ADMINISTRATIVE REPORT

Date: May 1, 2001
Author/Local:J.Davidson/7670

RTS No. 01573

CC File No. 5104

Council: May 15, 2001

TO: Vancouver City Council

FROM: Director of the Housing Centre in consultation with the Director of Real Estate Services

SUBJECT: Lease Terms and Other Arrangements for the Union Gospel Housing Society Project on the City-Owned 361 Heatley Avenue Site

RECOMMENDATION

A. THAT Council approve the ground lease of the 361 Heatley Street site, legally described as Parcel B, Block 59, D.L. 196 LMP 45880 to the Union Gospel Housing Society for 60 years for the pre-paid lease amount $862,500 and in accordance with the terms and conditions described in this report, as well as other terms and conditions satisfactory to the Director of the Housing Centre and the Director of Legal Services.

B. THAT no legal rights or obligations are hereby created and none shall arise hereafter except upon execution of all legal documents required to complete these transactions have been signed by all of the parties.

GENERAL MANAGER'S COMMENTS

The General Managers of Corporate Services and Community Services RECOMMEND approval of the foregoing.

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 75% of market value.

To give priority to upgrading existing residential hotels and rooming houses and building new non-market replacement housing for low-income singles in downtown.

To build replacement low-income housing and maintain housing for existing residents in the Downtown Eastside.

On October 7, 1999, Council approved the 1999/2000 City-Provincial Housing Partnership Agreement which included this project.

PURPOSE

The purpose of this report is to obtain Council approval of the terms of the ground lease of the City-owned 361 Heatley Street site to Union Gospel Housing Society to construct and operate a social housing project. This housing society is sister to Union Gospel Mission.

BACKGROUND

At its In Camera Meeting of February 22, 2000, Council approved:

- purchase of the 361 Heatley Street site for non-market housing development at a price of $1,150,000 plus applicable taxes.
- funding for the acquisition is to be provided by the Property Endowment fund.
- the lease of the site to the housing society for prepaid rent of 75% of acquisition price for 60 years, and on such terms and conditions to the satisfaction of the Director of Legal Services.

This project is part of the 1999-2000 City/Province Non-Market Housing Partnership. Under the terms of that partnership, this site is to be leased at 75% of the land costs for 60 years. The project received a conditional unit allocation from BC Housing on October 15, 1999.

This housing society currently operates a facility at 616 East Cordova which provides treatment and transitional housing for people with alcohol and drug dependencies. In addition a related Mission entity operates a Thrift Store at 659 East Hastings which would move to this project.

The project has progressed to the stage where the development permit will be issued in late April and the building permit approximately one month later. This is a design build project and the contractor is Progressive Homes. B.C. Housing Executive Committee is about to give final commitment to the project, subject to Council approval of lease terms.

THE SITE

The site is 100 x 120 with a total area of 12,200 sq. ft. The site has an older commercial building which will be demolished shortly. A Phase I environmental site assessment has been conducted and there was no indication of contamination on the site. Further investigation is not required.

The site is shown on Figure 1 below.
Figure 1

THE PROJECT

The project is a four storey wood frame building comprised of 81 dwelling units, about 5200 square feet of retail space at grade, with 14 underground parking spaces.

The housing consists of 81 dwelling units including three managers' suites. The suites range from 320 to 426 square feet and are designed for single occupancy. There is an amenity space on the first floor and an outdoor deck on the second floor.

It is proposed that the Thrift Store move to the ground floor of this building, taking a sub-lease from the housing society. The construction costs of the retail space will be paid partly by a capital payment of $175,000 by the Mission and the remaining $655,000 will be part of a single mortgage for both the residential and retail building components.

The project is located across the lane from the housing society's current residential rehabilitation operation. The society wants to operate housing for low income people who want to live in a drug and alcohol free environment. The housing society has undertaken a thorough investigation of the issue of alcohol and drug free housing. Residency in the facility will not be limited to people with substance use issues, although it is likely that all or a vast majority of the tenants will be recovering from addictions. The society proposes to use a tenancy agreement, signed by each tenant, in which the tenant agrees that the premises are to be drug and alcohol free and that breach of this requirement is grounds for immediate termination of the tenancy. It includes a clause whereby the tenant agrees to drug and alcohol testing where management has reasonable grounds to suspect a breach of this requirement. If the tenant refuses to cooperate, the tenancy would be terminated. A tenantmay be given a second chance where there is a willingness to continue the recovery process. The society also plans to use fixed term tenancies, which are initially for a 3 month period and increase to 1 year, after successful completion of several shorter term tenancies. This approach, including the form of the residential lease, has been reviewed by their legal counsel, who has provided the opinion that the lease agreement and policies comply with existing human rights and residential tenancy laws and regulations. A copy of the tenancy agreement, policies and legal opinion is attached as Appendix A (on file in City Clerk's Office).

LEASE TERMS

The site will be leased to the housing society in accordance with the standard terms and conditions agreed to between the City and B.C. Housing for social housing development on City-owned land, with special allowance for the retail space.

In summary, the general lease terms for the City's ground lease to Union Gospel Housing Society will be:

1. Term of 60 years.
2. Prepaid lease rent of $862,500.
3. Lease to be signed within 180 days after Council approval, or such later date as may be approved by the City Manager.
4. The Director of Legal Services and the Director of the Housing Centre must approve all subleases of the retail space to ensure it can only be used in ways compatible with the residential use.

CONCLUSION

This non-market housing project will serve low-income singles in the Downtown Eastside who want to live in an alcohol and drug free environment. It expands the choices of housing available to tenants in the area. In addition, the project permits the Thrift Store to move into new premises.

The development permit for the project is close to being issued and will be followed shortly by a building permit. The project will be constructed by Progressive Homes. B.C. Housing Executive Committee is prepared to provide final commitment to the project after the City approves the lease terms for the housing project.

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(c) 1998 City of Vancouver