y , measures undertaken must ensure that federal, p r o v i n c i a l , and l o c a l governments  become a c t i v e l y involved in  protecting the low-rise rental stock, i t s tenants, and i t s owners.  The rental housing market suffers from market  at the present time.  failure  Extremely low vacancy rates in the lower  mainland area of B r i t i s h Columbia, the result of increased demand, should bring on new supply of rental units that keep rents within the f i n a n c i a l means of tenants.  However, such  supply i s not forthcoming, and rent levels increase beyond the  1 49 means of tenants.  The need for government involvement, not only  in encouraging new supply, but also in protecting and enhancing existing rental accommodation i s c l e a r .  Principles Attempts to deal with threats to the low-rise rental stock that meet i d e n t i f i e d goals must adhere to the following princ i p l e s : 1. that more than one measure be u t i l i z e d since the multifaceted nature of the problems facing the low-rise rental stock requires that a comprehensive set of measures be employed; 2. that the threats to low r i s e stock w i l l d i f f e r according  to the c h a r a c t e r i s t i c s of a p a r t i c u l a r  and the response to threats must be f l e x i b l e  community,  enough to respond  to community differences; and 3. that any combination of measures to achieve goals take into account p o l i t i c a l r e a l i t i e s , including the multitudinous  demand for government expenditures,  and  therefore keep demands on government funding at a minimum.  Alternative Measures to Meet Goals The following measures have been advocated in the l i t e r a t u r e as ways of achieving the above mentioned goals. divided according Federal Programs  They are  to level of government r e s p o n s i b i l i t y .  1 50 Government Purchase of E x i s t i n g Low-rise Buildings.  The  purchase and operation of low-rise buildings by government would c e r t a i n l y r e f l e c t a s i g n i f i c a n t committment on the part of government towards the low-rise stock.  It i s l i k e l y that  buildings would be better maintained under government operation since the p r o f i t motive would no longer be primary. government operation,  Under  rents would l i k e l y remain affordable,  since no government would l i k e to upset such a large voting constituency  as renters.  However, this solution would be  extremely expensive, both from the point of view of the large i n i t i a l outlays of c a p i t a l for purchase, and for ongoing subsidies of building r e h a b i l i t a t i o n and rent l e v e l s .  For t h i s  reason, i t doesn't meet the t h i r d p r i n c i p l e outlined above, and therefore i s not considered  as a viable option, at least in the  short run.  Government Subsidies  for R e h a b i l i t a t i o n .  Government loans  and/or grants are a very popular measure to encourage r e h a b i l i t a t i o n of rental buildings.  For instance, rental RRAP  (Residential R e h a b i l i t a t i o n Assistance Program), a Canada Mortgage and Housing Corporation discontinued, provided  renovation  program that was recently loans to a maximum of $17,000  per unit for substandard low rent units. by landlords who kept post-renovation levels for f i f t e e n years. c r i t e r i a outlined above.  Forgiveness was earned  rents below average market  This type of program meets several It encourages repair to the existing  151 stock, and i t takes into consideration a f f o r d a b i l i t y through loan forgiveness i f rents are kept low in the postr e h a b i l i t a t i o n period.  Unfortunately, CMHC f e l t that i t was not  well targeted to those in core housing need, so discontinued the program. Undoubtedly a program l i k e rental RRAP would be h e l p f u l to those owners having low cash flows either due to low demand for rental units, or high mortgage costs.  For instance, Property #6  in the sample analyzed for returns on investment, a 21 unit apartment building in the Uptown Neighborhood, could face problems in affording r e h a b i l i t a t i v e work i f the owner had a 40 percent mortgage on the property.  Although the after tax return  on investment over a five year period, taking into account c a p i t a l appreciation, i s a respectable 10.10 percent, the f i r s t year after tax cash flow would only be $19,213.  Even year  three's cash flow i s only $29,747 after a l l operating, financing, and tax expenses have been paid.  If he/she were to  make any repairs, the expenses would have to come out of t h i s limited amount of money. If the owner of property #6 had an a l l equity investment he/she would be getting an after tax flow of approximately $52,000 during the f i r s t year.  He/she would be better able to  afford improvements in building condition.  The point to be made  is that there i s room for a program l i k e rental RRAP, but i t should be targeted to owners with problems in affording expenditures  on repair because of low yearly cash  flow.  1 52  Shelter Allowances.  As a Federally subsidized program,  shelter allowance advocates believe that such allowances paid to needy renters would bring on new supply, reduce rent levels making rental accommodation more affordable, and provide owners with returns on investment that would allow them to keep their buildings in.good repair. However, the program would be very expensive, and there i s no guarantee that needy renters, forced to go without many consumer goods because of low income, would invest their increased allowances in housing.  Therefore, increased incomes may not  lead to. increased demand for rental units, and as a consequence 24  new supply may not be forthcoming. F i n a l l y , there i s no guarantee that increased returns on investment to owners, resulting from increased a b i l i t y of renters to pay rents, would result in investment in building repair and maintenance.  Chapter Five showed that returns on  investment on an after tax basis from low-rise buildings in the study area i s very competitive with other investments.  However,  as was found in Chapter Three, there are many low-rise buildings in the study area needing minor and major repair.  In addition,  tenants complain about poor maintenance practices in many buildings.  Mayer found a similar discrepancy between higher '  Other c r i t i c i s m s of shelter allowances are provided by J. D. Hulchanski in Shelter Allowances and Canadian Housing Policy; A Review and Evaluation  153 returns and increased investment in building repair in his study of owners decisions to invest in r e h a b i l i t a t i o n of multi-family housing in Berkely, C a l i f o r n i a .  He states, " s u r p r i s i n g l y , given  exceptionally good potential investment return, owners of structures in bad condition r e l a t i v e to neighboring are found to do no more frequent(if anything, repair"(Mayer  Increased Allowances.  1981,  buildings  less frequent)  57).  Incentives Through More L i b e r a l Tax Increased  returns on investment could be realized  through such income tax provisions as accelerated depreciation of any r e h a b i l i t a t i v e expenses or lower rates on c a p i t a l of r e h a b i l i t a t e d rental buildings.  gains  However, owners/investors  are already getting ample incentives through such tax expenditures as interest rate d e d u c t i b i l i t y and c a p i t a l cost allowances, and  i t s t i l l does not seem to be enough to bring on  required repair to buildings. The problem in the study area, as far as getting required r e h a b i l i t a t i o n i s concerned, doesn't seem to be the result of inadequate returns.  If any  increased incentives were to be  given they should be targeted very c a r e f u l l y to those who need i t because of continuous problems with vacancies, those who  really  and to  are f u l f i l l i n g certain s o c i a l goals such as providing  rental accommodation to low income people.  Changes in Capital Cost Allowance Rates. r  Owners are allowed  1 54 to deduct 4 percent  of their building's depreciable base every  year from the income tax payable on their low-rise building. This i s an allowance for the depreciation of their building. One solution suggested to enhance building repair and maintenance, i s to allow greater CCA deductions, which would increase yearly cash flow making more money available for building repair and maintenance.  However, existing CCA rates,  as was e a r l i e r pointed, are not working in many cases to improve building repair standards, and besides there are some problems with CCA provisions that can pose a threat to rental' buildings. Capital Cost Allowance can be a threat to low-rise building longevity.  Most of the value of c a p i t a l cost allowances to an  owner i s taken out over the f i r s t  15 years he owns the building.  In addition, the size of his mortgage has been reduced through monthly payments, so that the combination of lowered  leverage  and lowered CCA benefits make his/her returns lower in relation to alternate investments. If the value of the property has gone up since he bought the building, which i s most often the case in the study area, the owner must pay a l l or part of the money he has received through c a p i t a l cost allowance back to the government when he s e l l s the building.  If he demolishes the building and just s e l l s the  land, he doesn't have to worry about paying back c a p i t a l cost allowances taken in the past.  If land prices have gone up, and  i f the owner has practiced deferred maintenance, the owner might find that i t i s in h i s interest to l e t the building deteriorate  1 55  and demolish i t , rather than s e l l the b u i l d i n g .  