Welcome to my blog on housing, culture, and design!
I’m Steve Fudge and I’m celebrating my 31st year as a realtor and property consultant in Toronto, Ontario, Canada.
In this post I’m going to explore how hotels have historically been not only been accommodations for travellers but homes for those requiring affordable shelter for longer periods of time, whether seasonally or permanently. I’m writing about this topic because, as a person who works in the shelter industry, I believe housing is a right and not a privilege. Everyone in a free society, regardless of who they are, should have a private room with a door they can lock for safety and security.
Canada is also in a housing crisis. Even though the Canadian real estate market is shifting with property values in decline, unless you’re paying for your property purchase in cash, shelter costs are actually higher than they were in the Spring due to rising interest rates – a 5-year fixed mortgage is about 2.5% to 3% higher than it was in February 2022 – landing at around 5.65% for a conventional mortgage. Because of this, homeownership is out of reach for an even larger pool of would-be buyers than it was in the Spring. This means that fewer buyers are getting onto the property ladder, and those who are being sidelined because of soaring interest rates have to shift their focus on securing suitable rental housing that both meets their needs and, ideally, is economical enough they can save their disposable income for a larger down payment. Higher interest rates mean more Canadians need affordable rental housing, and this growing need in itself will continue to fuel market rents higher.
These challenging circumstances require innovation – as I have explored recently in this post Design Innovations For A More Affordable Canadian Housing Future looking at different ways to think outside the proverbial shelter box – from creative land use to using alternative materials to more efficient construction methods – like with modular housing. In fact, that blog led to a subsequent television appearance on VisionTV when –> Realtor Steven Fudge Joins The Panelists On theZoomer To Discuss Housing Innovations!
Regardless of how much land Toronto has within its greenbelt (which, to my shock and disdain, is about to be parcelled off by Premier Doug Ford and his conservative party for redevelopment) there should be a focus and priority on upcycling existing buildings through adaptive re-use to create more affordable higher-density housing options for all markets. In most cases, this approach is more sustainable, has a lower carbon footprint, and expands the opportunity for incoming residents to integrate with an already established urban neighbourhood that is dynamic, vibrant, and accessible to all the necessary services and amenities. One such approach involves existing single-room occupancy buildings (SRO’s) and underused commercial, office, and retail. Hotels in particular present a unique opportunity because they are typically in favourable locations, and often close to transit. In a number of metros around the world, hotels have been part of the affordable housing conversation – but not without challenges.
After literally debating the issue for decades, Toronto city council recently voted in favour of creating more SROs by rezoning and shifting policy, which is significant- which I will explore in greater detail later in this post.
Let’s start by looking at the role that hotels and SROs have played in housing supply, and why that solution still presents opportunity today.
The History Of Hotels As Housing
A century ago hotels used to play an important role in housing supply in numerous cities around the world, particularly in the United States, where hotel rooms – from low-income single-room occupancy to ornate grand hotels – provided temporary and permanent shelter across a cross-section of society. They were an entry point for people with lower income into the housing system, just like a rooming house might be considered today, and then at the upper end, there were elegant hotels with housekeeping, room service, and all the luxury amenities we associate with them. A lot of century hotels were designed with kitchenettes, including hot plates and small refrigerators.
In the middle of the 20th century (think post-WWII) as the automobile began to rein supreme, the Canadian suburb exploded in popularity, and the baby boom saw the birth of the nuclear family as the dominant household (see my post Urban Planning And Toronto Real Estate for more context) the need for residential hotels began to dwindle. It was at that time when homeownership became more accessible; along with low-interest rates modest bungalows & 1.5-storey houses with unfinished attics were constructed with basic finishes for purchase. This was also the time when mobile home parks became popular, and other vacation options, like timeshares, entered the scene. Retirement homes were also built, and given that hotels had historically housed a lot of the elderly that didn’t live with their families, that demand diminished.
