In the midst of a widely recognized rental housing crisis, the city is poised to approve conversion of more than 250 apartments to condominiums. The two conversion proposals are supported by staff because they meet city policies, and that makes it difficult to reject them because the owners will likely be able to successfully appeal.
The larger of the two would see conversion of 128 rental units in the tower known as Effort Square at Main East and Catherine. It is managed by Effort Trust that owns or manages dozens of Hamilton apartment buildings. In addition to commercial uses this building contains “34 bachelor units, 69 one bedroom units, 24 two bedroom units, and one three bedroom unit”. The second proposal going before the planning committee on Tuesday would convert 124 apartments on Dundurn South at Chatham Street.
Staff opposed the Effort Square application last June because about a third of the units were deemed affordable housing. However city rules allow that objection to be waived if the landlord obtains the written support of at least three-quarters of tenants and Effort Trust says it now has done that.
The landlord made an earlier attempt to convert the building in 2014 but was thwarted by a dip in rental vacancy rates to below two percent – the other basis on which the city will block condo conversions. But those rates have now been above that cutoff for the required two years in advance of a conversion approval.
In the June meeting, former ward three councillor Matt Green denounced city policies that permit such changes as “really bad policy” and strongly opposed the conversion.
He argued that landlords were paying people to move out so they could raise the rent in “a market that’s completely out of control” and said it was “absurd that [the council] was even considering” conversion proposals. He pointed to information in the staff report that the rent for one-bedroom units in the building ranged from just over $600 to nearly $1900 a month as evidence that rents are jacked up dramatically when units become available.
At the same June meeting, Chad Collins contended that most conversions don’t actually result in lost rental units which continue to be rented. Staff confirmed that sometimes “investors” purchase the units and then rent them out.
The Hamilton Community Legal Clinic spoke in opposition to conversion of the Effort Trust building at the June meeting. Samuel Mason argued “less options means less supply, and with little supply landlords are able to raise rents higher” as a key reason to refuse conversions.
“We are seeing renters in Hamilton have reduced mobility. They’re stuck with fewer and fewer places to live,” Mason noted. “With each reduced option the risk of homelessness is increased.”
Both staff reports on this week’s conversion applications note that the change offers landlords considerable tax savings. Apartment buildings pay 2.74 times the property tax rate of single family homes, but once converted to condominiums they are treated as single-family.
Staff estimate that Effort Square property taxes will likely fall by over $50,000 a year. Apartment taxes are collected from the landlords but passed onto the tenants and usually make up about one-fifth of rents. If the taxes fall by more than three percent, the savings are legally supposed to be passed onto the tenants.
The tax savings apply to conversions even if units remain as rentals. This offers another reason for owners to obtain the conversion approvals. While existing tenants can’t be forced to move, Green suggested they can be “financially incentivized” (given money) to leave so the landlord can boost the rents or sell the unit.
The Dundurn South building tax situation is different. Because it has been built since 1999 it already pays the same tax rate as single-family units – a saving established by the city to encourage new apartment construction, As a result, in this case staff estimate taxes may increase by over $275,000 because the assessment value of condo units are usually double the previous apartment.