Agenda Index City of Vancouver

ADMINISTRATIVE REPORT

TO:

Vancouver City Council

FROM:

Director of the Housing Centre, Director of Non-Market Operations, and the Director of Real Estate Services

SUBJECT:

63 East Hastings, Segal Place, Lease Terms and other Arrangements

 

RECOMMENDATION

GENERAL MANAGER'S COMMENTS

COUNCIL POLICY

To purchase privately-owned sites for non-market housing projects and lease them to non-profit societies or co-operative associations for 60 years at nominal rent of 75% of market value.

Council's priorities for social housing are to maintain and expand housing opportunities in Vancouver for low and modest income households with priority being given to families with children; seniors on fixed incomes or in need of support; SRO residents; and the mentally ill, physically disabled, and others at risk of homelessness.

PURPOSE AND SUMMARY

The purpose of this report is to obtain Council approval of the terms of the ground lease of the City-owned 63 East Hastings to the Vancouver Public Housing Corporation, the sublease of the retail space to the City, and the approval of the inclusion of support for tenants in recovery from substance abuse.

BACKGROUND

At its In-Camera Meeting of September 29, 1998, Council approved the following:

On March 9, 1999, Council approved the 1999-2000 social housing partnership with the Province which included this project.

On July 8, 1999 Council accepted the pledge of a gift in the lesser amount of $200,000 or the cost of furnishing the individual apartments and the common areas of the proposed social housing project at 55-67 East Hastings Street from Joseph Segal, C.M., O.B.C, L.L.D, and approved naming the building "Joseph and Rosalie Segal Place" in recognition of the donor.

On February 22, 2000 Council gave conditional approval to a rezoning application to permit a 98 unit non-market residential project. The building, named Segal Place, will be managed by the City's Non-Market Operations Department.

At the public hearing Council also passed the following motions:
"THAT staff report back to Council with a proposed plan, including implications, on how to achieve a drug and alcohol free building at 55-67 East Hastings Street.

FURTHER THAT staff look at studies of the effect of offering housing as an intervention for people with alcohol problems."

These motions were not conditions of the rezoning.

This project is part of the 1998-2000 City/Province Non-Market Housing Partnership. Under the terms of that partnership, this site is to be leased at no cost to the sponsor, for60 years. The project received conditional project approval from BC Housing on February 27, 2001.

The project has progressed to the stage where a conditional development permit has been issued and a building permit will be issued shortly. This is a design build project and the contractor is Progressive Homes Ltd. Construction could begin later this year, depending on the outcome of the provincial housing review which includes this project. BC Housing Executive committee is ready to give final commitment to the project, subject to the provincial review and Council approval of lease terms and City sublease of the ground floor retail space. Even if provincial funding is not approved this year, it is suggested that the recommendations in this report be approved, so the project can move forward when funding does become available.

The Vancouver Public Housing Corporation is a corporation owned by the City and owns the land and housing which is operated by the City's Non-Market Operations Department.

DISCUSSION

The Site and Project

The site is 100 x 122 feet with a total area of 12,200 square feet. The site is vacant. A Phase I environmental site assessment has been conducted by Hemmera Resource Consultants Ltd and the potential for environmental contamination is minimal. However a limited sampling of the site fill material is recommended and this will occur during the site preparation for building construction.

Appendix A shows the site and the ground floor layout.

This is a 9 storey concrete/masonry building, comprised of 97 dwelling units, 4 retail units at grade and one level of underground parking off the lane at the rear. There are 15 residential parking spaces, and 4 retail parking spaces.

The studio suites range in size from about 350 s.f to 575 s.f and are designed for single occupancy. There are amenity spaces with outdoor areas on the main, 2nd and 6th floor.

The retail space can be divided into up to 4 separate retail spaces, all fronting onto Hastings Street. The retail spaces are served by one loading bay off the lane, shared with the housing. A shared garbage area is provided.

