City Coming to Terms with Vancouver Secondary Suites

The report entitled THE ROLE OF SECONDARY SUITES: RENTAL HOUSING STRATEGY – STUDY 4 published by the City of Vancouver’s Community Services Group is about a year old but nonetheless contains some interesting data on the state of Vancouver’s secondary suite rental accommodations. Here are excerpts from the executive summary:

The market-rental housing stock is usually divided into two segments – the primary or conventional rental stock, consisting mainly of purpose-built rental apartments, and the secondary rental stock made up of rented houses, secondary suites, individually rented condo units, and units in multiple conversion dwellings and SROs. Over the last three decades, the secondary rental sector has played an increasingly important role in meeting rental housing demand. This increased role reflects the decline in the construction of new purpose-built rental and the redevelopment and conversion of the existing rental stock.

Using 2009 BCA data, this report estimates that there are at least 25,000 properties with secondary suites in the city’s single-family zoned areas. The proportion of properties with suites ranges from 6% in Oakridge to 59% in Grandview-Woodlands. On the west-side as a whole, less than one in five properties have suites; on the east-side, almost one in two properties have suites. Six local areas on the east side account for three quarters of the city’s single-family zoned secondary suite properties.

It’s a fascinating report, highlighting how the concept of secondary suites is starting to percolate more and more onto the west side of the city and into the hearts and minds of city planners who realize that the term “single family home” is becoming outdated. We can look at all RS-zoned properties with secondary suites. It looks like a Vision/NPA civic election voting map LOL.

A few key facts and insights I picked up in the report:

  • Data claim only 21% of homes built in the 1990s have secondary suites. (p13) Hogwash. There is something wrong with the data.
  • There is some natural resistance to secondary suites on the west side because homes are generally of older vintage. That is, it’s less desirable to tear down an older structure that has been well-maintained but not suitable for suiting.
  • The City is coming to terms with its dirty little secret: people are living in illegal basement suites and their permit officers purposefully turn a blind eye to properties with obvious basement suites installed but without the proper permits in place. According to the permit application data, about 20% detached properties are being fitted with legal suites, yet over 60% of new stock have basement suites. The City is well aware of this and looks poised to start the thin edge of the wedge into the dirty underbelly of the City’s basement suite accommodation.
  • “Council also approved a post-occupancy inspection program. Under the program, all new single-family houses are inspected a year after being approved for occupancy. Properties found with unauthorised suites are required to either apply for permits or to close the suites. Despite the changes, the proportion of single-family houses being built with approved suites has remained low.”

I commend the City of Vancouver for making this report public and shows, at least to me, they are aware of the problems illegal suites pose to the quality of life in the city, accelerated depreciation of neighbourhoods with slum housing, and (not least I’m sure) the chance for expanding their permit and inspection business unit!

Feel free to post your Vancouver secondary suite stories, good and bad, in the comments section: have you ever dealt with home inspectors overlooking secondary suites? What’s your most bizarre secondary suite experience, either as landlord, renter, or acquaintance?

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Guest
blueskies
5 years 7 days ago

secondary suites will always be a
fact of life as the income is required
by the owners to help pay the
mortgage, this also causes the
prices to increase as now there is a
way to pay for the price increases

trapped forevermore……..

Guest
Someguy
5 years 7 days ago

Growing up on the west side we either lived in a basement suite or had a basement suite in almost every house we owned. The only exception was when the family finally built enough equity to move into a nice place without one. Most people I knew either had a rental suite or rented a room in the house to students. My family started back when an SFH in Dunbar was 2.6x gross annual income and mortages were 25/25. If the city is truly concerned about housing values going up forever they should tread carefully: Illegal suites are a significant… Read more »

Guest
Anonymous
5 years 7 days ago

I like the new trick of describing a basement suite with indoor/outdoor carpet rolled over concrete slab floor and a furnace in the middle of the "living room" as the "main floor" of the house because its closest to the ground.

Guest
Renting
5 years 7 days ago

It is laughable how many home owners think they a living in a SFH (single family house) when they are living in a poorly built multi family house that was designed as a single family house. I would rather live in a condo where at least there is some sound proofing and ventilation is not shared. Anyone who has to rent part of their house out to make a mortgage payment can't afford the house. The new trend in the future will be the owners living in the basements with the upstairs tenanted. It will be the only way to… Read more »

Guest
space889
5 years 7 days ago

WOW…..BC eating out at restaurants because we are bored!!! Bad economy, HST, strict liquor laws, higher cost of living, the value we get, etc all have nothing to do with eat out less. It's simply because we are high class/expectation and are just bored with the restaurant scene. Yeap, BC/Vancouverites apparently are the most sophisticated diners in the country and we are dining out less because we are bored with the same offerings from Cactus Club, Earls, and Joey's.

http://www.vancouversun.com/life/British+Columbia

Guest
Eddie
5 years 7 days ago

We live in a nice single family home with a basement and NO SUITE. We share our house with nobody. How can we afford it you ask? WE RENT!