There i s an  argument that could be made to reduce or r e s t r i c t the benefits of c a p i t a l cost allowances in order to protect low-rise buildings from demolition. It has already been pointed out that some owners facing higher vacancy rates or higher mortgage costs may suffer in the short run through small cash flows, and t h i s in turn could reduce their a b i l i t y to keep their buildings in good condition. is room for the use of c a p i t a l cost allowance in this  There  situation.  However, for many owners with low mortgage costs and low vacancy rates, there i s no need for higher c a p i t a l cost allowances. Provincial  Programs  Rent Review.  A program of rent review attempts to deal with  the problem of tenant a f f o r d a b i l i t y at the same time i t allows owners a reasonable  return on their investment.  As long as an  owner stays within some acceptable guidelines of rent increases, such increases are allowed.  For instance, a rent increase  within a market determined average rent increase would be acceptable, but the government may r o l l back a rent increase that exceeded a market determined average.  The problem here i s  that the market may well push rents far beyond the a f f o r d a b i l i t y of tenants.  Rent review may control the few overzealous  landlords who want to rent gouge, but i t does nothing to prevent the loss of a f f o r d a b i l i t y in tight rental markets such as i s evidenced in the study area.  156 Rent Control.  A program of rent control, such as B r i t i s h  Columbia introduced  in the 1970s, does deal with the  a f f o r d a b i l i t y issue d i r e c t l y by l i m i t i n g rent increases to a d e f i n i t e percentage each year.  Tenants may continue to loose  a f f o r d a b i l i t y , but at least i t doesn't come suddenly in dramatic spurts as rents escalate 30 or 40 percent  in one year.  The  problem with rent controls i s that i t can l i m i t landlord's cash flow and returns on investment so that needed repairs and r e h a b i l i t a t i o n of buildings i s not undertaken. 20 percent  Theoretically, a  increase in rents in one year could provide a  marginally p r o f i t a b l e apartment building operation with the cash flow i t needs to undertake improvements in building components. The  term t h e o r e t i c a l l y i s used because despite the removal of  rent controls in B r i t i s h Columbia in early 1980s, there has been no observable increase in the money expended on building maintenance and repair in the study area. It i s also argued that rent controls l i m i t the a t t r a c t a b i l i t y of holding property  in rental use, because of the lowered  returns on investment, and therefore accelerate the trend towards demolition.  The/re might be some truth to this p o s i t i o n .  However, there are many factors other than rent controls that can lead to premature demolition.  Rapid increases in land  values due to the increased demand for condominiums in the Kerrisdale neighborhood in Vancouver i s just one of these factors accelerating demolitions. Perhaps the negative  impacts of rent controls on landlords  157 could be ameliorated increases  by government subsidies for vacancies and  in operating costs.  In addition, perhaps  f i n a n c i a l tools such as index mortgages, by reducing  new interest  rates for landlords, could increase returns enough to compensate for any  losses brought about by rent controls.  Maintenance and Occupancy Bylaws.  The distinguishing  feature of these codes or bylaws i s that they describe, in bylaws, standards to which e x i s t i n g properties must be maintained as well as conditions of occupancy.  Under today's  circumstances, however, the maintenance features are considered  generally  more important than the occupancy features.  Maintenance bylaws normally cover a l l aspects of the building condition: s t r u c t u r a l , sanitary, plumbing, e l e c t r i c a l , and  fire  safety, and they are retroactive, even applying to conditions existing prior to the enactment of the bylaw. Most l o c a l j u r i s d i c t i o n s have a number of bylaws and regulations that appear to address the problems that a maintenance and occupancy bylaw deals with.  For instance,  there  are health regulations, sanitary codes, e l e c t r i c a l codes, f i r e safety codes, dangerous or d e r e l i c t building provisions, unsightly premises regulations, and  so on.  The Province of  B r i t i s h Columbia's Residential Tenancy Act had a duty to repair section that could force landlords to repair their buildings, although changes to the Act in 1984 almost useless.  has rendered t h i s provision  1 58 Robert L. Hale Jr writes: The difference between these and Maintenance and Occupancy Bylaws i s that they deal with new construction, applied for r e h a b i l i t a t i o n , or some s p e c i f i c aspect of a building. Only property maintenance Bylaws enable a Municipality to deal with an existing deteriorating property before i t gets so dilapidated that repair i s no longer f e a s i b l e . The other codes or Bylaws may overlap with the M & 0 Bylaw, but they do not protect a t o t a l building from neglect l i k e the M & 0 Bylaw does(Hale, 1986, 57). Although these M & 0 Bylaws are l o c a l l y drafted and administered,  authority to pass such bylaws are given to l o c a l  j u r i s d i c t i o n s by P r o v i n c i a l Governments. Charter  The City of Vancouver  gives the Vancouver City Council the power to pass such  M & 0 Bylaws. only province  However, the Province  of B r i t i s h Columbia i s the  in Canada that has not empowered i t s  municipalities to pass M & 0 Bylaws, and although a few municipalities have gone ahead anyway and passed them, they are generally considered municipal  u l t r a vires and are not enforced  by  governments.  The value of M & 0 Bylaws i s that they are not dependent on either positive market factors or the whims of owners in ensuring  that low-rise rental buildings are kept well maintained  and repaired.  Standards are set in bylaws, and through  encouragement, advice, assistance, and enforcement by l o c a l o f f i c i a l s , the buildings are  protected.  Tax on Landlords Used for Maintenance and Repair. places a 3.5 percent  France  tax on landlords incomes and modernization  and repair of buildings is financed out of this tax.  In  159 Denmark, public and private rental agencies are obliged by  law  to set aside 15 D Kroner per square foot of floor space per annum.  This tax generates a fund that i s used to finance small  subsidized maintenance loans for landlords(Harloe The philosophy  1985).  behind t h i s measure i s that each landlord, by  allowing his or her building to run down, places pressure neighboring due  properties to do the same.  on  Lowered rental levels,  to improper maintenance in one building, ensures that rental  levels in adjoining buildings w i l l also increase at a slower rate which in turn w i l l lead to poorer maintenance practices in these buildings.  If landlords have to pay a tax on their income  that would be used in improving neighboring might put more pressure on neighboring their buildings.  buildings, they  landlords to keep up  With t h i s sort of measure, costs of building  improvements are kept where they should be--on the landlord. L i t t l e information the money i s spent.  i s provided  in the French experience on  how  For instance, do owners requiring  assistance v o l u n t a r i l y ask for i t , or i s there some form of maintenance bylaw s t i p u l a t i n g what buildings need help, and then o f f e r i n g their owners assistance from tax monies collected from neighboring  landlords?  The danger of this measure i s that in a  tight rental market, with no rent controls, landlords w i l l simply pass the cost of t h i s tax onto  Property Tax Abatement.  tenants.  With t h i s measure, increases in  assessed values resulting from building r e h a b i l i t a t i o n are  1 60  forgone.  If there i s no increase in assessed value, there w i l l  be no property tax increase to owners as a result of the rehabilitation. determined  However, value for tax assessment purposes i s  by rent levels and i t might be d i f f i c u l t  to decide  whether rent increases are due to market factors or due to improvements in the building.  Property Tax Rebate.  It i s sometimes recommended that t h i s  measure go along with property tax abatement.  In the case of a  property rebate, not only i s there no tax increase because of r e h a b i l i t a t i o n , but the owner who improves his property a c t u a l l y gets back some of the money he pays in property tax.  There i s  probably some advantage in t h i s measure i f i t i s directed towards stock where repair i s badly needed, and where owners are not in a position, because of low cash flow, to undertake repair.  Provincial assessment f i l e s contain a l l the data  necessary to determine e l i g i b i l i t y Province.  for such rebates from the  However, as was the case with rental RRAP,  there would not l i k e l y  be much take-up of such a measure in the  study area i f i t were tied to a recapture of monies from property tax rebate upon the sale of the building.  Improvements in Services to Disadvantaged  Tenants.  This  measure would undoubtedly involve both federal and p r o v i n c i a l levels of government.  Chapter Four pointed out the low  educational levels of many study area tenants, and their  161 dependence upon low paying, part time work as well as government assistance.  Programs directed at meeting the educational  vocational needs of t h i s group could lead to increased thereby making apartment units more affordable.  and  incomes,  Most discussion  of ways to make rental accommodation more affordable concentrate on increasing supply or c o n t r o l l i n g rents, while very l i t t l e i s directed towards p o s i t i v e ways of increasing e f f e c t i v e demand. More income from better paying, steady jobs could make i t much easier for study area tenants to pay higher rents.  Provision of Property Management Training to Landlords.  