“Rentals are being phased out in our condo building because they are just too hard to manage and they bring down the value of the units.”

“Rentals are being phased out in our condo building because they are just too hard to manage and they bring down the value of the units.”
– comment by Kensington, 27 Jan 2013 4:00pm below ‘2012 a record year for Vancouver rental housing’, CBC News 27 Jan 2013

It’s still all about ‘value’ (read: price growth), and not about ‘income’.
The changes contemplated by this strata usually occur in red-hot price growth phases.
During weakness, when prices are descending, the potential for rental income becomes more important in the calculation of fundamental value, and in making a property attractive to buyers (thus offering more support to prices).
This strata appears to be late to the party.
– vreaa

31 responses to ““Rentals are being phased out in our condo building because they are just too hard to manage and they bring down the value of the units.”

  1. Not to mention, renters are morally inferior and you really don’t want to be forced to rub shoulders with that type of person in the elevator.

    • I think there is a great deal of truth to what you say. People who pay big bucks to own a condo, don’t want to find themselves in a building full of renters. Isn’t that what the word “exclusive” is all about? We always hear how the latest condo development is “exclusive”. Exclusive means that it excludes people. People don’t want to buy into a condo development that is INCLUSIVE of class diversity and INCLUSIVE of renters. They want to feel a step or two above the riff raff when they buy “exclusive” condos. So buyers get upset and may even feel somewhat defrauded when they find out that there exclusive condo building actually includes renters. I’ve heard stories about prospective buyers being absolutely appalled when they have found out that a building includes renters. Renters are a big turn off. The perception (rightly or wrongly) is that renters are bad neighbours.

      • Haha exclusive, you made my morning

      • Ralph Cramdown

        These are the same people who believe the full page mass-market newspaper ads inviting them to “pre-register” for “VIP access” to new condo projects, right?

      • Naked Official #9000

        Prestige prestige prestige Prestige prestige prestige Prestige prestige prestige Prestige prestige prestige Prestige prestige prestige Prestige prestige prestige Prestige prestige prestige Prestige prestige prestige Prestige prestige prestige Prestige prestige prestige Prestige prestige prestige Prestige prestige prestige

      • There’s plenty of exclusivity if you buy a waterfront property in West Van… but the $22.5K, 5% down payment will likely not get you there…

  2. At least if you are a renter you can easily move away from the owner-neighbour from hell!

  3. Maybe the owners just got fed up being in the elevator with all those happy, solvent, owner-subsidized renters talking about they’re latest trip to Europe or ski vacation. I bet that gets old really quickly when you’re sitting on a depreciating asset with exorbitant maintenance fees.

  4. Can the strata really ban rentals?

  5. Real Estate Tsunami

    Agree with VREAA.
    This seems to be counter intuitive, particularly if you are an investor.
    As usual, one needs to look at the circumstances.
    In this case, I suspect the majority of owners actually live there, whereas in the case of a newly built high-rise, the majority of units may be owned by absentee landlords.

    • this only seems counter-intuitive IF you are an investor. If you’re an owner, why would you particularly want to share your home with people that do not have a vested financial interest in the home itself, or that you did not have a say in bringing into your home in the first place?

      I have a few friends living in buildings that are open to rentals, some of them like it some don’t. I have another friend that lives in a building that caps rentals at 10% of total units, and their strata is attempting to stop all rentals as well – it seems that whatever units are getting rented have a low bar for choosing renters, and the rest of the owners don’t like it.

      • With such high ownership rates, you’re really scraping the bottom when you’re looking for a renter in many cases. This is a big problem for professional landlords, who will bend over backwards for a good tenant. And of course basement and cheap tiny studios are predominantly popular with students, who are not known for enjoying monastery-line peace and quiet.

  6. This happened to us last year in the Okanagan, sadly the ‘values’ in that complex have gone down since banning rentals, and 20% of the units (including the former rental ones) are for sale and have been for several months, even with price reductions. Of course condos in general have taken a big hit over the last couple of years anyway, but I agree that banning rentals is a mistake with the current market.

    The complex we moved to is ‘high-end’, with about 35% rentals. If it weren’t for the rentals those units would sit vacant, as most of the owners are underwater and are happy to have a part of their costs covered by renters.

