Regulating the Conversion and Demolition of SRO Hotels

POLICY REPORT
URBAN STRUCTURE

Date: June 3, 1997
Dept. File No. 3043
C.C. File No. 2602

TO: Vancouver City Council

FROM: Manager, Housing Centre in consultation with the Director of
Legal Services, Director of Central Area Planning, the
Director of Land Use and Development and the Director of
Community Services

SUBJECT: Regulating the Conversion and Demolition of SRO Hotels

RECOMMENDATION

A. THAT the Provincial Government be requested to amend the
Vancouver Charter to enable the City to regulate the
conversion and demolition of SRO hotels providing residential
accommodation generally in accordance with Appendix A.

B. THAT staff be instructed to initiate public consultation on
the implementation of these powers once the Vancouver Charter
has been amended.

GENERAL MANAGER'S COMMENTS

The General Manager of Community Services RECOMMENDS approval of
the foregoing.

CITY MANAGER COMMENTS

The City Manager RECOMMENDS approval of the foregoing, noting that
there is a short window of opportunity for Provincial approval
during this legislative session. The Charter amendments would
provide the City with additional powers. Council can subsequently
decide how to implement these powers after full public discussion
with the various stakeholders.

COUNCIL POLICY

On May 8, 1989, Council adopted policy to maintain and expand housing
opportunities in Vancouver for low and moderate income households, with
priority being given to Downtown lodging house residents, elderly people
on fixed and limited incomes, the physically and mentally disabled and
single-parent families.

On May 16, 1991, Council reiterated its intent to ensure one-for-one
replacement of Single Room Occupancy (SRO) units in Downtown South and
endorsed the principle of developing new social housing, constructing
unsubsidized SRO replacement projects, and retaining and upgrading the
existing SRO stock, as required in the absence of new replacement
housing, with priority given to housing the existing long term Downtown
South residents.

SUMMARY

The City is facing a major challenge for low-income housing in the
Downtown. In the past, non-market housing development has kept pace
with the loss of SRO hotel units. However additional tools are needed
as a result of both increased development pressures and reduced senior
government housing funding. This report recommends that the City
request Provincial enabling legislation which would give Council the
ability to better regulate the SRO hotel stock.

BACKGROUND

There has been a history of increasing City involvement in the
regulation of SRO hotels. After the urban renewal clearance schemes in
the early seventies, the focus of public concern switched to improving
the safety and quality of the remaining SRO stock. The City revised and
more rigorously enforced its codes, including the Lodging House and the
Standards of Maintenance By-laws, and the Fire By-law. At the same time
there were increased efforts to replace demolished or closed units with
better, more livable units in the form of subsidized non-market housing.

Efforts in the late 1970s and early 1980s brought about the
rehabilitation of SRO hotels through comprehensive by-law enforcement,
including an inspection program, together with Federal government
assistance through the Residential Rehabilitation Assistance Program
(RRAP) which the City administered. In the mid eighties, just prior to
Expo, Council was concerned about evictions related to Expo and in
February 1986 passed a resolution requesting the Province to introduce
legislation to temporarily control rent increases and evictions. No
action was taken on this request. It has not been possible to
definitively establish how many units were converted to tourist use for
Expo. One study estimates that 700 to 1000 residents were displaced
during Expo and that almost all the hotels switched back from tourist
use by the following year.
When the Downtown South Plan was prepared, Council passed a policy
stating the intent to provide one-for-one replacement of SRO units. The
methods of providing this replacement were through non-market housing,
density bonuses, and development cost levies.

The 1995 draft Victory Square Concept Plan, which Council has received
for information and is still under public discussion, indicates the need
to take further action to ensure SRO upgrading or replacement and
includes the following recommendation:

" Discourage the demolition of SRO units or conversion to tourist uses
or condominiums by:

- Defining "SRO" more precisely, to discourage conversions; for
example, distinguishing SRO hotels from tourist hotels in the
Zoning and Development By-law. Conversion to tourist hotel
would thereafter require a development permit, and current
hotel parking standards would apply.

- Considering Vancouver Charter and/or Zoning and Development
By-law amendments to require one-for-one replacement of SRO
units which are demolished or converted to non-SRO uses."