CMHC found in their National Housing Study that a  large percentage of landlords were not aware that their buildings were in need of major repair (CMHC 1986). on low-rise rental housing done in Ontario landlords, who  The  found that  study  small  dominated the low-rise stock in Ontario,  often  lacked the resources and technical knowledge to manage and maintain their properties in a cost e f f e c t i v e manner. They suggested that the v i a b i l i t y of these small  operations  could be improved through the provision of services in areas such as budgeting, financing, accounting, rent review, landlord tenant r e l a t i o n s , repair and maintenance strategies and energy improvements.  What was  needed, they suggested, was  P r o v i n c i a l l y funded program to pay owners, or  a  property  management associations, to provide training(Peter Barnard Associates  1985).  1 62 Although the small apartment building operations in the study area could l i k e l y benefit from advice on maintenance and repair strategies, the analysis of returns on investment  in Chapter  Five indicated that small buildings were doing as well as larger buildings, and would not require help in f i n a n c i a l matters.  One  of the reasons they are doing so well i s that with the high demand for rental accommodation they have no vacancies, and can increase rents as high as the market w i l l bear.  The small low-  rise buildings in the study area do not face problems with rent review as do the small low-rise buildings in Ontario.  In a  situation in which they had to face higher vacancies and  lower  revenues they might have to get more training to remain competitive.  It would be expected that i f a maintenance and  occupancy bylaw were introduced in New  Westminster, advice,  encouragement and assistance on repair and maintenance practices would be offered as a part of these new regulations.  Local Government Programs Use of Incentives to Obtain Desired Development.  In order to  increase the provision of amenities in low-rise buildings, the City of Calgary Planning Commission offer a bonus in the form of additional penthouse units.  For each square foot of workshop,  or a mini park he/she provided, the developer could have an ' additional square foot for a penthouse (City of Calgary Planning Department 1979).  This p r i n c i p l e could be applied to existing  buildings in the study area as well.  For instance, bonuses  163  could be provided to construct outdoor open space on rooftops, where building structure permits.  Registry of Developable  Land in the Municipality. If a  municipality kept a registry of the developable land within i t s j u r i s d i c t i o n , they could help developers find alternate s i t e s to existing low-rise building sites for development. great importance,  Of course, of  would be the provision of an adequate supply  of zoned land for d i f f e r e n t uses.  O f f i c i a l Community Plans.  O f f i c i a l Community Plans could be  made for neighborhoods that would outline the goals of future development, and which could provide residents and  developers  a l i k e with information upon which to base their decisions in respect of their property.  If goals for neighborhoods zoned for  multi-family accommodation are not set, no improvements occur in these areas.  Small Local Improvements.  Small, r e l a t i v e l y  inexpensive  improvements, such as sidewalk and boulevard improvements, public benches, and mini-parks can contribute towards the l i v a b i l i t y of an area, and help reverse trends towards deterioration in multi-family neighborhoods.  Rental Only Zones.  The a b i l i t y to zone areas for rental only  housing, i f permitted under the Municipal Act, could have some  1 64  positive e f f e c t s .  Demolition for condominiums would no longer  be a concern, although luxury renovation and perhaps even demolition for luxury rental accommodation might s t i l l be a possibility.  However, i t r e a l l y doesn't address the problem of  a f f o r d a b i l i t y , since rents in these zones would be unaffected by the fact that other uses were not permitted.  Establishing a Constituency for Housing.  In order to get a l l  levels of government more involved in the problems of the rental sector, an e f f e c t i v e constituency must be developed the existing rental stock.  to speak for  During periods of rapid economic  development in the lower mainland, voices are raised against the products of increased rental demand such as demolitions and displacement, but as soon as the economy slows down, discussion about preserving existing stock i s seldom heard u n t i l the next expansion of the economy. Interviews with community a c t i v i s t s in New  Westminster  indicated that renters do not usually become motivated to become involved in measures to preserve existing rental buildings and prevent displacement  u n t i l a c r i s i s occurs.  This may  be due to  the high mobility in these areas, and a lack of committment to the community.  However, there are sections of the rental  community that tend to be more stable, e s p e c i a l l y senior citizens.  This lack of committment from renters, however,  suggests that the constituency for rental housing must be broad.  165  Demolition Controls.  The power to stop demolitions e n t i r e l y  has not been given to municipalities in B r i t i s h Columbia. However, i f they were given this power now, they would be able to delay demolitions of rental units u n t i l a l t e r n a t i v e s to the destruction of these buildings could be found. Although  i t i s argued that demolition controls involves  excessive interference in an owners property r i g h t s , i t should be remembered that a good deal of the money that went into building low-rise buildings in the study area came from public sources.  Chapter Two pointed out how l i b e r a l tax incentives in  the 1960s stimulated the construction of low-rise buildings, and in the 1970s and 1980s forgivable loans, low interest loans, and l i b e r a l CCA rates a l l were used to increase rental production. A l l these measures were employed at the expense of the ordinary taxpayer.  Therefore, the public must have some voice, in the  future of an asset that they have made s i g n i f i c a n t  financial  contributions towards.  Creation of a Low-rise  Inventory  in Local Planning Departments  M u n i c i p a l i t i e s must be familiar with their low-rise stock, and be able to monitor the changes taking place within i t before any strategy can be implemented.  With provincial funding  municipalities could inventory their low-rise stock and develop a data capacity which would sensitize them to luxury renovations, conversions and demolitions.  This information  would also be used to deliver and evaluate programs designed to  166 a s s i s t this sector.  Alternatives Selected Measures to deal with threats to the e x i s t i n g low-rise and  stock  i t s occupants in the study area of New Westminster, in  addition to being comprehensive and c o s t - e f f e c t i v e , must be implemented according  to some time frame.  more urgently required than others.  Some measures are  For instance, tenants of  low-rise buildings in the study area are being displaced now due to excessive The  rental increases.  following measures aimed at dealing with problems of the  low-rise stock represent a comprehensive approach that i s of r e l a t i v e l y low cost.  In addition, the p r i n c i p l e of time frame  awareness i s adhered to by d i v i d i n g measures into those that should be implemented immediately, those requiring implementation in the near future, and those that can wait for further study prior to implementation. Short Term Rent Review. the excessive  Some immediate steps must be taken to control rent increases now occurring in the study area.  Mayor Campbell of the City of Vancouver advocates a system of government rent review in cases where tenants are subjected to an increase of rent in excess of 1.5 times the average rent increase.  If the rent increase exceeds the guidelines for no  good reason, the government should be able to have the rent r o l l e d back to the appropriate  level(The Province, January 26,  167 1990). Although t h i s proposal might be considered f a i r in a rental market operating properly, i t i s inadequate to deal with the problem in a market experiencing f a i l u r e . in an area with no new  supply may  Average market rents  be so high so as to frustrate  any intent of making rents affordable. The market average  may  well be in the 30 percent range, but the tenants a b i l i t y to pay remains the same. A landlord has a right to a reasonable return on a building, but t h i s return should be t i e d to the return on an investment of similar risk and not to some average rent increase in a f a i l i n g rental market.  This proposal involves determining the average  before tax and before financing return on an alternate investment  of similar r i s k , and making this the standard upon  which to determine  i f a rent increase i s reasonable.  instance, i f an average alternate investment  For  returns 9 percent  then t h i s would be the figure upon which a rent review i s made. This proposal would probably reduce returns on investment  over  a 5 year period on a low-rise building in the study area since average rental increases over this period would be reduced, in turn reducing the increase in c a p i t a l value of the building. However, the returns would be in l i n e with alternate investments, which seems a f a i r way  to treat an investor.  If such a rate of return on a alternate investment of similar risk were used as a guideline as suggested above, i t i s unlikely that double d i g i t rental increases would have been experienced  1 68  in the study area.  This measure would be f a i r to an  investor/owner because i t keeps h i s returns competitive with returns on other investments.  The P r o v i n c i a l Government would  be involved in reviewing rent increases, and although i t would mean some expense in h i r i n g new s t a f f , the Provincial Government does have recent experience in implementing  Maintenance  and Occupancy Bylaws.  