    The rent for the unit we are saves us about $ 1000 a month over the cost of ownership (based on 25 yr mortgage at 4%, 10% down, then adding taxes, strata fees and maintenance costs).

  7. Actually I think you got it in reverse. When prices are going up red hot, people care less about this stuff because prices are going up! When prices stop going up and are actually going down, that’s when people starts caring about things that may bring down their unit values. People feel the urge to do something, to find the cause of their problem and fix it. In a condo building, it might be the renters, the lack of pool, or whatever else people can come up with. When you are an owner living in your unit, you don’t care about the rental income but you do care about the price. If you think it’s the renters then well, the renters gotta go!

    As well, I don’t blame strata for banning rentals. In expensive condo building where there is a majority of owners and relatively small number of speculators, chances are a good majority of people who are paying the high asking rentals are people like students, escorts/full service masseuse, young careless people, families with young kids who like to run and scream at night, etc. Those are not the ideal neighbors you want if you have a family and want peace and quiet from your neighbors. When we were looking at condo rentals in Richmond/Burnaby, you will be shocked at how many units are rented to students sharing an unit because they are the only ones who would pay $700 or $800+ per room for units that would otherwise rent for $1200 / month. In Richmond, there are also lots of new immigrants family with young kids who file their taxes as married but separate to get all the single mom social assistances including housing assistance which allows them to rent a $1500-$1800 / month condo when they normally can only afford $1200 / month for rent. Lots of those family aren’t exactly what I would call careful about the maintenance and care of the condo building common areas.

    For condos where there are a lot of renters from mainland China, especially young kids here alone, smoking and drinking are a huge problem. Similarly for condo buildings that allow pets. A lot of purpose rental buildings don’t allow dogs/cats, so renters with dogs/cats rent in condos that allow pets and let’s be honest, not every pet owner is responsible and cat/dogs can’t be 100% toilet trained. Lastly, constant / frequent moving in/out for renters is annoying for residents due to holding up elevators, parking/front entrances, wear and tear on common area leading to more maintenance bills, etc. All these negatives/costs have to be shared by all residents yet the benefits go to the few.

    • Naked Official #9000

      Disloyal cadre, when you say drinking is a huge problem, this is clearly the evil influence of the west upon the pure hearts of compatriots! I remember getting black out drunk on my first two tsing-tao, too. I was a heavy drinker back in my disloyal youth- but brother Li Peng showed me the errors of my disharmony.

    • Real Estate Tsunami

      Space,
      We rented an upscale Townhome in Richmond. Almost all units in the complex were owned by fairly wealthy Chinese Business Immigrants
      The unit opposite of us was owned (and still is) by a well known Chinese immigration consultant (his office occupies a whole building at Westminster and # 3).
      He spends most of his time in HongKong. His daughter lives at the Townhouse with her “boyfriend”. She is supposed to attend UBC, but there were parties almost every night, drinking, smoking, noise etc.
      To the point where we, the renters had to move to get away from the circus.

    • “rentals are people like students, escorts/full service masseuse, young careless people, families with young kids who like to run and scream at night, etc.”

      This is an unfair stereotype about renters. Owner-occupied condo units can just as likely be occupied by students, escorts, young careless people, and families with young children. Just last night there was a real estate pump story on CTV in which two young Chinese sisters say they are looking to buy condos for Chinese New Year and that their parents are going to buy it for them because they can’t afford it on their own. Now, this story has been the subject of some discussion over at vancouvercondo.info because some are alleging that one of the sisters works as a condo marketer. Putting that aside for a moment, there are many young, immature people who may be students who get their parents to buy a condo for them. Also, owners who need to pay high mortgages may be driven to escorting or massaging to come up with the money. I think if someone wants to use a property for illicit activity whether it be prostitution or a marijuana grow op, there are advantages to owning because when you rent you have to worry about the landlord wanting to come in for an inspection. You have more privacy if you own which makes it easier to carry out illicit activity.

      “In Richmond, there are also lots of new immigrants family with young kids who file their taxes as married but separate to get all the single mom social assistances including housing assistance which allows them to rent a $1500-$1800 / month condo when they normally can only afford $1200 / month for rent. Lots of those family aren’t exactly what I would call careful about the maintenance and care of the condo building common areas.”

