New Westminster city council is standing by its plan to use rental-only zoning on six strata buildings in the city – despite warnings that the move could end up costing taxpayers millions of dollars and will erode its relationship with the development industry.

In January, council approved a zoning amendment bylaw that designated 12 city-owned properties and six private properties for residential rental tenure. While the six private properties had been built as stratas, they have been operating as rentals for years – and the city wants to keep it that way.

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In addition to clarifying some aspects of the residential rental tenure zoning, the new bylaw corrects some errors with the original bylaw.

Emilie Adin, the city’s director of development services, said the zoning restricts the occupancy of the units to rental only, so residential units with this zoning cannot be occupied by the owner. The exception is where a unit was already occupied by the owner of a property before the zone was put into place.

As part of Monday’s public hearing, the city received more than 200 pieces of correspondence, including many form letters from people supporting the bylaw. Representatives of the six buildings and the Urban Development Institute (UDI) and two local residents spoke against the proposal at the public hearing.

“The impact of your decisions, as well as the result of the petition currently against this council by this policy is being watched very closely. Our members, investors, financial institutions will now question whether the city in the future, without consultation, will quickly downzone other properties in terms of tenure, land use or density,” said Anne McMullin, president and CEO of the Urban Development Institute. “New Westminster’s previous deserved reputation as a reliable municipality for future commercial, industrial, strata or rental housing projects is at incredible risk.”

Through freedom of information requests, McMullin said the UDI learned the city had been working on the initiative prior to the October 2018 civic election and had identified the impacted property owners, something she said contradicted what city officials told the UDI and building owners after the city introduced the original bylaw.

“This is the most unfair, not transparent consultation and communication we have had with any municipality in my years working at UDI,” she said. “The trust between the development community and the city has been deeply eroded by this. I can’t recall another time we have had to rely on FOIs to decipher the intent of local staff and council.”

After an hour-long public hearing, council gave third reading to the zoning amendment bylaw related to residential rental tenure zoning.

“See you in court,” said one building owner.

After council approved the original bylaw, the registered owners of all six strata properties petitioned the Supreme Court of British Columbia to declare bylaw 8078 to be illegal and/or void, to impose anorder quashing the bylaw and to pay costs of the legal action.

In July 2018, the province enacted a new authority allowing local governments to enact residential rental tenure zoning so they could protect rental units in existing and future apartment buildings as a way of increasing the supply of rental housing in their communities. While some cities plan to apply the zoning to new construction, New Westminster was the first city in B.C. to apply the rental residential tenure zoning to existing rental housing stock.

Scott Cressey of Cressey Development said the downzoning left owners with no choice but to sue the city.

“You are sending a message out to the business community that you are not trustworthy. I don’t think that is the message you want,” he said. “You want to encourage people to build rental. You want us to build rental. You want other people to build rental.”

Gerry Sair said his family has paid “a great deal more in property tax” through the years in order to keep the family-owned 16-unit building on 12th Street stratified. He said the Community Charter states that property owners are entitled to compensation for loss or damages if a municipality injuriously affects their property by the exercising any of its powers.

According to Sair, the bylaw effectively reduces the value of his family’s property, as it now only has value as rental. He said the city has caused measureable economic loss to his family and owners of the other buildings.

“A recent appraisal found that the effect of the bylaw was to reduce the sale value of individual lots by a very substantial amount. There are over 230 strata lots divided amongst the six holdings. A conservative estimate is that the city may be on the hook for over $20 million in compensation,” he said. “Let’s think about that – $20 million, maybe more. I think it’s 236 lots. That’s a great deal of compensation you have to pay. Actually it’s not you – it’s the taxpayers, the hardworking people of New Westminster that have to pay that money. And why?”

Howard Kallner, a representative for the family that owns one of the buildings, said the bylaw contravenes the intention of the province’s rental-only zoning, as stratified units were never meant to be included in the zoning. He said building owners don’t believe the bylaw will stand up in court.

“We find ourselves now in the unfortunate situation of settling this with the city in the court system. We are spending our hard-earned money on legal fees and you are spending taxpayers’ hard-earned money and spending your valuable time on this case when you could be putting that time and money toward finding a solution for the housing crisis we find ourselves in,” he said. “It is important to note that while you feel you have a win for tenants – and if this is in fact a win – it is a short-term win in nature. If landlords and developers choose not to invest in New Westminster it will hurt the tenants in the long run.”

McMullin said downzoning is a critical concern for UDI members because the industry relies on a stable regulatory framework in which land is not devalued arbitrarily by governments with little or notice.

Mayor Jonathan Cote said the city has been considering various ways of creating new rental housing and preserving existing rental stock. While there is nothing to say any of the tenants in buildings included in the bylaw were under current threat of being evicted, he said the city wanted to do what it could to ensure they didn’t face renovictions.

In late 2018, the city learned that a stratified building that had operated as rental since it was built in the 1970s was being marketed for sale as units that people could buy and occupy themselves. To preserve the rental units in these six buildings, the city introduced the residential rental tenure zoning.

Cote said fears that the rental-only zoning could be applied to individual strata units aren’t warranted, as these six properties were identified because they have always operated as rental buildings.

“It’s unfortunate to put that out because I think it does create fear in the community,” he said. “We have heard that fear in the community, and I don’t think that is warranted.”