rent controls.  The Provincial Government  should make immediate changes in the Municipal Act to empower municipalities to pass maintenance and occupancy  bylaws.  Evidence suggests that some landlords, ho matter what sort of cash flow they are getting or how high their returns on investment are, w i l l not keep their buildings well maintained and in a good state of repair.  Negligence of buildings may be  caused by a desire to get as. much money as possible out of their buildings in the short run, or i t may be due to ignorance of the needs of their buildings.  Whatever the reason, steps must be  taken immediately to protect buildings, or else we w i l l pay heavily in the future in terms of having to construct new rental accommodation. It i s up to the Provincial Government to pass the new l e g i s l a t i o n to make i t possible for l o c a l governments to pass new maintenance and occupancy  bylaws.  Local Municipal  Governments are l i k e l y to need some f i n a n c i a l help from the Province in administering the program.  However, i f the new  program of inspection i s coordinated with other existing l o c a l  169  inspection programs such as health and building inspection services, the cost of the new service should not be that great. Some form of assistance to landlords, hard h i t by the need to repair their buildings, could come from already t r i e d programs such as property  tax abatement, rebate, or rental RRAP i f i t i s  ever reestablished.  Provision of O f f i c i a l Community Plans for Neighborhoods Under Redevelopment Pressure.  A municipality must have a clear  understanding of where i t would l i k e to see a p a r t i c u l a r neighborhood going in terms of development.  At the present  time  there are no neighborhood plans for the Brow-of-the-Hill or Uptown neighborhoods.  A plan would send clear signals to a l l  concerned about what i s l i k e l y to happen.  In addition, programs  leading to goals set in the neighborhood plan could be implemented and evaluated, providing a sense of d i r e c t i o n for a l l concerned. At the present  time New Westminster Council has a policy of  encouraging family growth in one portion of the eastern Brow-ofthe-Hill.  Neighborhood residents want t h i s family growth but  are reluctant to see the type of multi-family development proposals  that they feel are aimed at the empty nest and seniors  markets rather than at families with c h i l d r e n .  Of course to  private sector developers i t makes no sense trying to build for families with children since this group, i f they had the money to purchase a home, would be looking towards single family  170  detached accommodation in the suburbs.  At the time of rezoning,  neighborhood residents speak against multi-family proposals that cater to empty nesters and seniors, and council members have tended to support  them.  On the other hand, because of increased land values, i t i s no longer feasible to tear down e x i s t i n g older dilapidated houses and b u i l d new single family dwellings, ideally suited to families with children, in t h i s portion of the Brow-of-the-Hill neighborhood.  Multi-family accommodation i s the most viable  option, and yet without  some clear signal in the form of a  community plan outlining how accommodation catering to families with children i s going to be b u i l t in the area, nothing happens. Perhaps one solution to the problem of increasing the number of families with children in t h i s area would be the encouragement of cooperative housing associations whose membership i s r e s t r i c t e d to families with c h i l d r e n .  Low-rise Inventory  in Local Planning O f f i c e s .  The New  Westminster Planning Department already has a good deal of information on i t s low-rise stock.  However, a great deal of  information i s missing including information on tenant needs as well as building conditions.  The Provincial Government  should  make funds available to the City of New Westminster so they can either f i l l  in information gaps themselves, or be able to hire  consultants to provide this information to them.  This proposal  is unlikely to cost a great deal of money, and would provide the  171  needed information to monitor changes, and to develope  and  evaluate programs to deal with the threats to the stock.  Registry of Developable Land.  Although there i s l i t t l e  cleared developable land l e f t in New  Westminster, the City has  looked at redevelopment options in b u i l t up areas.  The City  should prepare a l i s t of sites suitable for d i f f e r e n t uses that could be made available to developers.  This may  save e x i s t i n g  low-rises from demolition in the future in that a developer could become aware of another s i t e to build on.  Establish a Constituency for Rental Housing.  There does not  seem to be much of a constituency for existing rental housing in New  Westminster.  There are a few l o c a l groups as well as a  small number of p o l i t i c i a n s who  are concerned about the issue,  but they are not working together, and there seems to be no plan of  action.  For instance, the Seniors Bureau, representing older  renters, does not work closely with the Lower Mainland Housing Registry, who  represent other low-income renters.  Further, the  residents association in the Brow-of-the-Hill doesn't work with other groups.  F i n a l l y , there i s no tenant's association in New  Westminster. There seems to be a need for interested groups to come together in New  Westminster, to e s t a b l i s h some goals and  p r i o r i t i e s to save existing rental accommodation in the C i t y , and to ensure that the stock remains affordable.  1 72  Small Local Improvements.  There are a number of small,  inexpensive improvements that could be made to the area. instance, the Seniors Bureau has advocated  For  in the past for  benches within the Uptown neighborhood that seniors could use as rest stops while they are walking through the area to shopping. Others have advocated  for mini-parks in the study area to  provide some area in which to s o c i a l i z e and to relax.  There are  larger parks nearby, but i t i s f e l t that small parks might foster a greater f e e l i n g of neighborliness.  In addition, steps  to cut down on outside t r a f f i c using the study area as a t r a f f i c shortcut('rat running'), while being f a i r l y inexpensive, would add a greater sense of l i v a b i l i t y to the neighborhood.  Mid  Term  Demolition Controls.  Although demolition controls would be a  program that should be implemented immediately  in Vancouver,  there are no immediate threats of demolition to low-rise buildings in the New  Westminster study area.  Such demolitions  could occur i f demands for condominiums in the area should increase in the future.  Chapter Five explored the  under which low-rise buildings might be demolished area.  circumstances in the study  Therefore, any housing constituency that comes together  for the purpose of protecting rental housing stock in New Westminster should advocate  for the inclusion, in the Municipal  Act, of municipal authority to delay demolitions while other  173 solutions are sought.  Encouragement of the Owner-occupant Form of Property Ownership.  The s p l i t between the shelter and  investment  components of ownership produce many problems in rental housing. Chapter Five pointed out that owners rarely reside in their apartment buildings, and are therefore primarily concerned their properties as investments.  about  Their tenants are not their  neighbors with whom they must interact, so therefore they are ' not as concerned about tenant problems.  Owners don't have to  deal face-to-face with tenants when they, as owners, make excessive demands for rent increases, and they don't have to continue l i v i n g with tenants on a day-to-day  basis after  neglecting promised services to tenants. Mayer's study of factors affecting landlord's housing r e h a b i l i t a t i o n decisions found that owner-occupant landlords have higher likelihood of r e h a b i l i t a t i o n investment than other landlords, and that there should be increased public encouragement for that ownership  form as an e f f e c t i v e housing  conservation measure (Mayer 1981). The problem with this proposal i s that most persons prepared to become owner-occupants simply do not have the cash to purchase a low-rise building in the study area.  These  prospective owners would have to carry such a large mortgage that their cash flow in the beginning years would be negative, requiring them to subsidize the s h o r t f a l l with income from some  174 other source, making the concept unworkable. The chances of several owner occupants purchasing a building are greater, e s p e c i a l l y i f they could obtain a price l e v e l adjusted mortgage (indexed mortgage).  Such mortgages have been  advocated for use in financing cooperatives, and as one author suggests, the market for indexed mortgages could be widened i f they were used with mortgage-backed s e c u r i t i e s .  These  s e c u r i t i e s would be purchased by pension funds which represent a huge source of c a p i t a l (Bossons  1985)  Of course the number of owner-occupants in any one building would have to be limited, or else i t would be a condominium project.  However, with low interest rates, such as those  provided by price l e v e l adjusted mortgages, and other forms of support such as increased CCA allowances, and property tax rebates for any r e h a b i l i t a t i o n expenses, several owneroccupants supplying their own management services might make such a program f i n a n c i a l l y viable.  Targeting of Capital Cost Allowances.  In recent years the  Canadian government has been targeting f i n a n c i a l aid in the housing market to those tenants in need.  