Member
Best place on meth
5 years 7 days ago

@space889:

Point #5 clearly shows it's a money issue.

5. Consumers are cutting back on appetizers, side dishes and dessert. Customer traffic at supper is declining faster than at any other part of the day, but breakfast is growing in quick service restaurants.

Member
VHB
5 years 7 days ago

Here are the end of January 2011 numbers. These are from PaulB's daily reports and so therefore are not official. But they are typically pretty close.

sell-list-ratio

1740 4547 38.9%

For 2001 to 2010, here are the totals and the mean and median January numbers. Was this January 'normal'? You decide.

January

sell list sell/list

2001 1225 3395 36.1%

2002 2248 3626 62.0%

2003 1966 3810 51.6%

2004 1954 3039 64.3%

2005 1697 3360 50.5%

2006 1924 3471 55.4%

2007 1806 4067 44.4%

2008 1819 4675 38.9%

2009 762 3700 20.6%

2010 1923 5147 37.4%

Mean 1732 3829 45.2%

median 1871 3663 47.5%

(Note that the median ratio here is the median of the ratios, not the ratio of the median sell and list)

Guest
space889
5 years 7 days ago

@Best place on meth: And yet the researchers still claim that's because we as consumers are bored, but because we have less money. The high price of restaurant meals or lack of disposable income was not mentioned even once in the article. Heck in value for money isn't really mentioned as a cause either. It's mainly just we are bored and too sophisticated for the current menu offerings.

Member
Absinthe
5 years 7 days ago

@Best place on meth:

Yes – first the article says it's because "we're bored", and then goes on to say that McDonald's is gaining market share.

McDonald's. Home of the challenging gourmet palette.

Guest
120 and Going Strong
5 years 7 days ago

For 2001 to 2010, here are the totals and the mean and median January numbers. Was this January ‘normal’? You decide

****

Uuum yup!

Looks pretty normal to me, and prices are sure to be up AGAIN this month for what will be like the 120th month of price increases in Vancouver.

Oh, and watch West Van and Van West sales and price increases this month.

Try discounting those non-existent Chinese buyers bidding up prices in the million dollar plus homes. Just try this month bears.

Member
Best place on meth
5 years 7 days ago

@VHB:

Now we're in February, which during the boom years averaged 150 sales per day, but last year was 120.

With the rush to beat the deadline we should see sales somewhere in between those 2 numbers.

Member
Patiently Waiting
5 years 7 days ago

"The average eater’s bill in a full service restaurant in B.C. is 11 per cent higher than anywhere else in the country."

There you go, say no more.

Actually, I'll say more. We are in no way the "culinary apex of the country". When I lived in Halifax, eating out was less of a risk. Sure I had less choice, but the odds of getting of decent plate of food was better.

The only thing worth mentioning about Vancouver is good, affordable sushi if you know where to go.

Guest
pricedoutfornow
5 years 7 days ago

http://www.cbc.ca/fp/story/2011/01/31/4199182.htm

Reduce CMHC role in mortgage insurance: CD Howe

"According to the report by Finn Poschmann, vice-president of research at the CD Howe Institute, the CMHC now backstops mortgages equivalent to more than 30% of Canada’s gross domestic product.

That’s left Canadians exposed to “large, ill-defined risks,” said the document, which argues that Ottawa should crank back the CMHC’s presence in mortgage insurance and allow more room for private sector insurers."

Oh really….you think?? Too late now!

Member
DaMann
5 years 7 days ago

@space889:

Not often you read a Sun article and the comments section is UNANIMOUS in their agreement. It's essentially the MONEY STUPID. A lot of people comment how expensive housing and the city in general is. You can only get so much blood from a stone. I will never understand why people think having the most expsenive housing market in the western hemisphere is a good thing. We are starting to see the results, aside from the housing industry, it destroys the economy eventually.

Guest
carlk
5 years 7 days ago

Without these secondary suites the rental rates would be even higher because the reality in Vancouver is that our government cannot and will not provide enough affordable rental housing stock to meet the current demand. So for those renters who criticize these single family homes with suites be careful of what you condemn.

Member
Best place on meth
5 years 7 days ago

Whistler, the dog murdering capital of the world has made the international news.

http://www.bbc.co.uk/news/world-us-canada-1233102

Should be a great image booster.