In July 1995 Council endorsed the initiation of a Housing Plan for the
Downtown Eastside, Chinatown, Gastown, Strathcona areas. A draft plan
will be tabled with Council this summer and discussed with the
communities during the summer and early fall. Staff are working with
the communities on three major topics:

- the future of the 6000 SRO hotel rooms;
- the role of small suites; and
- the appropriate housing mix.

This report deals with one component of the first topic. The City may
not have sufficient zoning powers to effectively regulate the conversion
or demolition of SRO hotels. There is uncertainty about how the courts
would apply the non-conforming use sections of the Vancouver Charter.
Provincial legislation is required to avoid uncertainty, possible
litigation, and ensure regulatory power is secure. This issue is being
raised now because it may be able to be dealt with in the current
legislative session.

DISCUSSION

1. Description of the problem

Single room occupancy (SRO) housing is an important part of the City of
Vancouver s low-income housing stock. In 1996, there were 13,193
low-income housing units in the Downtown Core. SROs accounted for the
largest portion. There were 7481 SRO units, 4710 non-market housing
units and 1002 units in special needs residential facilities. SRO hotels
are comprised of residential hotels and rooming houses. The
distribution of the 172 SRO hotels in the Downtown Core is shown on Map
1.

MAP

These SROs house, on a monthly basis, mainly low-income people who have
few other housing choices. A 1991 survey of residents showed the
average income to be $763 per month. Traditionally the market rent has
been set by the shelter component of social assistance (GAIN), which is
at this time $325 per month. Recently the rents have been increasing
and tenants typically pay in excess of 60% of their income for housing.

In the Downtown Eastside area, the average resident is 47 years old.
Over eighty percent of the residents are men and the average overall
length of time living in the area is 14 years. Almost 40% of the
residents are disabled.

If the SRO housing stock is lost, experience in other cities has shown
that homelessness increases. Information from the United States
indicates that New York has lost 30,385 units or 60% of its stock.
Seattle has lost 15,000 units. There is much evidence that homelessness
contributes in a profound way to a person's physical, mental and
emotional health problems. Homelessness has a negative effect not only
on those people who suffer from lack of shelter, but also on nearby
businesses and residents. Public costs are also increased as people who
are without adequate shelter are more likely to use emergency health
clinics, ambulance services and longer term counselling services.
Beyond the financial costs, homelessness is contrary to a variety of
City policies and many citizens sense of Vancouver being a humane and
livable city.

There has been a significant loss of SRO stock in the Downtown Core. In
1970 there were 13,400 SRO units in 436 buildings. As shown in Figure
1, by 1996 this stock had shrunk by 5900 units to 7500 units in 172
buildings. Over the twenty-six year period, this represents a 44%
decrease in units, a 61% decline in the number of buildings, and an
average loss of 228 units a year. This rate of loss has declined over
the last ten years to 80 units a year.

Housing programs from senior governments combined with previous City
policies and actions have stabilized the number of low-income housing
units in the Downtown Core. As also shown in Figure 1, in 1970 there
were about 13,900 of both SRO and non-market units compared with 12,200
of both SRO and non-market housing units in June 1996.

Two significant factors have changed which point to the need for
additional action by the City. The first is the withdrawal of federal
government housing programs in the early 1990s, which reduced by
two-thirds the amount of funding available in B.C. Because the Province
has modified its participation to stretch the available funds, the
federal withdrawal has not resulted in a two-thirds reduction in unit
allocation. Nonetheless fewer units have been allocated. In the ten
years prior to the federal government withdrawal (1984-1993), the
Downtown Core received an average allocation of 215 non-market housing
units. Since the federal withdrawal the average annual allocation has
been reduced to 150 units for this area.

GRAPH

The second factor is the continuing development of areas in and adjacent
to the eastern Downtown core where the majority of SROs are located.
These developments are consistent with the City's Central Area Plan and
area-specific plans. They include Downtown South, False Creek North,
International Village, Gastown and City Gate. Currently plans are being
developed for Victory Square, Thornton Park, and the Trillium site south
of Strathcona. A new Trade and Convention Centre is under review and a
decision may be made later this year. Without new or additional controls
or incentives, development pressures would likely lead to both
conversion and demolition of SRO stock. The tables below show the
reasons for SRO stock losses between 1970 and 1996. Of the 5900 units
lost, 44% were demolished, 44% were converted to other uses and 12% were
closed. Of the demolitions, 69% were for private redevelopment or
parking/vacant lots. Of the conversions, 73% were for private
development. Conversion to tourist use accounted for 28% of these.
This type of conversion is increasing. In the 1970s there were 140
units converted, in the 1980s 170 units, in the first six years of the
1990s 240 units, for a total of 550 units. The City is aware of
possible conversions of an additional 300 units over the next few years
including the Dominion, Niagara and Cambie Hotels.