Capital cost  allowance, a tax expenditure given to owners to compensate them for the depreciation of their buildings, must also be targeted so that owners whose buildings are appreciating in value are actually receiving lower CCA rates than owners whose buildings are depreciating.  Under the proposed scheme certain areas of  175 the country experiencing higher vacancy rates, and therefore presumably lowered property values, as well as areas experiencing advanced ageing of their low-rise stock would get higher CCA  rates (e.g. 6%).  Those areas where property  have been appreciating would get lower CCA  values  rates (e.g. 1%).  The  net effect of this proposal would be to redirect t h i s form of tax expenditure  from those receiving high returns because of  property appreciation to those areas of the rental stock receiving low returns.  The assumption i s that such a  redirection w i l l result in more money available to owners of buildings requiring more repair.  Reintroduction of Rental RRAP.  For most owners of low-rise  rental buildings in the study area, problems of high vacancy rates and huge mortgage payments are not r e a l l y a concern. Demand for apartment units i s high, rents are increasing, and as Chapter Five indicated, many properties have no debt financing. As a result, take-up of rental RRAP was area(City of New  low in the  Westminster Planning Department).  study Owners  did not want the controls placed on rent increases that were involved in rental RRAP.  They f e l t that returns on investment  would be enhanced by turning down the opportunity of free government loans, and allowing rent increases to push up cash flow and c a p i t a l appreciation. If a maintenance and occupancy bylaw were introduced in New Westminster, there may  be increased interest on the part of some  176  study area landlords, who are facing high mortgage payments, in f i n a n c i a l assistance such as was provided through rental RRAP. They would discover that they had to improve their buildings, and at such a time they may have some d i f f i c u l t y financing such improvements.  in immediately  Therefore, CMHC should reintroduce  rental RRAP to a s s i s t more marginal low-rise operations.  Improvements in Services to Disadvantaged Tenants.  Chapter Four indicated that many of the tenants in the  study area do not have the education and s k i l l s to compete in today's job market.  Single parents often do not have job  s k i l l s , but also require c h i l d care services so they can work. What i s required i s an active outreach program, undertaken through the cooperation of the federal and p r o v i n c i a l government, to provide personal and vocational counseling, job t r a i n i n g , and ongoing support to disadvantaged tenants in the study area.  Long term solutions Studies on the Long Term Future of the Private Sector Rental Housing Market.  If the d i s p a r i t y between tenant incomes and  rental rates continues to grow in our major Canadian c i t i e s , the private rental housing market w i l l become less and less viable. If i t i s not viable now or in the future, the federal government must take steps towards decreasing tax expenditures in the form of  interest rate deductions and CCA deductions from taxes owed,  1 77  and instead use these forgone revenues to begin purchasing  low-  rise rental buildings so that such buildings are owned and operated by public or non-profit agencies.  S i m i l a r l y the  Provincial governments must, i f rental markets become less and less viable as evidenced by decreasing a f f o r d a b i l i t y , impose a rent control system. Before such drastic measures are taken, the federal and p r o v i n c i a l governments should fund studies and research into the private rental market and ways that the i n t e g r i t y of rental buildings might be maintained, and the needs of tenants and owners might be met within the context of a private rental housing market.  Redevelopment as well as Preservation To t h i s point the preservation of e x i s t i n g low-rise buildings has been of prime importance.  Although e x i s t i n g rental  buildings meet tenant needs, and therefore should be preserved, there are a certain number of them that because of past neglect, cannot be preserved.  Furthermore,  as was  found in Chapter  Two,  existing low-rise buildings do not provide large enough apartments for families with children.  Therefore, i f the goal  is to s t a b i l i z e study area neighborhoods by increasing the number of families with children, something in addition to preservation must be In Chapter One  proposed.  the creation of three new  Westminster over the past five years was  neighborhoods in New  seen as a f u l f i l l m e n t  1 78  of housing objectives expressed in New Westminster's Community Plan.  Official  At that time i t was noted that t h i s new housing  was for middle and upper income c i t i z e n s , and that  little  provision has been made in the plans for these new neighborhoods for the housing needs of low and moderate income people. Perhaps i t i s time to look at the redevelopment  of older low-  r i s e building s i t e s for housing low and moderate income families with c h i l d r e n .  The New Westminster  City Council could take a  position of favouring such a course of action. accommodation would  Of course such  not be undertaken by the private sector,  but would require the involvement of public and non-profit agencies.  7.3 Summary Low-rise rental buildings in the study area represent a s i g n i f i c a n t housing resource in the City of New Westminster, and in the lower mainland of B r i t i s h Columbia.  Although the threats  to t h i s stock are not as immediate and dramatic as in some other areas of Greater Vancouver,  they nevertheless are important.  In preceding chapters attempts were made to describe the origins of the low-rise building form in New Westminster, as well as the c h a r a c t e r i s t i c s of the present stock. C h a r a c t e r i s t i c s of tenants and buildings were presented as well. It was determined that buildings were suitable for tenants and owners in many ways, but that there were problems that posed threats to the longevity of the low-rise stock, and the  179  s a t i s f a c t i o n of i t s tenants and owners. these threats were evaluated,  Ways of dealing with  and recommendations made of those  options f e l t to be most desirable in the short, mid, and long term. In addition, i s was suggested that preservation alone w i l l not solve a l l study area problems.  Older neglected  low-rise  buildings w i l l need to be demolished in the future, and new homes must be found for persons displaced.  Existing low-rise  buildings cannot meet the needs of families with children. Redevelopment of existing low-rise s i t e s for low and moderate income families with children should be encouraged by New Westminster City Council. Although the recommendations to deal with threats to low-rise stock w i l l be advantageous, the future of the low-rise market rental building w i l l continue to be troubled.  The continual  c o n f l i c t between investment objectives dictated by the market and the needs of tenants for affordable accommodation in locations that meet their needs w i l l not get better. If government doesn't take a very active role in the protection and enhancement of the stock, tenants w i l l be displaced, and valuable rental housing units w i l l be l o s t .  180 REFERENCE LIST American Society of Planning O f f i c i a l s . 1964. Apartments in the Suburbs. Chicago: American Society of Planning O f f i c i a l s . Information Report No. 187. B e l l , L. I., and Jon Constantinescu. 1974. The Housing Game: A survey of consumer preferences in medium-density housing in the Greater Vancouver Region. Vancouver: Social Policy and Research Department, United Way of Greater Vancouver. B i l l i c k Mary, Director of the Lower Mainland Community Housing Registry Society. June 1989. Interview by author, New Westminster. Bossons, John. 1985. The Effects of Using Indexed MortgageBacked Securities To Finance Non-Profit Housing Cooperatives . Ottawa: Co-operative Housing Foundation of Canada. Buckley, Kenneth. 1965. Construction and Housing. In H i s t o r i c a l S t a t i s t i c s of Canada, ed. M. C. Urquhart, 495-515. Toronto: Macmillan Co. of Canada Ltd. Burns, Leland S., and Leo Grebler. 1986. The Future of Housing Markets: A New Appraisal. New York: Plenum Press. Canada Mortgage and Housing Corporation. 1981. Residential Rehabilitation Assistance Program. Ottawa: Canada Mortgage and Housing Corporation (CMHC). . 1982. New Housing in Existing Neighborhoods: Advisory Document. Ottawa: Canada Mortgage and Housing Corporation (CMHC). . 1987. Housing For Elderly People: Design Guidelines. Ottawa: Canada Mortgage and Housing Corporation (CMHC). NH 18-2/2-1987. . July 1987. A Consultation Paper on Housing Renovat ion. . 1988. Residential Renovation Overview: Summary Report. Ottawa: Canada Mortgage and Housing Corporation (CMHC) . 1989. Rental Vacancy Survey Report - October 1989. Canadian Builder. 1965. This study gives the reasons for the coming boom in homebuilding. Canadian Builder, 15 (June): 40-42.  181 Carman J r . , Edward C , and David A. Smith. 1986. Rental Housing in the 1980s. Journal of Property Management 51 (March/April): 46-49. Chaster, Barry, r e t i r e d Director of Planning for the City of New Westminster. May 1989. Interview by author, New Westminster. City of Calgary Planning Department. 1979. Amenities for Apartments: 1979 Design Guidelines. Calgary: City of Calgary Planning Department. City of New Westminster Planning Department. 1982a. Special Need Residential f a c i l i t i e s in New Westminster: A Problem of Housing Citizens in Need. New Westminster: New Westminster City Planning Department. • . 1982b. A Residential Development Strategy For New Westminster. New Westminster: New Westminster City Planning Department. . 