      Are you saying that new immigrants and people on social assistance make bad neighbours? I think there is a great deal of bigotry evident in this particular quote. That said, you make a good point about social assistance and housing assistance. Many real estate bears are unaware of how government intervention actually inflates RENTS as well as ownership prices. In BC, we have two such programs: SAFER (Shelter Aid for Elderly Renters) and RAP (Rental Assistance Program). Both of those programs provide cash subsidies to low income renters and are likely contributing to rent inflation in BC. Similar housing voucher/housing allowance programs in other countries (France, US) have been found to cause rent inflation.

      “For condos where there are a lot of renters from mainland China, especially young kids here alone, smoking and drinking are a huge problem.”

      First, young people from China may have their rich parents BUY the condo for them. Young people from China and renters are not the only ones who drink and smoke. At least with renters, if there is an ongoing problem with disruptive late night parties, they can be fined and evicted out of the building. But you can’t evict an owner for bad behaviour. There recently was a story in the Vancouver Sun about some rich guy who owns a penthouse condo in Yaletown and he was keeping his neighbours up at night with loud hot tub parties. All the strata can do is give the guy fines and he has the money to keep paying the fines so he doesn’t care. If he was a renter, they could get him evicted.

      “renters with dogs/cats rent in condos that allow pets and let’s be honest, not every pet owner is responsible and cat/dogs can’t be 100% toilet trained. ”

      Renters are not the only ones with cats and dogs. Renters are not the only ones who can be irresponsible pet owners. The issue of pets is separate from the issue of renters. Strata can make a separate pet policy that puts restrictions on pets. In my experience, dogs are worse than cats because they bark loudly and they have to go out for walks so sometimes there is a problem with dogs peeing in the common areas. Cats usually stay in their unit so they don’t get a chance to pee in the common areas. I’ve seen a lot of irresponsible pet owners who are also condo owners.

      I have a friend that lived in a condo building and they were driven crazy by the nextdoor neighbour who was constantly doing renovations. The neighbour was an owner and they were constantly making noise with a hammer and various equipment because they were renovating. They were renovating because they were trying to flip the unit. But by trying to sell the unit, they were disrupting the other residents with all the renovations. This went on for months. If they would have rented out the unit, then the unit could have actually been lived in by someone and the residents wouldn’t have to put up with the sound of constant renovations.

  8. Real Estate Tsunami

    65 per cent of Swiss are renters.
    I guess that explains why their country is in such a mess. /sarc off.

    • Naked Official #9000

      Disloyalty to the party! Your splittist ideology has been duly noted in your file!

      Continue your disharmonious ways and You will be spending many hours in the apple factory with that attitude!

    • Too bad we don’t live in Switzerland. The attitude toward rental property is completely different here. The condition of condo towers with large proportions of renters is immediately obvious when you walk in and look at the wear and tear on the common areas.

  9. I would never buy in a building that banned rentals, for two principal reasons:

    1. I can’t anticipate every turn in life and value the flexibility of being able to rent out the dwelling.
    2. Rental restrictions tend to speak volumes about the general strictness of the strata (e.g. if they ban rentals, what else are they busybodying on about?)

    • As Real Estate bears we should love towers than ban rentals. No rentals = No speculation. This is unlike all presale towers these days that are instantly 70%+ speculator investors. When there is no speculation in a tower we can immediately discount that tower as part of the Vancouver Housing Problem. Those people are there to live, it’s a true measure of the need for housing. From a quantifying point of view — it’s great! From the owner’s flexibility and bigotry point of view, they have big problems, but I love seeing them. On the other extreme, I love purpose-built rentals, another easily quantifiable tower. It’s in the middle, where the best you get is asking the agent “so is this a good investment for rentals, how many people have bought in this tower for investment purposes?” and hoping you get a straight answer to measure speculation.

      • Ray -> Fair point. But this still doesn’t account for the habit that some have had of purchasing properties, leaving them empty, and banking on future price appreciation. Pure ‘growth’ plays.

  10. Blame speculators and crappy property management companies.
    They only care about getting the unit rented at a high price no matter what kind of tenant it is. Prompton is horrible, so is Advent. I have had my fair share of lousy neighbors and these companies are the ones responsible for placing the tenants. I had to call the cops on their tenants a couple of years ago. My landlord had to write numerous letters to them telling them their tenants were violating building bylaws. The strata kept fining them until they finally evicted the bozos.

  11. Ahh the 3 P’s of condos – people, pets and parking

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