Table 1: SRO Units Losses by
Type
Demolitions 2600 44%

Conversions 2600 44%
C l o s e d 700 12%
units/other*
Total 5900 100%

Table 2: Demolitions
by Type (Units)
P r i v a t e 1800 69%
redevelopment
P u b l i c 800 31%
redevelopment

Total 2600 100%

Table 3: Conversions
by Type (Units)
P r i v a t e 1900 73%
redevelopment

P u b l i c 700 23%
redevelopment
Total 2600 100%

*other includes renovations and other
net changes within existing stock

Replacing the lost SROs is costly for the public. If non-market housing
were the only tool to replace all the SROs, a conservative estimate of
the capital cost is $750 million. The annual cost to replace the
average historical loss is about $23 million. In the last 3 years, the
Province has committed the equivalent of about $15 million per year in
capital construction for non-market housing in the Downtown Core. The
shortfall could amount to about $8 million per year. In addition to
the provincial funding, the City has $2.5 million through the 3 year
capital planand one time payment of $1.1 million received from
International Village in pay-in-lieu funds. This will be helpful in
replacing some of the SRO stock, but cannot be relied upon solely to
deal with the expected increase in stock losses from development
pressures.

In short, the pressures on the SRO stock will be bigger than in the
past, and there are fewer public funds available to replace the units
that are lost.

2. The issue

Currently there is uncertainty about the City s ability to control the
conversion or demolition of most SRO hotels. (The City does have power
to regulate conversions to strata-title and this type of conversion is
effectively controlled by existing legislation). SRO hotels can be
classified as rooming houses or hotels. The majority of the
residential hotels are classified as hotels which are defined in the
Zoning and Development By-law as premises providing temporary
accommodation... which implies occupants have another place of
permanent residence. However, for most SRO residents, it is their only
residence. The hotels are typically providing residential rental
accommodation, not transient accommodation. However many of them may
have provided transient accommodation at some point in the past.
Residential hotels which change to tourist hotels do not apply for a
development permit for a change of use. Under existing City powers, new
use terms could be introduced which distinguish residential hotels from
tourist hotels and require a permit to change from these uses. However
there is uncertainty about whether the new terms and permit requirement
for change of use would only affect new hotels and not existing hotels,
which are the ones where regulation is needed. It is not clear whether
the existing hotels would have non-conforming use status and would be
able to carry on as they have, which includes providing either transient
or residential accommodation, or a mix, as the owner choses.

In the case of demolitions, the City has limited ability to set
conditions under which demolition could occur. The City currently
charges a fee for the demolition of residential accommodation ($1,000
per unit) and regulates the timing of demolition (all permits must be in
place before demolition of residential accommodation can occur).
However the City may have limited powers to go beyond this.

To regulate SROs with secure and definitive legislative authority, staff
recommend that changes be sought to the Vancouver Charter to
specifically and expressly empower the City to regulate the conversion
and demolition of SRO hotels.

3. Proposed solution

Staff have investigated how the City could control conversions and
demolitions of SRO hotels which are providing monthly accommodation.
The provinces of Ontario and Quebec have legislation which covers all
residential rental accommodation, including residential hotels. The
cities of San Diego and San Francisco have by-laws regulating
residential hotels which rely on state legislation. The charter
governing the City of Montreal also has enabling authority and that City has passed a by-law which regulates conversions and demolitions similar
to what is proposed in this report.

The proposal is for City Council to request amendments to the Vancouver
Charter to give City Council the power to approve or refuse applications
to convert or demolish SRO units. The Charter amendments would also
provide Council the ability to establish conditions for considering the
applications.

If the City wishes to further regulate the residential hotels, there
are three steps:

1) City to request enabling legislation from the Province.
2) Province to pass the legislation which would result in changes to
the Vancouver Charter giving the City the authority to regulate
hotel conversions and demolitions.
3) City Council to pass one or more by-laws to implement the authority
and to set the conditions under which conversions and demolitions
could and could not occur (this has similarities to the condominium
conversion regulations which are currently in effect).