Lease Terms

There are two leases involved in this project. The first is a ground lease from the City to the Vancouver Public Housing Corporation for 60 years at nominal rent. The second is a sublease of the ground floor retail space from the Vancouver Public Housing Corporation to the City for 60 years less a day.

Ground lease to Vancouver Public Housing Corporation: (VPHC) The site will be leased to VPHC in accordance with the standard terms and conditions agreed to between the City and B.C. Housing for social housing development. Two terms (4 and 5 below) have been added which are unique to this project and deal with the retail space.

1. Term of 60 years.
2. Prepaid lease rent will be nominal.
3. Lease to be signed within 180 days after Council approval, or such later date as may be approved by the City Manager.
4. Rent in lieu of property taxes will be paid only on the residential portion (i.e. not on the retail portion) of the property.
5. Vancouver Public Housing Corporation will sublease the retail space on the ground floor to the City for a term of 60 years less a day at nominal rent, in accordance with the sublease terms described below.
6. Such further and other terms as are acceptable to the Director of the Housing Centre and the Director of Legal Services. No legal obligation shall arise or be created until execution of the lease to the satisfaction of the Director of Legal Services.

Retail Sublease to the City: It is proposed that VPHC sublease the ground floor retail component to the City for 60 years less a day at nominal rent. In return, the City will pay VPHC the construction and soft costs for the retail space estimated to be $480,000. The retail component of the building includes approximately 4,900 square feet of storefront, a shared garbage area, one shared loading bay and 4 retail parking stalls. Progressive has committed to building the retail space for this amount. The source of funds will be the Property Endowment Fund. Payment will be made in two installments. The initial installment of $408,000 (85%) will be made at the time of the first construction loan advance. The final installment of $72,000 (15%) will be the later of expiration of the lien holdback period or issuance of the unconditional occupancy permit for the project by the City. Paying 85% of the capital cost upfront will eliminate any interim financing charges during construction. Holding back 15% will provide some financial leverage in expediting any necessary remedial work that may be identified during the final inspection of the retail space by the City prior to taking possession. The City will initially pay the full GST of $28,560 on the retail space, and will apply for an input tax credit. Further the City will pay VPHC over the term of the sublease the pro-rata share of common building expenses attributable to the retail. The exact terms will be worked out over the next few months among the various departments involved. The lease rent will be nominal. As isthe normal practice, the housing sponsor, in this case VPHC, will be charged rent in lieu of property taxes only on the residential portion of the property.

Financial Implications: Real Estate Services will sublease the retail space to commercial tenants on a triple net basis whereby the tenant will be required to pay additional rent in lieu of property taxes, plus utilities and maintenance.

The total cost of the retail space will be $480,000 plus GST for construction and up to $160,000 plus GST for fit-up costs. There is currently low demand for retail space in this area of Hastings Street and it is anticipated that the retail units could have high vacancy rates and provide a low rate of return for the foreseeable future. The development of quality retail space will assist in the continued revitalization of Hastings Street and it is hoped that eventually the City may be able to realize a reasonable return from these retail units.

Project Management and Tenants in Recovery: The recently adopted Framework for Action calls for a range of housing options for people who have substance use problems. The existing continuum of housing options range from alcohol and drug free, through minor tolerance of substance use, some tolerance, to alcohol and drug tolerant. The vast majority of social and non-profit housing in the Downtown Eastside is managed with little tolerance for alcohol and drug use. Most buildings screen tenants for intravenous drug use or those likely to hold drinking parties. The most common approach is to not permit drinking of alcoholic beverages in any common area, not allow tenants in common areas if intoxicated and not tolerate the use of common areas for fixing or drug sales.

At one end of the spectrum is substance tolerant housing. The New Portland Hotel is one example, where people who use drugs and alcohols are provided some stability through housing linked with other supports.

At the other end of the continuum are two projects which are alcohol and drug free - Dunsmuir House and McCready Residence, both operated by the Salvation Army. In addition, there is Union Gospel Mission which operates a quasi health-related facility on Cordova, providing treatment and transitional housing. All these projects link housing with services.