There also was “moral opposition” to hotels as well, as this NPR interview points out in “What We Lost When Hotels Stopped Being Housing” including the growing disdain that women who lived there weren’t active enough in maintaining their households (a lot of household chores could be relegated to hotel staff) and the belief that hotels were hotbeds for drinking, drugs, and prostitution.
And so, as the suburbs expanded as bedroom communities, once reputable hotels and single-room occupancy buildings in city centres fell into disfavour and disrepair, eventually getting demolished in favour of urban renewal. Unfortunately, this eliminated a significant number of dwellings – predominantly for single people – and a much-needed supply from the market.
Compounding the supply issues, as the old-school residential hotels were demolished, contemporary zoning discouraged the creation of hotels for residential use, instead encouraging their creation for conferences, conventions, and tourism as we know it, concentrating them in commercial areas that would support the local economy. As a result, over time a lot of vintage hotels and SRO buildings were destroyed, effectively eliminating a chunk of what was really housing supply. In New York, over 100 000 SRO’s were destroyed in the 1970s and 1980s. During a similar time frame, half of Seattle and Los Angeles’ SRO hotel accommodations were gone, and Chicago lost a vast number as well.
This article “The Hotel-Spirit” talks about how hotels play (and have played) a vital role in housing supply over the years, and still do today – suggesting that this housing opportunity should be explored more enthusiastically. Hotels aren’t just for vacationers, but for seasonal workers, corporate relocation, post-secondary students, as well as seniors, and people requiring accommodations for an extended period.
This case study from the National Association of Realtors in the US (I suspect the data in principle here mirrors Canada), looks at hotel conversions over the last many years across their country. The case study showed that hotel conversions are viable and helpful – and not just in creating a multi-family housing supply (although the study shows that the bulk of hotel conversions went to support that group). There is also senior/assisted living, student housing, homeless housing, and satellite healthcare/quarantine facilities.
Interestingly, for the most part, the hotels that were converted were already existing long-stay hotels with kitchens, as these types of extended-stay hotels remain in high demand, with people able to travel and work from home. Furthermore, over half of the hotel conversions required rezoning applications. 65 percent of these completed conversion projects that offered multi-family housing were either rented below market or were a mix of below and at-market rates.
There is evidence today that there is a need for this type of housing, and not just to provide affordable housing for those in low-income situations. Just look at the rise of Airbnb – and extended stay hotels have appeared en masse over the last few years – clearly filling a need from the public, whether for short-term accommodation – or something longer, as cities like Toronto faced a housing supply issue – in particular for the missing middle.
This article “Timely Opportunities For Hotel Conversions” from the Altus Group appeals to commercial real estate owners (particularly of hotels) to recognize the opportunity that exists with conversions of these properties to apartments, citing a few conversions in Canada, including a hotel in Victoria that was converted successfully to house homeless, and in Edmonton, where a 1970 high-rise apartment hotel was converted into a suite hotel in the early 2000s and then into apartments for rent. In Calgary, the International Hotel – also built in the 1970s – was converted in the late 2010s to offer premium short and long-term rental apartments.
As this report points out, while the opportunity and demand are present, some of the challenges threatening profitability reside in the costs (and viability) of retrofitting and converting an existing hotel to apartments, along with the possibility of creating high-end amenities, which are in high demand from prospective renters.
Certainly, development costs are a factor working against developers, especially when they are building new multi-residential plexes. As this Globe and Mail article, “Rental Apartment Construction Slumps In Toronto As Building Costs Rises” shows, housing starts for apartment construction have fallen sharply this year in Toronto, where vacancy is razor thin.
With the current housing market conditions and a dire lack of affordable housing, hotels and SROs are helpful in offering shelter and in creating housing supply, both in building new buildings – or in looking at adaptive reuse of existing hotels for apartments or condominiums.
Let’s explore how SROs are evolving in two of Canada’s cities where affordability is most constrained, Toronto and Vancouver.
