April 30, 1999

To:Urban Environment and Development Committee

From:Commissioner of Community and Neighbourhood Services

Commissioner of Urban Planning and Development Services

Subject:Results of Condition Survey of Toronto's High-Rise Apartment Buildings

Purpose:

This report reviews the findings of research, recently completed for the City and for Canada Mortgage and Housing, that surveyed the condition of high-rise apartment buildings in the former Cities of Toronto and York. This report also discusses policy and service implications for the City.

Funding Sources, Financial Implications and Impact Statement:

No short-term implications.

Recommendations:

It is recommended that:

(1)Council urge the federal government to fund the Residential Rehabilitation Assistance Program at levels sufficient to preserve affordability in the small minority of high-rise buildings where needed repair work cannot be done without significant rent increases;

(2)The Municipal Licensing and Standards Division report back this year on options for proactive inspections and use of technical consultants to ensure that needed capital repairs are done in apartment buildings in poor condition; and

(3)Staff collaborate with Canada Mortgage and Housing Corporation to distribute the Condition Survey of High-rise Rental Stock to landlord and tenant organizations and other interested parties, and to identify further research needed.

Council Reference/Background/History:

The condition of high-rise apartments is a matter of public interest, relating to housing affordability, rent regulation, and the quality of housing and neighbourhoods.

High-rise residential rental buildings comprise 188,000 of the city's 475,000 rental units, including a large share of the affordable private stock. About three-quarters of high-rise units are 25 to 40 years old (built in the 1960's and early 70's); many need significant repair or replacement of building components nearing the end of their normal life; some require upgrading to meet today's codes.

If maintained well within owners' current income, such buildings can provide affordable housing for many years. If allowed to fall into disrepair, they may require major renovation down the road, leading to higher rents or to investor interest in redevelopment. Repairing older buildings is usually far less costly than new development to replace them, and will often require less public assistance.

Apartment maintenance and repair has been a major issue in the in recurring debates about rent control. The successive statutes governing residential rents have had various provisions for pass-through of capital repair costs, amortization of repair investment, penalties for disrepair, and so forth. The Tenant Protection Act has changed the financial incentives for capital repair.

The condition of rental housing affects the living conditions of tenants, many of whom are not in a position to enforce adequate maintenance by the landlord. Large-scale disrepair can spill over to affect neighbourhood quality, values of nearby property, and ultimately the tax base. The City has had to deal with a few "problem" buildings where chronic disrepair lead to political controversy and to the City taking possession of the property, entailing large demands on various departments.

In 1995 the former City of Toronto formed an Interdepartmental Task Force which, among other things, identified a need to study how widespread were such repair issues. CMHC was highly interested and it was undertaken jointly (funded 75/25 CMHC/City, including 2 percent from York).

This study will inform current work by City departments, noted here under "Next Steps".

Comments and/or Discussion and/or Justification:

1.0Summary

The Condition Survey of High-Rise Rental Stock in the City of Toronto, undertaken jointly with Canada Mortgage and Housing Corporation (CMHC), examined a sample of 63 buildings in the City, stratified by age, to provide estimates of overall repair needs and costs in the high-rise stock over the next 10-year period. All main building elements were inspected by a team of experts.

Results of the study should not be misconstrued. It is not an analysis of property standards infractions. Estimated costs include work needed in 5 to 10 years in buildings now in good condition. Repair costs can be translated to rent increases only with due regard to applicable legislation. Results vary greatly from one building to another; overall results will not apply to any one building.

• Estimated cost of needed capital repairs ranged considerably: from typically $500-$3,500 per unit over 10 years for buildings built in the 1980s and 90s, to typically $4,000-$17,000 per unit over 10 years for those built before the 1960's. Older and smaller buildings tend to have higher costs per unit. (Costs are expressed in per-unit terms but most work is not in-suite).

• Unusually high repair costs of about $15,000 to $20,000 per suite were found for approximately 10 percent of the buildings.

• Extrapolating the costs by age of building, the global costs for needed capital repairs are estimated at just over $400 million over 10 years for the former Cities of Toronto and York (the study area) and $1.2 billion over 10 years for the entire new City.

• The majority of buildings have repair needs with costs that are quite manageable at just above guideline rent increases. Scenarios developed by staff show that median 10-year repair costs yield annual capital cost pass-through between 0.2 and 1.3 percent annually on average rents (on top of rent control guideline increases), reaching only 2.5 percent annually for highest per-unit capital repair costs in the study. Nevertheless, cumulative rent increases for capital work could undermine affordability in particular buildings.

The results of the study do not imply any need for a new regulatory system to ensure good repair and preservation of the affordable high-rise stock. Property standards enforcement should nevertheless incorporate proactive approaches to ensure that buildings in poor condition get adequate attention.

Given potential impacts on affordability in a minority of cases, there may continue to be a need for public rehabilitation assistance, to permit repairs to be done while preserving affordability. Additional work will be required to determine the number of units and cost involved in such cases.

2.0Purpose of the Study:

Earlier studies by the Province and the City examined high-rise "conservation" and ideas for proactively ensuring good repair of the high-rise stock. These studies involved typical or anecdotal information rather than a sample, or they focused on particular problems such as parking garages.