Recently there has been an increase in alcohol and drug free social housing, both within and outside the Downtown Eastside. Union Gospel Mission has a project under construction for 81 units at 361 Heatley on City-owned land. It will be operated under the Residential Tenancy Act, with fixed term tenancies and a tenant agreement that prohibits substance use. GVHC, in conjunction with Vancouver Native Housing, will be managing a project at 10th and Watson which will be oriented to people who wish to be substance free.

The key to successful alcohol and drug free housing is the provision of ongoing support services to assist people with their efforts to stay clean and sober. For many, recovery from addiction is cyclical, and relapses occur. Without support, relapse can result in eviction, and with few housing options, people return to the lifestyle they wanted to change.

The City's Non-Market Operations Division operates the projects owned by the Vancouver Public Housing Corporation. Its approach has been to house and stabilize low-income residents of the downtown. The buildings are operated under the principle, supported by the Residential Tenancy Act, that tenants are able to use their private space as they wish, as long as their activities do not infringe on the safety or "quiet enjoyment" of their neighbours. In practice this means that where tenants use alcohol or drugs in their units, they do so without disrupting others. A number of City tenants have alcohol addictions, a few have drug addictions. These are not cause for eviction unless disruption occurs. Staff encourage tenants to be sensible about their consumption, but do not have the resources to provide significant support, which is a health role. Drug dealing is not tolerated, as it creates significant disturbances with the coming and going of non-residents. In the public areas of the lodges/residences, no alcohol or drug consumption is permitted.

This building will provide higher quality space than other residences managed by the City in the Downtown Eastside, by being new and having self-contained suites, similar to the New Continental in Downtown South. It is an opportunity to house higher-functioning tenants within the City's own housing portfolio. The intent is that many residents of the new building will be coming from existing SROs in the Downtown Eastside, and from the Central Residence at 42 East Cordova, managed by the City.

In the case of Segal Place, the Vancouver Coast Health Authority (VCHA) has agreed to provide resources for a support worker to provide support to about 20 tenants who are in recovery from addictions (Appendix B). This is the first example of this type of City/VCHA partnership. This will enable people to be housed who have demonstrated a desire to recover from their addictions through engagement in alcohol and drug treatment. The building has been designed with an office, separate from the needs of the building management staff, where the support worker could work with tenants as needed. Discussions are continuing with VCHA on the details of the arrangements. It may be possible to provide some level of support to other buildings operated by the City's Non-Market Operation Department.

Literature Review On Housing for People with Alcohol and Drug Addictions - 63 East Hastings: A literature review was conducted for the City by consultant Deborah Kraus and the report is on file at City Clerk and on the Housing Centre's web site. Thirty-two studies were reviewed and summarized. The studies consider the role of housing for people with alcohol and drug use issues.

There is consensus in the literature that "housing is the cornerstone of care" for homeless persons. Studies of a variety of projects in the US have concluded that one cannot begin to address the alcohol and drug problems of homeless persons unless they are provided with appropriate housing.

The literature also discusses the need for a variety of housing options to meet the needs of individuals with alcohol and drug issues, and to meet the changing needs of individuals over time. The literatures discusses the merits and drawbacks of various forms of housing along the wet-dry continuum, and there is general agreement that all types of housing along the continuum should be available.

Although it is clear that housing is a necessary pre-condition for addressing the needs of individuals with issues related to the use of alcohol and drugs, the provision of housing alone is not a guarantee that people will be able to remain clean and sober or achieve housing stability. In most cases, some form of support or treatment will be necessary. The literature notes that the nature and level of services needed will vary with each individual.

CONCLUSION

Segal Place will be an asset to the Downtown Eastside and the City's housing portfolio by providing stable affordable housing for people in the neighbourhood. Through the partnership with VCHA and the provision of a support worker, some of the housing units will be available to people who are in recovery from addictions. Up to four retail spaces will be available for lease to legitimate businesses and agencies, which will assist in revitalizing Hastings Street.

Link to Appendices A and B

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