Common Sense Says Create A Supply Of Rooming Houses
One of the greatest barriers to affordability and to the creation of new housing supply is the red tape that surrounds the processes. From development charges – which are eventually passed along to Buyers – to zoning by-laws and regulations that deter (or at least impede) the creation of new supply. I wrote about the challenges of accommodating the multi-unit dwellings in Toronto Real Estate, Yellowbelt Zoning & The Missing Middle: Part One & presented some design solutions from across the country in Part Two.
If it’s challenging getting multi-units for the missing middle in a single-family neighbourhood, you can imagine how difficult – in fact, near impossible – it is to create Single Room Occupancy spaces in these areas. And what makes it particularly frustrating is that the definition of a multi-tenant house – or rooming house – is when four or more unrelated people have their own bedrooms and collectively share a kitchen and a washroom. Just four people. Isn’t that shocking?
And the problem with the onerous nature of red tape, is that it fundamentally impedes progress – making it problematic trying to efficiently roll out a shelter solution to those who need it. And we are seeing this in real time in the Toronto real estate trenches, where there is a good news/bad news situation unfolding. The good news is that the City of Toronto is enacting a new policy to permit rooming houses across the city, but the bad news is the process of compliance won’t motivate a lot of property owners to go this route.
Until yesterday multi-tenant properties (aka rooming houses) were prohibited in Etobicoke, North York and Scarborough but in an effort to create more affordable housing city council has just ordered zoning bylaw amendments to permit a maximum of six dwelling rooms per multi-tenant house in those areas, and up to 12 to 26 dwelling rooms in other parts of Toronto, beginning in 2024. This is good news, but it also means that in order to comply, they must be licensed which is an onerous complicated process. Still, it’s progress. Here’s a CBC article called “Toronto City Council Has Debated It For Decades. Now, It’s Finally Legalized Rooming Houses City-Wide“.
This has been a contentious issue for some time in Toronto, with councillors historically being divided on the issue in urban versus suburban ridings, but the recent vote saw a large majority support the framework to create supply. In addition to the policy changes around zoning, they voted to include a public education rooming house plan. For property owners who want to build more than the maximum six allowed SRO units in a building, the owner will have to apply to the Committee of Adjustment to get approvals.
For more background, check out this Toronto Star article “Toronto Votes To Legalize Rooming Houses Citywide In 2024“.
To give you some context around the geography of current SROs, the map above shows that right now the majority of rooming houses are clustered in three parts of the city – in Parkdale, in Ward 14; in Ward 20, in the Annex, Kensington Market and Chinatown; and in the east downtown core, in Wards 27 and 28 in the Moss Park and Cabbagetown neighbourhoods. (Unlicensed & illegal rooming houses are not shown.)
Until the new bylaw takes effect in 2024, rooming houses are only permitted in certain areas of Toronto where zoning permits them. In other words, it’s basically illegal for four people who are not related to share a single-family dwelling. And here is where we see common sense versus policy battling it out, amplified by an extended timeline for implementation when the need is right now – and it is urgent.
It’s disconcerting, given it’s the only option for those earning minimum wage (which is not a living wage in Toronto and most other Canadian villages, towns and cities). And with the rising cost of everything, purchasing power for life’s necessities is eroding even more quickly for this group.
It implies that four unrelated people care less for the safety of those who share a roof than four related people, right?
SROs & Emergency Shelter Hotels During The Pandemic
The pandemic brought about a number of changes in housing and design (in fact, the impact of COVID-19 on real estate was so profound, I created a new Category in my blogs to explore the ramifications of it. Check out –> COVID-19 and Toronto Real Estate).
In regards to single-room occupancy housing and hotels, the pandemic presented an opportunity to make the best use of available space to those who needed it – namely hotels left vacant during the lockdowns when travel and tourism went ‘On Hold’. Many hotels – in Toronto in particular – were used as a temporary emergency shelter for the homeless, significantly expanding the available space to house the homeless. In addition to providing shelter off the street, these hotels had the added benefit of separate private space, a luxury not typically afforded to the homeless who often stay in dormitory-style residences. With the need for physical distance during the pandemic, the single-room space that hotels afford was ideal – not just for their physical health but for their psychological benefit. No matter how small or how spartan – a room with a door that locks – is a fundamental provision for having dignity and security when homeless.