1982c. The Community Plan For the City of New Westminster: Goals, Objectives and P o l i c i e s . New Westminster: City of New Westminster. . 1989. Low Rise Apartment Buildings, Brow-of-theH i l l and Uptown Neighborhoods, New Westminster, B.C.. New Westminster: New Westminster City Planning Department. City of Vancouver Planning Department. 1982. Provision of Affordable Rental Housing Through the Private Sector. Vancouver: Vancouver City Planning Department. Clay, P h i l l i p L. 1987. At Risk of Loss: The Endangered Future of Low-Income Rental Housing Resources. Washington, D.C.: Neighborhood Reinvestment Corporation. Clayton Research Associates Ltd., and Woodbridge, Reed and Associates Ltd. 1984a. The Vancouver Rental Housing Market 1991. V i c t o r i a : The Ministry of Lands, Parks and Housing, Government of B r i t i s h Columbia.  To  . 1984b. A Longer-Term Rental Housing Strategy For Canada: A Report Prepared for the Housing and Urban Development Association of Canada. Toronto: Canadian Home Builders Association. . 1984c. Rent Regulation and Rental Market Problems. Toronto: Commission of Inquiry into Residential Tenancies.  182 Clendenning, E. Wayne. 1980. The V i a b i l i t y of Rental Construction. Ottawa: Canada Mortgage and Housing Corporation (CMHC). Cocke, Yvonne, Alderman in the City of New Westminster. June 1989. Interview by author, New Westminster. Corporation of the D i s t r i c t of Burnaby Planning Department. 1969. Apartment Study 1969. Burnaby: Burnaby Planning Department. . 1974. Multiple Housing Questionnaire. Burnaby: Burnaby Planning Department. Crone, Theodore. 1988. Changed Rates of Return on Rental Property and Condominium Conversions. Urban Studies 25 (February): 34-42. Dodge, Robert I. 1980. Rental properties can be r e h a b i l i t a t e d using private investment, subsidy techniques. Journal of Housing 37 (October): 497-505. Dolbeare, Cuhing N. 1983. The Low-income Housing C r i s i s . In America's Housing C r i s i s : What i s to be done?, ed. Chester Hartman, 57-61. Boston: The Institute for Policy Studies. Donnelly, Corporal Greg, Community Services D i v i s i o n , New Westminster Police Department. June 1989. Interview by author, New Westminster. Easton, Shelly. 1990. Campbell presents rent-review plan. Province, 26 January, 5(C). Eisen, Denis. 1981. Project Turnaround Through Rental Counseling Part 1: The V i a b i l i t y Index. Journal of Property Management 45 (July/August): 199-202. Eshleman, Irene T. 1987. The F e a s i b i l i t y of Rehabilitating Distressed Property. Journal of Property Management 52 (September/October): 38-41. Gau, George W. 1982. Real Estate Investment Returns: Implications for Management. Journal of Property Management 47 (July/August): 10-12. Gau, George W., and Anne P. Wicks. 1982. Impact of the ARP and MURB Programs on The Vancouver Housing Market, funded by Canada Mortgage and Housing Corporation (CMHC). Gau, George W., and Michael A. Goldberg. 1983. North American Housing Markets Into The Twenty-First Century. Cambridge, Mass.: Ballinger Publishing Company.  183 Gleeson, Michael E. 1981. Estimating Housing Mortality. Journal of the American Planning Association 47 ( A p r i l ) : 185-94.  Greater Vancouver Development Services. 1984. Vancouver Metropolitan Region Household and Housing Demand Forecasts 1981-2006. Vancouver: GVRD Development Services Department. Greer, Gaylon E. 1982. The Real Estate Investor and the Federal Income Tax. New York: John Wiley & Sons. Hale, Robert L. 1982. A P r o f i l e of successful maintenance and occupancy experience in Canada. Ottawa: Canada Mortgage and Housing Corporation (CMHC). . 1986. The Provinces and Property Maintenance' Bylaws: A review of P r o v i n c i a l Enabling Legislation, P o l i c i e s and A c t i v i t i e s in Support of Municipal Maintenance and Occupancy Bylaws. Ottawa: Canada Mortgage and Housing Corporation. Harloe, Michael. 1985. Private Rented Housing in the United States and Europe. London: Croom Helm Ltd. Hartman, Chester. 1979. Comments on 'Neighborhood R e v i t a l i z a t i o n and Displacement: A Review of the Evidence'. Journal of the American Planning Association 45 (October): 488-90. Heilbrun, James. 1969. Reforming the Real Estate Tax to Encourage Housing Maintenance and Rehabilitation. In Land and Building Taxes: Their E f f e c t on Economic Development, ed. Arthur P. Becker. Madison: The University of Wisconsin Press. Horowitz, Carl F. 1983. The New Garden Apartment. New Jersey: Center for Urban Policy Research. Hufbauer, G. C. and B. W. Severn. 1974. The Economic Demolition of Old Buildings. Urban Studies. 11 (May):  349-51.  Hulchanski, J . David. 1982. Making Better Use Of The Existing Housing Stock: A L i t e r a t u r e Review. Toronto: The Ministry of Municipal A f f a i r s and Housing, Province of Ontario. . 1983. Shelter Allowances and Canadian Housing Policy: A Review and Evaluation. Toronto: Center for Urban and Community Studies, University of Toronto. . 1984. Market Imperfections and the Role of Rent  184 Regulations in the Residential Rental Market. Toronto: Commission of Inquiry into Residential Tenancies. Humes, F. David, and Susan Dunn. 1987. The Use of Demographics in Modernizing the Residential Asset. Journal of Property Management 52 (September/October): 32-34. Jackson, Ronald C. 1987. Turning Around Troubled Multi-family Properties. Journal of Property Management 52 (July/AugustTl 6-9. Kamenz, Marvin. 1989. Economic and Social Impacts of Subsidized Rental Starts in the Greater Vancouver Area, 1975-1985. M.A. Thesis, University of B r i t i s h Columbia. Kelley, Edward N. 1981. What Tenants Really Want in Rental Apartments. Journal of Property Management. 46 (July/August): 233-34. Kiefer, David. 1980. Housing Deterioration, Housing Codes and Rent Control. Urban Studies'17: 53-62. Kolodny, Robert. 1981. Family Housing: Treating the E x i s t i n g Stock. Washington, D. C : National Association of Housing and Redevelopment O f f i c i a l s . Langstroth, Kathleen, President of the Brow-of-the-Hill Residents Association. June 1989. Interview by author, Westminster.  New  Leech, Maggie. 1969. Poverty, c i v i c obsolescence—or neglect?. Columbian, 25 A p r i l . Listokin, David, ed. 1983. Housing Rehabilitation: Economic, Social and Policy Perspectives. New Brunswick, New Jersey: Center for Urban Policy Research. Loeppky, Dennis, Director of Affordable Housing Advisory Association. June, 1989. Interview by author, New Westminster. Lovering, Mary Jane. 1986. Perception and Motivation for the use of Outdoor F a c i l i t i e s and Neighborhood by residents of Seniors' Apartments. Ottawa: Canada Mortgage and Housing Corporat ion. MacDonald, Val, Housing Coordinator with the Western Society for Senior Citizens (Seniors Bureaus). June 1989. Interview by author, New Westminster.  185 MacLennan, Duncan. 1986. The Maintenance And Modernization Urban Housing. Paris: Organization For Economic Cooperation and Development.  Of  Mayer, Neil S. 1981. Rehabilitation Decisions in Rental Housing: An Empirical Analysis. Journal of Urban Economics (July): 76-94.  10  Metro Trends. 1968. Real Estate Trends in Metropolitan Vancover 1968. Vancouver: Real Estate Council of Greater Vancouver. . 1969. Real Estate Trends in Metropolitan Vancouver 1969. Vancouver: Real Estate Council of Greater Vancouver. . 1970. Real Estate Trends in Metropolitan Vancouver 1970. Vancouver: Real Estate Council of Greater Vancouver. . 1987. Sample Apartment Building. Real Estate Trends in Metropolitan Vancouver. Vancouver: Real Estate Council of Greater Vancouver. New Westminster Columbian. 1965. Builders accused of plan changes. Columbian, 20 July. . 1965. Apartment areas urged.  Columbian, 8 October.  . 1966. Apartment Design Crackdown Coming. Columbian, 5 August. . 1967. Apartment affords permanence. Columbian, 20 January. New Westminster Now. 1989. Zoning changes blasted. New Westminster Now. 16 August. Noonan, Rosemarie. 1980. Financial strategies for moderate r e h a b i l i t a t i o n of multi-family housing units. Journal of Housing 37 (March): 147-154. O'Mara W. Paul. 1983. Rental Housing on the Comeback. Urban Land 42 (February): 8-13. PCensus Version 88 and 89. Tetrad Computer Applications Limited, Vancouver, B.C. Peter Barnard Associates. 1985. Under Pressure: Prospects for Ontario's Low-Rise Rental Stock. A report prepared for the Ministry of Municipal A f f a i r s and Housing, Province of Ontario. Racanello, B i l l , apartment building owner and manager. June 1989. Interview by author, New Westminster.  186 Royal Lepage Appraisal. 1985. Canada Mortgage and Housing Corporation Apartment Building Sale P r o f i l e . Ottawa: Canada Mortgage and Housing Corporation. Schaaf, A. H. 1969. Economic F e a s i b i l i t y Analysis For Urban Renewal Housing Rehabilitation. AIP Journal (November): 399-404. Selby, Joan. 1985. Rental Housing in Canada 1900-1985. Thesis. University of B r i t i s h Columbia.  M.A.  Sharp, Campbell. 1984. Survey of Financial Performance of Landlords. Toronto: Commission of Inquiry into Residential Tenancies. Research Study No. 7. Slavik, J . Ronald. 1981. Senior Housing: P r a c t i c a l Innovations. Journal of Property Management. 46 (July/August): 229-32. Staele, Rick, B r i t i s h Columbia Housing Management. June Interview with author, Burnaby. Steele, M. 1977. Housing Starts in processed, University of Guelph.  1989.  Canada, 1868-1920. Guelph:  . 1983. Construction and Housing. In H i s t o r i c a l S t a t i s t i c s of Canada. Second Edition, ed. M. C. Urquhart, S1-6 to S335. S t a t i s t i c s Canada and Social Science Federation of Canada. Sternlieb, George, and James W. Hughes. 1981. The Future of Rental Housing. New Brunswick, New Jersey: Center for Urban Policy Research. Struyk, Raymond J . , and Margery A. Turner. 1987. Future U.S. Housing P o l i c y : Meeting, the Demographic Challenge. With the collaboration of Makiko Ueno. Washington, D.C.: The Urban I n s t i t u t e . Sumka, Howard J . 