Guest
Anonymous
5 years 7 days ago

Taxes for the homeowners for the secondary suites are coming from both fed and local governments.

Member
Patiently Waiting
5 years 7 days ago

@carlk: Perhaps if suites were less common, there would be more pressure to build real housing.

I did my time in a basement suite – wrote about it previously and want to leave it behind me – and I'd rather live in a small, normal apartment any day.

Guest
superduperbulltime
5 years 7 days ago

Bear BC unemployment rate lowest in country and lumber industry taking off like hot balloon. Yeah restaurant traffic down because renter broke after spending all cash on drug and alchohol over christmas crying in corner of basement suite but once credit card paid down renter loser out party again.

Member
Best place on meth
5 years 7 days ago

@superduperbulltime:

That's two blatant lies I've read from the worthless cheerleaders today.

Member
Devore
5 years 7 days ago

@carlk: Nothing to do with criticizing. City hall is getting hungry for revenue, and they will come knocking on those doors soon enough. The feds will probably come snooping before long too.

Guest
GF Armstrong
5 years 7 days ago

Best place on meth Says:

February 1st, 2011 at 11:03 am

@superduperbulltime:

That’s two blatant lies I’ve read from the worthless cheerleaders today.

******

He is a troll grad school boy….don't they teach you that in your university

Guest
Anonymouse
5 years 7 days ago

I'm bored of paying $70 for a bottle of wine in a restaurant I could pick up at a liquor store for $20.

Guest
Anonymous
5 years 7 days ago

@Devore: I often wondered how much income tax is "lost" due to non-reporting of rental income of tenants in the basement. It must be substantial. Kind of makes a renter think that if there were ever a problem with a landlord, one call to CRA should do the trick…lol.

Member
Devore
5 years 7 days ago

@space889: Downturn due to boredom not finances, but consumers move to lower cost meals and cut out the expensive supper out? Oh yeah, that quick service breakfast is the culinary pinnacle. Vancouver doesn't even have a Cora's. The article is complete bunk, but there's some good reading in the comments section. Just another perfect example of the disconnect between what MSM reports and what regular people are observing and living.

Member
Devore
5 years 7 days ago

@Anonymous: It must be quite substantial. Take $1000-1500 a month (that's $15,000 a year) and multiply by hundreds of grey suites across Vancouver alone, that could easily justify a few extra staff at CRA. In the US, where government budgets have been getting squeezed at all levels, IRS is hiring like gangbusters, and audits are way up. As Harper boards the fiscal responsibility bandwagon before the election (or at least the budget) I would expect similar actions in Canada in the not too distant future.

Guest
Anonymous
5 years 7 days ago

@Devore: It wouldn't really take extra staff. More like computer cross matching of addresses on income tax returns. A couple of different names at the same address should justify a letter or a phone call. That, IMHO, should be enough to start the ball rolling.

Guest
pricedoutfornow
5 years 7 days ago

@Devore:

"It must be quite substantial. Take $1000-1500 a month (that’s $15,000 a year) and multiply by hundreds of grey suites across Vancouver alone, that could easily justify a few extra staff at CRA."

But when you take into account the fact that when someone reports the income from their suite, they are also allowed to deduct the related expenses (say 50% of the interest paid in the year, repairs, property taxes etc), how much tax is really lost here? Just wondering if it's really worth it.

Member
Best place on meth
5 years 7 days ago

I propose a special monthly "suite" tax on ALL secondary suites that the city could use to promote development of co-ops and other forms of affordable rental housing.

It would be similar to a gas tax that supports public transportation.

Let's start off with 5 cents per square foot per month.

Guest
Troll
5 years 7 days ago

@Devore:

It must be quite substantial. Take $1000-1500 a month (that’s $15,000 a year) and multiply by hundreds of grey suites across Vancouver alone, that could easily justify a few extra staff at CRA.

It's not that substantial, since you can claim mortgage interest on the portion of the home that's rented. The net is that the taxable income would likely be pretty low for most mortgaged homeowners.

Guest
Anonymous
5 years 7 days ago

@Anonymouse:

I’m bored of paying $70 for a bottle of wine in a restaurant I could pick up at a liquor store for $20.

Or you could pick up that same bottle in Seattle for $7. Vancouver: "The Most Overpriced Place on Earth".

Guest
GF Armstrong
5 years 7 days ago

It’s not that substantial, since you can claim mortgage interest on the portion of the home that’s rented.

Wow! One more benefit for homeowners eh bears?

First, no capital gains tax on primary residences and then you get to deduct mortgage interest (just like the US) on the rented portion of the home.

Do you ever think that maybe people have suites because they can deduct half of their mortgage interest every year as opposed to needing them to pay for their house?