The creation of these shelters was intended to serve as a bridge from the street towards affordable, permanent housing. Unfortunately, this has not been the case. Apparently, only 10 percent of those who stayed in temporary shelters are being relocated to permanent housing which is a strikingly low number. And with winter coming and the imminent closure of these shelter hotels, the problem of homelessness and space in which to accommodate them is more pressing, so there are ongoing calls to keep these shelter hotels operating. Recent estimates have the occupancy of these shelter hotels at 99 percent.
Click here to read this CBC article, “Homeless Advocates Call On Toronto To Address ‘Dangerous’ Shortage Of Shelter Spaces This Winter” and this article “Toronto’s Shelter Hotels Promised Safe Transitional Housing— What Happened?“.
On the flip side, the financial model of the shelter hotels is unsustainable long-term, with monthly rents being expensive and more economical options possible. However, the hope is that lessons learned during this pandemic will be cognizant of the importance of providing a room to call one’s own whereby shelters become less congregate and more home-like. Having a small private space may be enough to bridge a number of the many other contributing factors that proliferate homelessness.
There are also challenges around NIMBYSM – particularly when it comes to housing the homeless – which is a chronic barrier to its creation. In August 2020 there was a big uproar in Midtown Toronto when 3 hotels became homeless shelters in a location surrounded by middle-class family-friendly neighbourhoods. Shortly after these hotels were converted there was a spike in petty crime (such as bicycles being stolen from yards), vandalism and altercations. Apparently, many of the appliances in the bedsit hotel rooms disappeared and were presumably sold by the residents to fuel their addiction. Here’s a CBC article from that time called “‘Like We’re Living In A Nightmare’: Midtown Toronto Residents Fed Up With Crime, Vandalism Near Shelters“.
While it would seem a perfect match (unused hotel space + people needing safe, separate accommodation) the emergency shelter program is not without its challenges, like drug abuse and physical & sexual violence, which underscores that providing support to the homeless isn’t just about creating rooms; support needs to be comprehensive. Furthermore, the use of these hotel spaces was not meant to be permanent, and with tourism returning robustly, several of these hotel shelters are being transitioned back to regular hotel use.
A number of hotels have already gone back to hotel status, with many more slated for the coming months. Receiving a fair bit of media attention at the moment is the decommissioning of the Novotel on the Esplanade, which had housed a significant number of homeless throughout the pandemic. As this Toronto Star article outlines: “Inside The Short-Lived Effort To Turn An Esplanade Hotel Into A Homeless Shelter. What Lessons Can Toronto Learn From It?” urges readers to understand that forging connections with surrounding communities and providing on-site support that is comprehensive can help create more sustainable models going forward.
As the Novotel returns to hotel life amidst plans in place to re-develop the site into two 36-storey condo towers. We are entering a new phase of city building when a hotel built in 1979 is proposed to be demolished for replacement by a higher and better use – aka market housing – which is potentially coming at the expense of an already vulnerable population.
A Hotel Conversion Into Affordable Housing In Downtown Toronto
The Bond Hotel, located at Yonge and Dundas has been an emergency hotel shelter during the pandemic. The city bought it to convert it into affordable housing units. This conversion will see homes for a range of incomes, including several that are deeply subsidized, but the current residents will be displaced. And they will not be guaranteed priority for the new units when they become available. So as seems to be the case with this complicated issue, a solution for one problem creates challenges for another.
Here’s a valuable Toronto Star article titled, “Residents Are Scared: Inside The City’s Plan To Turn A Homeless Shelter Into Affordable Housing“.
And then there is the matter of budget. A report earlier this year showed that the city overpaid by over $13 M to various hotels during the emergency hotel shelter program during the pandemic. Can you imagine if that money had been invested in permanent housing- and a long-lasting solution? According to the report referred to this in Toronto Star article titled “Audit Finds City Overbilled By Over $13M More By Hotels Than Shelter Contracts Required“.