Generally, the approach taken by the City in making requests for
legislation is to keep the recommendation broad-based and general, and
for detailed legislative wording to be worked out during the process
with provincial staff. And in this case, many of the implementation
details, including what conditions would be used in considering
applications, would be the subject of a subsequent Council report on
specific by-law changes. The main points of the proposed Charter
changes are in Appendix A. These have been discussed with Provincial
government staff.

4. Description of proposed changes

a) Properties Affected

Type and location of properties:
The Charter amendments would empower Council to define SRO
accommodation. The precise definition would be part of the third step
and reported back to Council. One possibility is to develop a list of
properties which have sleeping and housekeeping units and which are now
used as residential. Information from B.C. Assessment Authority and
other sources could be used to develop the list.

The Charter amendments would empower Council to designate an area or all
of the City where the regulations would be in effect.

Exemptions:
The Charter amendments would empower Council to exempt properties from
the by-law. The precise exemptions would be part of the third step and
reported back to Council.

b) Changes which would be regulated

The City would be empowered to use a permit or licensing system as a
trigger for a conversion or demolition approval system. Further the
City would be empowered to:
- require owners to apply for a permit or license to demolish or
convert SROs to a different type of business;
- establish conditions for approving an application;
- approve or deny an owner's application; and
- issue a permit.

With these powers the City could regulate conversion of SRO hotels to
tourist uses as well as upgrading of rental accommodation to apartments
and live/work accommodation. Conversions to office or other commercial
could also be included. Demolitions could also be included as they have
been a source of loss of the low-income housing stock.

c) Conditions to be used by Council in considering applications

Once the provincial enabling legislation is in place, Council would
approve by-laws and guidelines describing the conditions for approval
and how they would be implemented. Approval of applications would be by
motion of Council. This is similar to the condominium conversion
process. This is part of the third step of this process and will be the
subject of a report back to Council.

5. Public consultation

Once the legislative changes have been made, Council can determine the
best way of using the powers. At that stage a full public process can
be initiated with various stakeholders including property owners and
residents. Staff will report back on the results and implementation
options.

The City is clarifying a distinction which is obvious to most people but
not adequately reflected in our zoning bylaws, i.e. the Hotel Vancouver
is quite a different land use than the residential hotels in the
Downtown Eastside. SRO hotel owners have previously enjoyed a much
wider scope of business operations than most other land uses in that
they could be both commercial and residential. The proposal can be seen
as bringing the same amount of rigour to hotel definitions as we
currently have to most other uses. In addition, many of the hotels have
benefited for many years through a type of public investment in that
much of the rent comes from provincial government welfare funds. In the
1991 survey, 72% of the tenants reported their income as from some form
of government assistance.

6. Proposed Controls are part of Comprehensive strategy for Affordable
Housing

This proposal is not an isolated action, but is part of a comprehensive
strategy that the City has for affordable housing, not just in the
Downtown, but throughout the City. Appendix B contains a list of
other City housing initiatives which provide a context for this specific
proposal.

Regulating SRO hotels is consistent with the provincial government
affordable housing strategy. Appendix C illustrates how this proposal
fits in with provincial housing goals.

CONCLUSION

Increasing development pressures and reduced senior government housing
funding means that the losses to the SRO hotel stock will likely be
greater than what it is possible to replace in a timely way.
Homelessness could increase as has occurred in other cities where the
SRO stock has been lost. Provincial government enabling legislation is
required before the City could regulate the conversion and demolition of
that stock.

* * * * *
DRAFT Appendix A

PROPOSED VANCOUVER CHARTER AMENDMENTS

Amend the Vancouver Charter to add the following:

279D(1) The City may make by-laws regulating the conversion and
demolition of a building providing single-room accommodation and for
that purpose may

(a) define what constitutes single-room accommodation, whether by
description, by location or a combination of both

(b) exempt from the operation of the by-law,

(i) different classes of building,
(ii) different classes of persons, and
(iii) different classes of business or activity,

(d) provide that an approval is at the sole discretion of Council,

(e) prescribe terms and conditions and make it an offence for any
person to fail to comply with such terms and conditions,

(f) without limiting the generality of clause (d), require, as a
condition of approval, one or more of the following:

(i) the provision of alternate residential accommodation at a
similar rent,
(ii) the payment to the city of an amount of money as
specified in the by-law, which money must be paid into a
reserve fund for the provision of replacement housing and
used only for that purpose,
(iii) substantial compliance with applicable City by-laws,
(iv) compliance with such other terms conditions which
Council deems will encourage the supply of low-cost housing.