The objective of this study was to provide, based on a selected sample, a comprehensive assessment of the physical condition and capital repair needs of high-rise apartment buildings in Toronto, and of the costs for such capital repairs over the next 10 years. A secondary objective was to develop a protocol, whereby a standard set of data collected at any building can be input to a data analysis system which generates a profile of multi-year repair needs and costs.

"Capital repair" refers to major work that is beyond regular weekly or monthly "maintenance", and will be needed regardless of how well regular maintenance is carried out. High-rises (defined as those greater than 5 stories) warrant particular attention as they typically have more complex structure, and systems (plumbing, ventilation, elevators, etc.), and are exposed to greater weathering.

The study examined a sample of 63 buildings in the former Cities of Toronto and York. Its results, adjusted for different age profiles of buildings, can be generalized to the whole new City of Toronto.

3.0Research Method and Process

The study was undertaken by Gerald Genge of GRG Building Consultants, and three firms as building review subconsultants, all experts with experience in judging conditions and repair cost.

The sample of 63 buildings was taken from the 542 high-rise buildings identified in City databases. The sample was stratified by age of building (pre-1960s, 1960s, 1970s, post-1970s). A typology based on age permits repair needs to be linked to particular building technologies resulting in distinct repair needs (for example, 1970's buildings with multi-level garages and 1960's buildings with floor slabs exposed at their edges to weather), and to the occurrence of certain repair needs at certain ages.

The condition of each building was assessed within seven "building systems":

1.Site: pavement and walkways, structures (e.g. retaining walls);

2.Structure: garages, balconies, building framing;

3.Building Envelope: exterior walls/cladding, windows and exterior doors, and roofs;

4.Mechanical: heating, cooling, ventilation, water, drainage, plumbing fixtures;

5.Electrical: power supply/distribution, lighting, auxiliary systems (e.g. building entry);

6.Life Safety: fire suppression, fire alarm and voice communication, emergency power;

7.Elevators: equipment, cars and controls.

Costs of repair and replacement were generated based on expert knowledge and industry norms for the life of building components and the costs of each element. A "building rating" was also developed, which ranks the condition of the building. The rating system corrects for the high per-unit costs in small buildings, and gives more emphasis to urgent repair needs.

The procedure developed in the study is (with variations) based on that used by consultants to condominium corporations and social housing providers, undertaking "technical audits" or reserve fund studies. Both the Toronto Housing Company and MTHA have commissioned similar studies on many of their buildings, as a basis for planning multi-year capital repair programs.

Further details on the research method are provided in the accompanying executive summary.

The survey was managed by a steering committee comprising City staff (Shelter/Housing, City Planning, Municipal Standards, Legal), CMHC staff, landlord and tenant representatives, and staff of the Ministry of Municipal Affairs and Housing as well as Peel Region. The landlord organizations (Fair Rental Policy Organization and later Greater Toronto Apartment Association) were vital in securing landlords to participate in the study. Work in progress was discussed in steering committee meetings, with overall results discussed in December 1998 and March 1999 meetings having active participation by landlord and tenant representatives, who were able to help interpret issues and information in this study, from their experience.

Additional follow-up with stakeholders is noted below under "next steps".

4.0Key Findings of the Study

4.1What the Study Does and Does Not Tell Us

The study is NOT an analysis of infractions of property standards by-laws. This study estimates future capital work to keep buildings in good condition, whereas the City's property standards powers deal mainly with current problems. For example, an original furnace in a 1960's building will, within the 10-year period, reach the end of its lifespan and need to be replaced even if it is now in good condition. Further, the study did not deal with certain items, such as condition of interior walls, which are important for tenants. The study methodology required that where an urgent safety matter was identified and owner did not immediately address it, the City would be notified; no such notification proved necessary.

The estimated cost of capital repairs needed over a 10-year period is not a measure of current disrepair. High future costs do not necessarily mean poor condition today, although in particular cases they may.

The capital repair costs are not a measure of potential rent increases. The effect of capital repair investment on rents will depend on market conditions, capital cost pass-through permitted by legislation, and the owner's cash flow situation and financing arrangements. But capital repair requirements may have effects on rents, as discussed in this staff report. Likewise, estimated future capital repair costs are in no way a measure of potential public costs for rehabilitation, although assistance may be warranted in some cases.

The overall results cannot be applied to any one specific building or portfolio. The requirements vary considerably from one building to another, depending on the age, size, maintenance and capital repair history, and other factors. The value of this study is in providing an overall profile. The study does not present data on any specific building or identify specific addresses (these are known to the consultant but not to staff); this was a condition agreed to with participating owners, to protect their commercial interests and proprietary information.

4.2Summary of Findings

An executive summary of the research report, emphasizing the findings, accompanies this report.

The study did not find any large share of buildings having extreme or pressing repair needs, but it found a large need for investment in capital repairs over the next 10 years. Overall results are best understood in terms of typical 10-year costs by age group of building. The following table provides a summary. "Typical" cost is here defined as that between the 25th and 75th percentile of buildings distributed by cost --in other words, the middle half of the buildings, excluding those with unusually high or unusually low costs per unit. This gives a better sense of typical cost than citing a median or average.

Buildings that are in good condition today may appear as having high costs because of potential capital replacements which may be required in year 7 or 10. In some cases, costs include replacement even though ongoing repairs and maintenance may be sufficient (for example, older elevators for which it is now difficult to get parts).