1979. Neighborhood R e v i t a l i z a t i o n and Displacement: A Review of the Evidence. Journal of the American Planning Association 45 (October):480-87. Toft, Marian. 1986. A f f o r d a b i l i t y Sparks Low-rise Alternative. Canadian Building 36 (September): 15-17. Vienneau, Marcel. Coordinator of Programs, Canada Mortgage and Housing Corporation. May 1989. Interview with author, Vancouver. Watts, William B. 1964. Apartment Trends in Metropolitan Vancouver. Vancouver: Watts Marketing Research Ltd.  1 Wheeler, Michael. 1968. Sourcebook on Housing in Canada. Ottawa: The Canada Welfare Council. Whipple, R. T. M. 1971. Urban Renewal and the Private Investor Sydney, A u s t r a l i a : West Publishing Corporation Pty Ltd.  NEW WESTMINSTER IN THE METROPOLITAN AREA  A P P E N D I X  A  NEW CITY  WESTMINSTER BOUNDARY  — • • S T U D Y  AREA  BOUNDARY  A-PPt-NOlX THE S T U D Y  B AREA  „IN  N 6W  — W E S T M I N S T E R  CO CO  191 APPENDIX D A Sample of Low-rise Apartment  Buildings  Although the sample of 20 market rental low-rise buildings was not randomly selected, an attempt was made to s t r a t i f y the sample according to location of building by neighborhood, size of building in terms of number of units, and by date of construction. To this end five buildings were selected from the western Brow-of-the-Hill neighborhood, eight from the eastern Brow-of-the-Hill area, and seven buildings from the Uptown neighborhood. In terms of number of units, four buildings containing 15 or less units, eight buildings with between 16 and 32 units, and eight buildings with more than 32 units were chosen. F i n a l l y , seven buildings that were constructed prior to 1960, 12 buildings constructed between 1960 and 1979, and two units constructed in the 1980s were selected. The Buildings Chosen property #1 The "Gregory" apartment building, a 15 unit building, was b u i l t in the eastern Brow-of-the-Hill area in 1958. This building contains a l l one bedroom units renting at $450 per month, and there are no vacancies at the present time. Two years ago suites rented for $350 per month, an increase of almost 30 percent in two years. This building has been owned since July, 1980 by James and Margaret Home of 246 W 6th Street, North Vancouver, B.C. The assessed value of the property, as of June, 1989 was $406,100 of which $148,950 was for land, and $257,150 was for buildings. This property was clear t i t l e . The design of this building i s t y p i c a l for many b u i l t prior to 1960 on small(66' x 132') l o t s in New Westminster, and the Lower Mainland. The exterior of the building shows average upkeep. However, i t is very poorly landscaped with gravel replacing lawn in the front yard. There are a few parking s t a l l s at the rear of the property, and as i s t y p i c a l for pre-l960s apartment construction, there are no balconies for individual suites. property #2 The "Toohey Apartments" i s a 9 unit 'pre 1960s' building in the western Brow-of-the-Hill neighborhood. It was b u i l t on a 55 x 125 foot l o t , and i t s stucco exterior i s in poor condition. The building contains 8 two bedroom units and one bachelor unit. This building was l i s t e d for sale in 1988 showing an e f f e c t i v e gross income of $36,312 and an expense r a t i o of 24.9 percent. The l i s t i n g price was $310,000 and the sale price was $240,000. It was l i s t e d again in the later part of 1988 and resold for $394,900. In 1989 i t was once again placed on the market for $425,000. At this time the claim was that the building earned $51,217 e f f e c t i v e gross income, and that the expense r a t i o was 20 percent. This l i s t i n g placed the age of the building at 30 years, which means i t was constructed in 1958. The building  192 sold in June, 1989 for $410,000. The owner of the property i s Intervanc Investments Inc. of North Vancouver. The assessed value was $267,800 with $75,200 for land and 192,600 for buildings. Information suggests a f i r s t mortgage of approximately $259,070. property #3) The "Pine Crest Apartments" i s a 10 unit building in the western Brow-of-the-Hill area. The appearance of t h i s building i s poor, and the s i t e i s devoid of any landscaping. The front yard i s e n t i r e l y taken up with parking spaces. The property was l i s t e d for sale in 1989 for $495,000 and sold for $488,000 in February, 1989. The property i s owned by Helene and Andreas Zlok of 7176 Duff Street in Vancouver. The assessed value of the land as of June, 1989 was $322,150 of which $89,500 was for land and $232,650 was for buildings. property #4 The "Capri V i l l a Apartments" i s a 15 unit building in the Uptown area, and i s a good example of pre-1960s low-rise buildings, although i t does have some balconies. The exterior appearance of t h i s building i s poor in that both the stucco and trim needs painting. There are some v i s i b l e signs of wood rot on the trim. The property i s registered to Barbara Starniovich of #201, 436 Ash Street, New Westminster, and i s the only property in the sample in which the owner occupies a rental unit. The assessed value of the property i s $362,050 with land valued at $141,150 and the building at $220,900. The property i s clear t i t l e . property #5 The "Royal Court Apartments" i s a 17 unit building constructed in the Uptown neighborhood in 1981. The exterior appearance of t h i s building i s very good, and in addition i t i s well landscaped with a variety of well cared for trees and shrubs. There i s a professional management firm (Rines Property Management) in charge, and rents are $500 for the one bedroom and $650 for two bedroom suites. The registered owners of the property are S.J.S. Developments Ltd. of 8151 Sunnywood Drive in Richmond, B.C. The assessed value of the property i s $590,500 of which $248,350 i s land and $342,150 i s b u i l d i n g s . This property has a f i r s t mortgage of approximately $461,000 on i t . The property was up for sale in 1988 for $1,050,000. Information supplied at that time indicate an e f f e c t i v e gross income of $101,553 and an expense r a t i o of 31 percent property #6 The 21 suite "Saint Michelle Apartments" was b u i l t in 1969 in the Uptown area. There are 4 bachelor and 17 one bedroom suites in t h i s building that rent for $475 and $575 per month respectively. Two years ago these units rented for $345 and $400 per month, an increase of 38 percent and 44 percent respectively. The appearance of this building suggests that i t i s well maintained with a t t r a c t i v e landscaping. It does  193 have underground parking, balconies, and a resident manager. It has no elevators. The building i s registered in the name of Frederick and Islay Forewell of 6368 Gordon Avenue, Burnaby, B.C. since December, 1971. The assessed value i s $563,800 with $256,550 for land and $307,250 for buildings. There are no encumbrances registered against t i t l e . property #7 The "Ashwood Court Apartments" are a 16 unit building in the Uptown area of New Westminster. This pre-l960s b u i l t structure has a clean external appearance, but very limited landscaping. There i s a small number of parking spaces in the rear of the small l o t that i s accessed by a narrow driveway down one side of the property. The building has no balconies, and there appears to be no resident manager. The registered owner of the property as of June, 1989 i s Tom Stephen Ltd. of 4069 Madeley Road, North Vancouver. The assessed value i s $425,000 with $169,350 to land and $255,650 to buildings. property #8 The 16 unit "Ash Manor Apartments" were b u i l t prior to 1960 in the Uptown neighborhood of New Westminster. The registered owner of the building as of June, 1989 was MacMillan Agencies Ltd. of 512 Ash Street, New Westminster. The assessed value of the building i s $348,700 of which $169,350 i s for land and $179,950 i s for land. The 8 bachelor suites in the building rent for $330 per month, while the 6 one bedroom units and 1 two bedroom unit rent for $400 and $450 respectively. property #9 The "Ambrose Apartments" are l i k e l y the oldest units in the sample. The building i s located in the western Brow-of-the-Hill area. The external appearance of the building is poor, as i s the quality of the landscaping. There are no balconies and no provision for parking on-site. The registered owners of the property are Richard and Anne Jonas of 11239 Danniels Road, Richmond, B.C. The assessed value of the property i s $298,250 with $65,850 for land and $232,400 for buildings. There are no encumbrances registered against this property. This property was for sale in 1988 for 320,000. Information supplied suggest an e f f e c t i v e gross income of $29,648 and a c a p i t a l i z a t i o n rate of 11 percent. property #10 The " S i r Roman Apartments" i s a 18 unit building constructed in 1969 in the eastern Brow-of-the-Hill neighborhood. The external appearance of the building i s f a i r , but the landscaping i s poor. Current rents are $380 for a bachelor suite and $465 for a one bedroom unit. There are 14 one bedroom units, and 1 two bedroom and three bachelors units. The property i s registered to Guiseppe Iorio of 3148 Adanac Street in Vancouver. The assessed value as of June, 1989 was  194 $489,450 with $89,350 going to land and $300,100 for buildings. The property was of clear t i t l e in 1988. The property was for sale in 1988 for $699,000. At that time information supplied suggested an e f f e c t i v e gross income of $77,437, and expense r a t i o of 31 percent, and a c a p i t a l i z a t i o n rate of 7.6 percent. property #11 The 24 unit "La Belle Manor" was b u i l t in 1964 in the Uptown area of New Westminster. This building has a good external appearance, although the landscaping i s only f a i r . The building has 14 one bedroom units, 7 two bedroom units, and 3 bachelor units. A bachelor unit in the building rents for $425, and a one bedroom for $495. In 1988 the owners were A,P, C&W Lau. Information on assessed value of the property i s not available. There i s a small second mortgage of $27,984 on the