Explain This Condo Conversion Conundrum

From the Leader-Post [emphasis added]:

A report by the University of Regina’s Business Centre for Management Development (BCMD) Inc., released in May, recommends that the waiver clause be scrapped and the vacancy number be lowered to one per cent. The three per cent bar is too high given the residential vacancy rate has only met that target twice in the last 10 years, said Bruce Rice, a senior policy and research analyst with the city. He added the average residential vacancy rate since 2001 is 1.9 per cent.

F.Y.I., the waiver clause they’re talking about is the requirement that 75 percent of the apartment building’s residents must agree to a conversion.

What I need explained is why, at this point in time, three per cent is too high. If the city starts approving more condo conversions, won’t the vacancy rate drop further, simply because there are fewer rental units out there? The report seems to me to be addressing the issue in the wrong way. Stimulating investment by allowing more conversions is good on the one hand — money for people and the city and the province and yay and stuff — but would hurt the renters of those properties and probably drive up rents in the market through demand. This isn’t an occasion where we can hope that the market corrects itself and that new rental properties start opening up; in the meantime, a lot of people might get screwed.

Clearly, I’m not Super EconMan — the only calculator I own is on my phone and it sees a lot less use than BrickBreaker — but when I look around me, I don’t see rising rents getting people excited about becoming landlords or developing new properties, and I don’t see Regina becoming a more attractive place for renters. If we’re already screwed when it comes to vacancy rates, making this the new norm by adjusting the waiver clause seems like it could only hurt us.

Author: James Brotheridge

Contributing Editor with Prairie Dog.

10 thoughts on “Explain This Condo Conversion Conundrum”

  1. Hey James,
    The L-P article misses this but the report wasn’t sent on to council with the original recommendations. (Incidentally, there is a newsbrief on condo conversions coming up in the issue of p-dog that hits newsstands on Thursday. I wrote it this morning.)

    The report from the consultant recommended that conversions be allowed when the vacancy rate has been at least 1% for 18 months.

    But that is NOT what was approved.

    Staff recommended and RPC approved that conversions should only be considered when the vacancy rate has been at least 2% for 12 months. (So they upped the min vacancy rate but dropped the time frame.)

    We’ve pointed out repeatedly (in every piece on housing that’s been done in the paper or on the blog … and we’ve done a lot of those) that the vacancy rate is currently 0.7%, it was 0.5% in 2008 and the highest it’s been since then is 1%… and that was only for about six months.

    So, if the moratorium gets scrapped and the new condo policy gets put in place, there will still be a de facto conversion moratorium.

    And there are a lot fewer loop holes in this new policy than there were in the old one.

    A few other things will be changing….

    There will be a series of tenant transition measures that landlords must adhere to (such as they have to provide 2 years tenancy and right of first refusal on their suites).

    Also, strangely, the L-P piece gets this backward. It says…

    “Apartment’s ineligible for conversion include heritage and vacant properties.”

    But actually, heritage and vacant properties are not only eligible for conversion, they’re exempt from the vacancy rate provision. So, a heritage building can convert to a condo even if the vacancy rate is zero. But it will have to jump through the Municipal Heritage Advisory Committee hoop to make sure they’re not messing with any of its heritagey features.

    Um… what else, what else…?

    Personally, I’m cool with ditching the waiver clause, btw. That was the loophole that allowed 20-odd conversions to get approved when the vacancy rate was under 1%.

    And by including those tenant transition measures, they’re basically saying “We’re going to assume condo conversion causes hardship and so we’re going to require landlords do something about it.”

    And it means there will be no more cutting of sweetheart deals behind the scenes to get tenants to sign on to a conversion so they can get to that magic 75%.

    All that said, there were transition measures that were in use before that were left out that I think should have been kept. Like lifetime tenancy for tenants who are 70 years old or older. And a rent control provision to keep landlords from driving inconvenient tenants out of their buildings.

    Anyway, the report is here
    http://www.regina.ca/Page5870.aspx?DateTime=634580928000000000&PageMode=View

    And it’s not a bad read as these things go. And the decisions are worth reading because they list off the changes that were made to the recommendations.

    Also, I did write a perfunctory post on the subject like a week ago.

    http://www.prairiedogmag.com/?p=34013

    But, I’m thinking I have to write something longer on the subject. (Longer even than the newsbrief I submitted to Steve today. Sigh.)

  2. Why are they even looking at condo conversions when the vacancy rate is this low? Also, with the 2% threshold, the earliest any conversions are likely to happen won’t be for some time. The timing of this is just really, really weird.

  3. I think they’re looking at condo conversions precisely because the vacancy rate is this low.

    If it makes you feel any better, they’ve also hired a consultant to draft a comprehensive housing strategy. But we probably won’t hear anything from them for a year or more.

  4. What do the experts say about Regina’s vacancy rate and conversion conundrum? What does Richard Florida say? Who are the housing experts? What is Saskatoon’s vacancy rate? Is ours so tight because we’re a government town whose public servants are out of touch/unconcerned with the plight of the non-home-owning underclass?

    Of course, private industry will do what it can to make a buck and its boys on council will facilitate that. Where’s the public pressure for more new rental units, less conversion? Boomers are retiring, don’t care anymore, we’re on our own. Do we have the tools?

    BTW, I heard the Premier say the way to “lower rents” is though more new rental units. First of all, that’s like saying more gas stations will lead to cheaper gas–no it won’t. Second, is there even any measurable amount of work being done on new rental units? Ahh, not that I’m aware of. That’s probably a good barometer–Is the “private sector” willing to build rentals in Regina–If they expected the “boom” to last wouldn’t they see a market to exploit?

    Or, is Regina destined to become this extremely forbidding place to anyone not committed to raising a family in a large $500,000 home?

  5. Wait till the economic boom goes bust — and it will, because they always do — and get ready to buy a cheap condo. Someone observed to me the other day: “What do you call a half million dollar cardboard and stucco tract home in suburban Regina? Yours for life.”

  6. Talbot: Great video! A useful video!

    “Do we have the tools?”
    Yes, but we don’t know how to use them. (I don’t, anyway.)

    “is there even any measurable amount of work being done on new rental units?”
    Measurable? Yes. As in, it can be measured in units. A small number of units when compared to the scale of the problem.

    “Where’s the public pressure for more new rental units, less conversion?”
    You’re joking, right? I’ve never seen council under so much pressure over an issue as I have on housing and conversions.

  7. Just a quick facts check:

    The private sector *is* building new rental units.

    Last year, approximately 1000 new single family homes were built and 270 rental units were built.

    If I recall correctly, over 300 units are being built in 2011.

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