There was a meeting this week hosted by the Vancouver Tenants Union in my Brow of the Hill neighbourhood. It was to address the culminating “renoviction” crisis in this area, and to hear from people who may be facing renoviction. As I said in my previous post, this is the hardest question for me to address as a City Councillor, and this meeting was at times heartbreaking (see a good summary in the Record here). These are my neighbours (quite literally in one case), they are scared, and we heard a lot from them at this meeting.

The background to the meeting is the work that the Vancouver Tenants Union are doing around the region to provide support to people who are facing renoviction. They are one resource that can assist people in appealing eviction notices, in making sure tenants’ rights are protected to the letter of the law. They have been working mostly in Vancouver, but have also done some work in other areas in the Lower Mainland, and see New Westminster as a current “hot spot” for renovictions.

Whenever this issue of renoviction comes up, there is a common refrain that we need to give landlords the ability to maintain and renovate these lower-cost buildings, or they will quickly degrade into slums. We hear that many of these buildings are approaching end-of-life, and the increase in rent is necessary to fund the renovations to keep them standing. The VTU are presenting data that this is largely a red herring, and I am going to dig deep into one example they use. So grab a tea and comfy seat, this may go on a bit:

If you prefer TL;dnr versions: The current renoviction surge in New Westminster is mostly the result of investors extracting healthier returns for their portfolios by throwing low-income people out on the street. This is not an unfortunate result of unavoidable events – this is driven by greed for profits. And they aren’t even subtle about it.

The building-systems-reaching-end-of-life situation does occur. We get applications every couple of years for a building that fits this description. However, we are now seeing a huge increase in numbers, and dozens of buildings in New Westminster are now facing some form of renoviction, most owned by the same small group of land-flipping corporate entities. There is significant evidence that this is a profit-driven activity.

As a single case in point, the VTU provided me a copy of a sales brochure for a commercial property in New Westminster. I have done what I can to remove the actual address from this to protect the privacy of the current residents, but suffice it to say this is a ~40 year old three-story walk-up typical of New Westminster’s ample affordable rental stock. The real estate agent is offering this “renovators dream” for sale for $3.5 Million, which is $500k over assessed value. Here is a redacted image of page 2 of the brochure:

I would love to go through this pamphlet and pick out the numerous flaws in fact in here, (“The area has gone through a major resurgence with the redevelopment of St. Mary’s Hospital into condominiums” – The St. Mary’s site is currently an elementary school and public park), and speculative fiction about potential increases in suites, but making fun of sales-fluff seems seems pedantic, so I will concentrate on what we can glean from the prospectus. (highlights are mine:)

This shows 13 rental suites (one illegal, or “unauthorized” in the parlance of sales), with three of them vacant to “to help streamline the improvement program”. The other 10 are single-bedroom and renting for between $735 and $850 a month. This includes free parking and cable, and some landlord subsidy of the electrical (likely for common areas, heating, etc.). The building is netting $67,278 a year, which is a Cap Rate of 1.9% per year based on the $3.5M sale price. For some reason they are not renting out two legal suites in a market where rental vacancy is under 1%, but add that revenue, even if it meant a concurrent 20% increase in expenses and you can turn in an extra $16K, bringing the Cap Rate up to 2.3%. This is less than the expected return for a serious real estate investor, but in no way is this building losing money. As a bonus, the Residential Tenancy Act allows annual rent increases greater than inflation – these numbers will only get better over time.

Now shift over to the “Potential Rent” column. It shows an increase in rents ranging from 100% to 135%, renting the illegal suite, charging for parking, all of the electricity and cable, and all of the sudden your Cap Rate is a very attractive 6.6%. Note that nothing in this prospectus mentions the cost of significant renovation, and the sales pitch seem to suggest the building is in good shape, with recent heating and electrical upgrades. So the proposal is to more than double the rent and not increase costs at all. I guess I am mostly shocked that they have no shame just putting that right out there in the middle of a housing crisis.

The VTU have found a number of buildings in New Westminster in similar situations, and have been tracing the ownership of the corporate entities who are – and there is no finer point to make than this – making a healthy investment strategy out of throwing low-income and vulnerable people out on the street in the tightest real estate market in the country.

Arguably, there is nothing illegal going on here. People are allowed to buy buildings and make money renting them out. If this building needs significant upgrades (or, if the landlord just wants to do upgrades such that they require the suites to be vacant), they are totally within their rights to throw those people out, provided they give appropriate notice. It becomes legally grey if they just do superficial upgrades as an excuse to evict residents. However, there is currently nothing the City or the Province can do to prevent this activity from taking place, and when the decision is to turn a small profit into a bigger profit by making vulnerable people homeless, then we are into a question of morality, not law.

The City is working hard to identify these properties, as are the VTU. At this point, all we can do is try to contact the residents and assure they understand their rights under the Residential Tenancy Act and what supports exist for them if they are insecure in housing. The VTU is working to get people in these buildings organized, and help guide them through the appeal process that exists under the RTA if they feel they were unfairly evicted, but need all of the information and support they can get. The City has no power to refuse building permits in these cases, if the landlord even bothers to apply for a permit.

Ultimately, we need to change the regulations to protect these vulnerable people from predatory rent increases. This is most likely to come from the Provincial government. At UBCM last year, the City of New Westminster put forward a resolution (endorsed by the membership) that read:

be it resolved that UBCM urge the provincial government to undertake a broad review of the Residential Tenancy Act including, but not limited to, amending the Residential Tenancy Act to allow renters the right of first refusal to return to their units at a rent that is no more than what the landlord could lawfully have charged, including allowable annual increases, if there had been no interruption in the tenancy;

Although some changes in the RTA were made in May to give renovicted tenants more notice and compensation, we are still short of where we need to be, and renovictions are an emergent crisis in New Westminster. I wish there was something we could do, because being in a meeting with 50 people feeling the stress and recognizing some of them may become homeless, after all of the work this City has done and investments this City has made to protect and enhance our affordable housing stock, only because of a lucrative investment opportunity being sold here, is enraging