Appendix B Page 1 of 2

CITY OF VANCOUVER AFFORDABLE HOUSING INITIATIVES

AFFORDABLE HOUSING INITIATIVES THROUGH THE CITY OF VANCOUVER
The City encourages the retention and development of affordable housing
in all areas of the City. The hotels in the Downtown Core are at one
end of the chain of housing and are affected by the supply of affordable
housing elsewhere in the City. Some of the relevant City-wide
affordable housing policies and programs are:
- Encouragement of secondary suites in neighbourhoods where there is
support.
- Condominium Conversion Review
- Non-market housing land lease
- 20% non-market housing requirement
- Assured moderate rental housing program
- Neighbourhood Demonstration program

Downtown Affordable Housing Policies and Programs
- Operation of a non-market housing portfolio
- Affordable housing fund
- Downtown South development levies and density bonusing
- Downtown District low cost housing bonus

Specific Neighbourhood Plans in the Downtown
The City is currently working on a Housing Plan for the Downtown East
side Chinatown Gastown and Strathcona area. A draft plan for the
Victory Square has been prepared and will be forwarded to Council later
this year. These initiatives contain the objective of maintaining and
expanding the supply of affordable housing. A key component is the
regulation of demolition, conversion and renovation of SRO hotel units
which is subject of this document. However this is only one component
of a overall strategy. The other components of the Draft Victory Square
Concept Plan are:
- Adjust zoning to facilitate housing objectives

- Encouraging new non-market and low-cost market housing by:

Continuing City land leasing for social housing projects

Encouraging Provincial housing programs for low-income singles
Using payments-in-lieu, if as a last resort these are available,
from major projects

Using development cost levies

- Facilitate upgrade of SRO units

Better inform owners of alternate seismic requirements for SRO
upgrading for rehabilitation programs

Continue City purchase and SRO hotels

- Discourage demolition or conversion of SRO units

Raise demolition fees

Assist managers of hotels to deal with issue in their buildings

Establish Council policy to deny request for Council approval of
stratification for SRO buildings unless replacement units, with
similar rent levels, are provided nearby.

- Recommend expansion of the provincial government allocations of
rent supplements to permit people with special needs to acquire
housing in the area and other parts of Vancouver and the Lower
Mainland.

The Housing Plan is under development and will likely include many of
the same policies. In this area there are 6000 hotel rooms which need
to be retained, upgraded or replaced. Over time it is expected that the
majority will be upgraded or replaced through new social housing, public
or privately funded upgrading and possibly some small suites. However
time is needed to put these alternatives into place. If social housing
were built at the rate at which it has been in the last 5 years, it
would take 60 to 100 years for the 6000 hotel rooms to be replaced. The
controls discussed in this document will give time for the public and
possibly the private sector (small suites) to provide alternatives.

Appendix C

HOW CONVERSION/DEMOLITION CONTROLS FIT INTO PROVINCIAL POLICIES

In April 1996 the Province published its Strategy for Affordable
Housing . The conversion/demolition/renovation controls relate to three
of the five goals contained in the strategy.

Building Partnerships to Broaden Participation

The strategy speaks to how local government has considerable influence
over housing and gives encouragement to local governments for innovative
leadership.

Preserve and expand the stock and variety of moderately priced rental
housing

The strategy recognizes the issue which the City of Vancouver is
addressing with this initiative by noting that many older buildings are
being converted, particularly the older hotels in the downtown areas
where many low-income singles live in SRO hotels. Indeed one of the
goals is to preserve and maintain existing market . . "rental stock"

Promote a range of housing options for individuals with special needs.

Many of the people who live in SROs have special needs. Forty (40)
percent have a physical disability and the same percentage assess their
health as poor or fair. The provincial housing strategy is to "promote
a range of housing options for individuals with special needs".

In 1996 the Province also published "Nowhere to Live" which contains
recommendations of a task force established by the B.C. Minister of
Housing, Recreation and Consumer Services. This report provides much
information about the SROs and recommends
"Protect existing SROs through:

- the establishment of demolition and conversion controls,
either at the local or provincial level
- a one-for-one replacement policy requiring a suitable
replacement for every lost unit, or pay-in lieu fees, which
adequately mitigates any loss of housing for existing
tenants."