property. In 1988 the property was up for sale for $850,000. Information supplied at that time suggested an e f f e c t i v e gross income of $100,102, an expense r a t i o of 50.1 percent, a c a p i t a l i z a t i o n rate of 5.8 percent and a Gross Rent M u l t i p l i e r of 8.5. property #12 "Marine View Manor" was b u i l t in 1925 and contains 21 suites (1 bachelor, 13 one bedroom and 7 two bedroom). This western Brow-of-the-Hill property was l i s t e d for sale in 1988 for $505,000 with the registered owners l i s t e d as Strothert Holdings. Information on the l i s t i n g suggests a Gross Income M u l t i p l i e r of 5.9, a c a p i t a l i z a t i o n rate of 10.5 percent, an expense r a t i o of 37 percent, and an e f f e c t i v e gross income of $84,454. The building has the external appearance of being minimally maintained. property #13 The 43 suite "Tamarest Apartments" was b u i l t in 1976 in the eastern Brow-of-the-Hill neighborhood. External appearance and landscaping are both good, although the front entrance and front yard are rather messy with papers and cartons strewn around. The building r e f l e c t s some improved design over 1960s construction, in that there are enclosed patios with ground l e v e l suites, and in addition neighboring balconies are separated by a s o l i d divider for privacy. Rents are $475 for a one bedroom, and $600 for a two bedroom suite. As of June 1989 the registered owner of the property was Socarp Holdings Ltd. of #270 1441 Creekside Drive, Vancouver. The assessed value of the property was $1,209,750 of which $460,950 was for land and $748,800 was for buildings. This property was for sale in 1989 with an asking price of' $2,255,000 and sold in November, 1989 for $2,355,000. property #14 The 43 unit "Panorama Court" was b u i l t in 1966 in the eastern Brow-of-the-Hill area. This building has a good external appearance but has poor landscaping. One bedroom suites run between $355 to $370 per month, while two bedroom units are $470 per month.  195 The registered owner of the property as of June, 1989 was Centr 0 Mart Ltd. of 6582 Wiltshire Street, Vancouver, B.C. The assessed value was $1,256,650 of which $447,100 was for land, and $809,550 was for buildings. State of t i t l e information i s not available. property #15 "Del-Vue Court", b u i l t in 1969, has 35 suites, and i s located in the eastern Brow-of-the-Hill area. The exterior appearance of the building i s good, but the s i t e is almost devoid of any landscaping. One bedroom units rent for $500 per month, while two bedroom units rent for $570. The registered owner of this property, as of June, 1989 i s Deck Holdings of 890 E. 29th Street in North Vancouver, B.C. The assessed value of the property i s $1,037,100 of which $345,900 is for land, and $691,200 i s for b u i l d i n g . There is a f i r s t mortgage registered against the property. property #16 The 98 unit "Lincoln Manor Apartments" i s the largest development in our sample. It comprises three buildings that were constructed in the Uptown neighborhood in 1977. The external appearance of this building i s good, as i s the landscaping. The building r e f l e c t s the improved design in the later 1970s with the s o l i d dividers between balconies to give a sense of privacy. This complex has 33 one bedroom suites, 14 two bedroom units and 51 bachelor units. One bedroom suites rent for #560, while two bedroom units go for $670 per month. The registered owner of the building as of June, 1989 was Lincoln Manor Ltd., of #101 727 5th Avenue, New Westminster. The assessed value of the building was $2,585,500 of which $1,185,650 was for land and $1,399,850 was for buildings. The building has a f i r s t mortgage of approximately $2,600,000 on i t . This development was l i s t e d for sale in 1989 for $4,950,000. Information supplied at the time suggested an e f f e c t i v e gross income of $484,989, an expense r a t i o of 33 percent, and a G.R.M of 9.2. property #17 "Windsor House" is a 37 unit building in the Uptown neighborhood. It was b u i l t in 1964. The external appearance and landscaping of this building are both poor. Current rents are $510 for a one bedroom, and a l l suites are one bedroom units. The registered owner of the property as of June, 1989 i s Anne Markin of 1327 W. King Edward Avenue, Vancouver, B.C. The assessed value of the property i s $1,021,700 of which $450,500 are for land and $571,200 are for buildings. The property is free from a l l encumbrances. property #18 "The Bel-Air", located in the western Brow-oft h e - H i l l neighborhood, was for sale in 1988 for $1,250,000. The owners were J&K Chand but as of June, 1989 were 1210 Cameron Management Ltd. of #809 626 W. Pender Street, Vancouver, B.C. Information at the time of sale suggests a $700,000 f i r s t mortgage and a $200,000 second mortgage registered against  196 title. The l i s t e d c a p i t a l i z a t i o n rate was 10 percent, the GRM was 6.6, and the expense ratio was 31. There are 41 suites in this building constructed in 1961. Twenty nine of the units are one bedroom, and 11 units are two bedroom. In 1988 rents were $375 for a one bedroom and $500 for a two bedroom. This building i s in a more run down section of the area, and although the external appearance of the building i s f a i r , the yard i s messy, with papers strewn about, and shrubs and plants appear to receive minimal care. property #19 "Daylin Manor", b u i l t in 1967, i s a 47 unit building in the eastern Brow-of-the-Hill area. Current rents for the one bedroom units i s $506, and two bedroom units rent for $606. The external appearance of this building i s good, while landscaping receives a f a i r report. The assessed value i s $1,370,250 of which $682,000 i s for land and $688,250 i s for buildings. The building's owners are B r i s t o l Investments Ltd. of Vancouver. There i s only a very small mortgage registered against t i t l e . property #20 "The Barcelona" i s a 42 unit building in the eastern Brow-of-the-Hill area. Both external appearance and landscaping are good, although the yard has been kept in a mess with papers and cartons strewn around. The two bachelor units in the building rent for $390 per month, while the 34 one bedroom units are $515 and the 6 two bedroom units are $625 per month. The present owner of the property i s the Mutual L i f e Assurance Co. of Canada with o f f i c e s in Vancouver. The assessed value of the property i s $1,217,550 of which $564,550 i s for land and $653,000 i s for the building. This building was for sale in 1988 for $990,000. At that time the e f f e c t i v e gross income was given as $180,240. It was stated that there was a $140,000 f i r s t mortgage and a $237,000 second mortgage on the property.  APPENDIX E C a l c u l a t i o n of I n t e r n a l Rate of Return f o r P r o p e r t y Inputs  $1 ,232, 120 $1 ,569,952 $ 739,272 $ 492,648  Purchase Price Sales Price Equity Mortgage P r i n c i p a l  12.5% per annum 300 months (25 years)  Mortgage Interest rate Term $  Gross Income (year 1) Rent e s c a l l a t i o n Vacancy Allowance Operating Expenses % of E f f e c t i v e Gross e s c a l l a t i o n rate Marginal Tax Rate Disposition as to CCA Year 1 Buildings CCA Rate Buildings (Year 1) -Other Years  140,100 6.5% per annum 3% 32% 5% 50%  $  Capital Gains  677,666 4%  2% 75%  Outputs  Single Period Measures ROI(Capitalization rate) Equity Dividend Rate Equity Y i e l d Rate Multi-Year Measures Internal Rate of Return Before Tax After Tax  7.5% 3.78% 2.60%  12.58% 10.10  Five Year Proforma Year 1  Year 2  Year 3  Year 4  Year 5 180,233 5,407  Gross Income $140,100 Vacancy $ 4,203  149,206 1 58,904 169,233 5,077 4,767 4,476  -Effective Gross Income $135,897 $ 43,487 -Expenses  144,730 154,137 46,466 51,748  164,156 1 74,826 55,117 56,700  -Net Income -Interest -CCA  $ 92,409 $ 61,435 $ 13,553  96,343 102,369 61,031 60,573 26,564 25,501  109,039 116,126 60,055 59,469 24,481 23,502  -Taxable Income x Tax Rate  $ 17,421 .50 $  8,648 .50  -Tax Payable  $  8,710  4,323  Net Income -Debt Payments  $ 92,406  -Before Tax Cash Flow -Tax Payable -After Tax Cash Flow  16,313 .50 8, 1 56  96,242 102,369  24,501 .50  33, 155 .50  12,250  16,577  109,039 116,126 64,485  64,485  64,485  64,485  64,485  $ 27,924  8,710  31,756 4,323  37,903 8, 1 56  44,553 51,640 1 2,350 16,577  $ 19,213  27,433  29,747  32,303  35,063  CCA Computation Undeprec iated $677,666 664,112 Balance .02 .04 x Tax Rate  637,548 .04  612,046 587,564 .04 .04  -Maximum CCA  $ 13,553  26,564  25,501  24,481 23,502  Closing CCA Balance  $664,112  637,548  612,046  587,564 564,061  C a p i t a l Gains and C a p i t a l Cost Allowance Recapture Residual  Net Sales Price -Outstanding Debt  $1,569,952 $ 472,986  =Before Tax Residual -Tax on Capital Gain -Tax on Recovery  $1,096,965 $ 126,687 $ 56,802  =After Tax Residual  $1,027,080  Tax on C a p i t a l Gain  Net S e l l i n g Price -Adjusted Cost  $1,569,952 $1,232,120  -Total Gain =Tax on Recovery  $  337,832 .75  -Taxable Capital Gain x individual Tax Rate  $  253,374 .50  =Tax on Gain  $  126,687  CCA Recovery Buildings $ x Tax Rate  113,604 .50  Tax on Recovery  =Tax on Recovery  $  56,802  200  Mortgage Calculations $ 492,646 12.5% 300 months $ 5,374 per month  Pr inc ipal Interest Term Payment Outstanding Balances Year 1 Year 2 Year 3 Year 4 Year 5 Amortization Month Jan-89 Feb-89 Mar-89 Apr-89 May=89 Jun-89 Jul-89 Aug-89 Sep-89 Oct-89 Nov-89 Dec-89  here.  $ 489,797 $ 486,343 $ 482,431 $ 476,002 $ 472,966  Schedule Princ i p a l $ 239.96 $ 242.45 $ 244.96 $ 247.53 $ 250.11 $ 252.72 $ 255.35 $ 258.01 $ 260.70 $ 263.41 $ 266. 16 $ 268.93  Interest $5,133.83 $5,131.33 $5,126.81 $5,126.26 $5,123.66 $5,121.07 $5,116.44 $5,115.76 $5,113.09 $5,110.38 $5,107.63 $5,104.86  Balance $492,608 $492,365 $492,120 $491,873 $491,622 $491,370 $491,114 $490,856 $490,596 $490,332 $490,066 $489,797  Only one year of a 25 year amortization table i s presented  

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