Guest
Anonymous
5 years 7 days ago

Thanks for the monthly numbers VHB.

The closest comparison for 2011 is 2008. This year we have about 5% less sales and nearly the same listings. I'd be happy with a continuation of a 2008 pattern combined with higher interest rates instead of lower ones. 1-2% more isn't going to affect my purchasing power on a monthly basis. Rather, I hope weak sales and higher rates will deflate prices and psychology at the same time.

Guest
GF Armstrong
5 years 7 days ago

@GF Armstrong: “It’s not that substantial, since you can claim mortgage interest on the portion of the home that’s rented.

Yeah and they get capital gains when they sell. Thanks for playing.

******

Not when it is their primary residence, hence the owner occupied house with a rented basement suite. Thanks for playing.

Member
DaMann
5 years 7 days ago

@Troll:

"It’s not that substantial, since you can claim mortgage interest on the portion of the home that’s rented. The net is that the taxable income would likely be pretty low for most mortgaged homeowners"

But if that's the case and they are writing off expenses and interest then I beleive the house is no longer 100% capital gains free. No free lunch, you will have to pay the piper at some point.

Guest
Anonymous
5 years 7 days ago

@GF Armstrong: Doesn't work that way. Capital gains kick in on the rental portion of the the property. Deemed disposition I think is what it's called. You never get to have your cake and eat it too. Whatever the case, it will open a huge can of worms for the homeowner with the possibility of being red-flagged with CRA. Not fun. They will always get their pound of flesh.

Guest
GF Armstrong
5 years 7 days ago

CRA doesn’t usually check but suite income should be included in tax returns. @GF is right, but it won’t always stop CRA if they think you have undeclared income. ***** Booyacka bears! These are the benefits of owning that you are unaware of in your rented pads. I know I know – its another unfair advantage of owning over renting, and another demonstration of how the tax system favours the owner in Canada. But hey, owners take the risk. Not every homeowner renting their basement needs the income – many do it for the tax benefits.

Guest
Troll
5 years 7 days ago

The CRA Rental Income Guide, T4036, states that if all of the following conditions are met, you will not be considered to have a change in use:

– the part of the home used for rental purposes is small in relation to the size of the whole property,

– you do not make any structural changes to the property to make it more suitable for rental purposes, and

– you do not claim any capital cost allowance on the part you are using for rental purposes.

Guest
fixie guy
5 years 7 days ago

@27 Devore Says: "As Harper boards the fiscal responsibility bandwagon before the election (or at least the budget) I would expect similar actions in Canada in the not too distant future." I wrote elsewhere that Harper will maintain artificially pumping RE as long as possible, until either they secure the next election or are able to pass a full fledged disaster (a la Bush) to the next government and spend the next four years blaming them for the fallout. That he's making election noises now, along with backing away from policies formerly trumpeted as a miracle 'Action Plan', signals to… Read more »

patriotz
Member
5 years 7 days ago

@pricedoutfornow quotes CD Howe Institute:

That’s left Canadians exposed to “large, ill-defined risks,” said the document, which argues that Ottawa should crank back the CMHC’s presence in mortgage insurance and allow more room for private sector insurers.”

That is completely laughable, private sector insurers (I mean real ones, not Genworth etc. which are 90% taxpayer backstopped) are not the slightest bit interested in offering MI in Canada today. They know full well a bust is coming.

They're not even interested in the US market where 99% of MI today is done by FHA/Fannie/Freddie.

patriotz
Member
5 years 7 days ago

@jesse:

I actually owned a house with a rental suite some years ago, declared all revenue and expenses from the start, and was able to get the PR exemption on the whole house when I sold.

I never claimed CCA on the suite because I knew that would disqualify me from claiming the PR exemption.

Member
DaMann
5 years 7 days ago

@Troll: "the part of the home used for rental purposes is small in relation to the size of the whole property, " Well I stand corrected. However that's a HUGE chunk of grey are right there. What is small? 49% of the total sf of the house or 25%? Does anyone here honestly think the tax man won't care if someone is pulling in $2k a month from a basement suite as opposed to $1000 a month. There is a big difference. We all know the CRA can be bastards. Just like your principle res is tax free. HOWEVER the… Read more »

Member
DaMann
5 years 7 days ago

@Troll:

"you do not make any structural changes to the property to make it more suitable for rental purposes"

One moree question about this point. Does that mean a simple reno of the basement suite? What is structural exactly? The rules couldn't be any more vague.

Member
Best place on meth
5 years 7 days ago

I wonder how many owners of these suites have an annual business license as is required by law?

So many little things that the city could crack down on if they so desired.

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