As history has shown us, this housing crisis is complex- and so is the solution. It’s not a straight line.
It’s not just the homeless that need affordable, safe and secure housing. It’s students, refugees (side note – hotels are being used in Toronto to house refugees as well), seniors, people struggling with addictions, low-income families and more. In a perfect world, It would be ideal if there was a political initiative to build a complex of micro-apartments where different floors could be allocated to different needs based on the situation at each moment in time – meaning a floor could be dedicated to student housing, the homeless, an addiction rehabilitation centre, senior’s housing, single parents, with community services.
I recognize the challenges of concentrating ‘marginalized groups’, and the view of segregation, but if physical spaces and access to them were designed with support in mind and at the ready, really to support health and safety for all- all in an affordable and sustainable package- isn’t that the best use of available space designed space?
Vancouver SRO Conversions
Vancouver has actively been pursing an SRO conversion strategy as a means to creating housing to assist with their affordability crisis, particularly to house the homeless, but it hasn’t been without its challenges, showing the complexities of finding and implementing solutions.
Built mostly to house miners and transient workers in the 20th century, SROs in Vancouver have been scourged with poverty- and are the scene for drugs, poverty etc. They are also largely in disrepair and pose fire hazards because of a lack of upkeep. Here is an interesting history: “The Agony And The Ecstasy Of Vancouver, British Columbia“.
The SROs in Vancouver are majority-held by a single corporation, which is problematic in itself, as accountability and attention to upkeep of these SRO complexes are notoriously in disrepair. Atira Property Management Inc. owns 20 SRO buildings, vs. 11 that are government owned.
Because of the lack of upkeep, and the majority holding, these SRO’s tend to pose great hazards- like fire safety. A series of fires this past summer, coupled with the heat dome that sat stubbornly over BC for a sweltering period, caused a exodus of residents from these SROS into a blocks-long tent city. The tent city was brought down by the authorities- but these people largely had nowhere to go, thanks to the state of these SROs.
This is partly because the residents’ marginalized folks said that they are scared for their safety, and refuse to live in their SRO’s. Interestingly, the city of Vancouver is well aware of all the code violations etc., of these buildings, and the owners are vilified for their inaction, and yet nobody has presented a solution. Rather, they sit at the crossroads of a weird shelter stalemate.
For example, the revival of the London hotel with a $720,000 grant was voted against by city councillors. Not because they didn’t want it repaired, but because they had concerns over funding a project that might ultimately be unsafe and contribute to the problem. The strategy is to withhold funding to try to force accountability. Click here to read “Vancouver Council Balks at SRO Grant Over Safety Concerns“.
Another option that is gaining traction is the conversion of office space to apartments, as the work-from-home movement borne from the pandemic has cemented, with office vacancies running high. Again, like with hotel conversions, some of the same challenges exist around renovation and retrofitting, but it comes down to identifying the best use of the built environment based on relevancy and current need. Read this RENX article, “Transforming Office Buildings To Livable Spaces” for more.
The GBD Magazine article, “6 Examples of Affordable Housing Through Adaptive Reuse“, talks about adaptive reuse in various places in the world to create housing, including a high-school turned seniors home in Paris.
There is a thought too that adaptive reuse is particularly timely for senior populations, with the aging population- and the fact that seniors are more likely to be displaced and/or face homelessness or be in need of social assistance for housing. Furthermore, given the communal living nature of seniors residences (i.e. central dining rooms without kitchens in-unit) make conversion to suit this purpose in principle easier and possibly less expensive for developers.
Read about a Calgary hotel conversion for just that, in: “Former Northeast Calgary Hotel Converted Into Non-Market Housing For Seniors” as well as this article in Macleans Magazine called “How This Calgary Company Is Transforming Empty Offices Into Housing Units“.
With the rising cost of living, affordable housing is important for everyone – from high-end homeowners to those seeking basic shelter. With a broad overview of the market and a sound knowledge of how housing affects us all, I’m here to help!
**Title Image courtesy of DowntownTorontoHotels.ca, with thanks!**
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