The committee met at 8:03 a.m.

[P. Milobar in the chair.]

P. Milobar (Chair): Good morning, everyone. We will get started with our meeting. We have a couple of members that may be signing in on Zoom as the meeting gets underway. We’ll get started in the meantime.

We are here today with the consideration of the report on B.C. Housing’s COVID-19 Response: Property Purchases.

I will turn it over to you, Michael.

Consideration of
Auditor General Reports

B.C. Housing’s COVID-19 Response:
Property Purchases

M. Pickup: Thank you so much.

Good morning, everybody.

I will start by acknowledging, with respect, that at the Office of the Auditor General, we conduct our work mainly on Coast Salish territories. Primarily, this is on the Lək̓ʷəŋin̓əŋ-speaking people’s traditional lands, now known as Victoria, and the W̱SÁNEĆ people’s traditional lands, now known as Saanich. I’m grateful to have been a visitor on these lands, and I strive to be mindful of the connection it holds to Indigenous people of these territories.

I want to express my appreciation for all of the effort and professionalism that our audit team has devoted to the report we’re here to discuss this morning. The team members are Malcolm Gaston, assistant Auditor General; Amy Hart, executive director, who joins me here at the table; Daria Babaie, director, who joins me here at the table; Suzanne Smith, Forrest Joy and Julianne King, many of whom are behind me over my left shoulder, as well.

[8:05 a.m.]

Also behind me are a number of other people from our office. I want to particularly point out and thank two of them, two of our co-op students who finished their last week of work with us this week.

Thank you to Natalie and Mercedeh for their time spent with us.

I put them on the spot a little bit this morning on the walk over and asked them if they would come back. I think I got a yes from them, so that may be a good sign. But I do want to thank them for their work.

I also want to thank B.C. Housing for its participation in this audit, especially considering the pandemic and the challenges, and to the ministry for their cooperation as well. I’m also thankful to the Clerk of Committees and the office of the controller general for the positive and professional assistance they offer us.

Just before handing it over to our team, to Amy and Daria, I also want to mention, of course, that the province has proclaimed today as Red Hat Society Day in British Columbia. The international Red Hat Society works to empower women of all ages, especially women 50 or older, to pursue friendship, freedom and self-expression.

The Office of the Auditor General joins all communities across B.C. in recognizing the Red Hat Society and the important role of all women in our province. As somebody with many close friends and colleagues who identify as women over 50, I truly appreciate this group of people.

I will now turn it over to our audit team.

D. Babaie: Good morning, Chair and committee members. Thank you for your interest in our audit of B.C. Housing’s COVID-19 Response: Property Purchases, which was tabled on March 1, 2022.

For today’s presentation, I’m going to walk you through the Audit at a Glance, which is a summary of the audit’s focus, findings and conclusion. It is a two-page document that you will find in the package that was provided to you.

Funded by the B.C. government, B.C. Housing purchased nine properties in Vancouver and Victoria in 2020 and 2021 to house former residents of city parks and other people experiencing homelessness and to protect them from the spread of COVID-19. The properties were a significant expenditure, totalling $221 million, and were secured quickly because of the urgency of the government’s pandemic response. We have provided information on page 9 of the full version of the report. It includes locations, purchase dates and final costs for these properties.

We framed the audit around one objective, which you will see in the blue box on the left-hand side of the Audit at a Glance. The scope of this work is explained more on page 8 of the report. We wanted to determine if B.C. Housing’s purchases of nine properties in Vancouver and Victoria during the COVID-19 pandemic were in compliance with the existing approval processes of government, the Provincial Rental Housing Corp. and B.C. Housing’s board of commissioners and executive committee.

Consistent with the mandate of the Office of the Auditor General, we did not examine or offer an opinion on government’s decision to purchase the hotel properties.

I will now provide the summary of other findings.

The government approved a budget for four properties purchased in 2020 and the purchase of five properties in 2021. We found that the total purchase amount for nine properties was within the approved budget. In addition, B.C. Housing met all required government directives in the purchase and closing of properties.

B.C. Housing’s board of commissioners approved individual purchases of more than $35 million, as required: the Howard Johnson Hotel, $56.6 million, and the Patricia Hotel, $64.6 million, both in Vancouver. In addition, B.C. Housing’s executive committee approved all nine properties.

[8:10 a.m.]

Moving to the second page of the Audit at a Glance, we also found that the required due diligence reviews were completed by B.C. Housing for all acquisitions. The appropriate levels of due diligence reviews were determined after assessing the potential risks and the impacts of the pandemic.

Some due diligence items were considered less applicable at the time and were deferred with approval of the executive committee. For example, eight hazardous materials surveys were deferred until major renovations are undertaken on the properties.

B.C. Housing obtained market value appraisals for all nine properties, as required by internal policies and procedures. The appraisals were performed by accredited appraisers. The total purchases were less than the total appraised values for all nine properties.

Overall, we concluded that B.C. Housing met all relevant approvals and policy requirements for the purchases of nine properties in Vancouver and Victoria in 2020 and 2021. For this reason, we made no recommendations. However, I would like to highlight the three questions that are included in the Audit at a Glance for readers to consider as they review this report.

In closing, I would like to thank B.C. Housing for their cooperation and assistance as we carried out our work over the last year. It is never easy to undergo an audit, and during the pandemic, it was even more difficult. We are very grateful for everyone’s time and effort. Thank you.

I will now turn it back to the Auditor General, who has some closing remarks.

M. Pickup: Thank you, Daria.

I think I will leave it at that, Chair.

P. Milobar (Chair): Okay. Thank you so much.

Any questions from committee members? I don’t see any questions.

Does the ministry want to jump in and maybe provide a few comments? Then we’ll loop back into questions again.

A. Cooke: Good morning, Chair and committee members.

Firstly, I’d like to acknowledge that I come to you today from the unceded territory of the Lək̓ʷəŋin̓əŋ and Coast Salish peoples.

My name is Angela Cooke. I’m the associate deputy minister with the Attorney General and Ministry Responsible for Housing. I’m here today with my colleague Assistant Deputy Minister Tracy Campbell and my colleagues from B.C. Housing Shayne Ramsay, Patrick Murphy and Raymond Fieltsch. Unfortunately, the deputy minister couldn’t be here today.

I would like to thank all the staff at the Auditor General for all the hard work in conducting the review of B.C. Housing’s response to COVID-19 property purchases.

To give you a quick overview, B.C. Housing purchased nine properties between 2020 and 2021 to house people experiencing homelessness and to protect from the spread of COVID-19. As you’ve heard, the acquisitions totalled $221 million and were secured very, very quickly. The office of the Attorney General found that B.C. Housing met all relevant approvals and policy requirements, and no recommendations have been made.

Key findings. The final cost of the nine purchases, at $221 million, were approved within the Treasury Board budget envelope. B.C. Housing received funding approval from TB to use capital funding from the housing priority initiatives special account. B.C. Housing also received purchase approval from its board of commissioners for the property purchases exceeding the $35 million value in accordance with the board’s terms of reference. The nine properties followed the typical approvals processes, and B.C. Housing ensured that they obtained market value appraisals for all properties.

B.C. Housing’s response. B.C. Housing’s plans to keep the public informed about these purchases were conducted through a range of tactics tailored to each individual situation. B.C. Housing has learned that while hotel purchases are not the ideal method of supporting affordable supportive housing, these acquisitions were needed to provide short-term solutions for the most vulnerable populations and to ensure that we’re able to secure longer-term future social housing.

[8:15 a.m.]

Given the age of the properties that were acquired, it’s been identified that they will require redevelopment in the medium and longer term.

In summary, B.C. Housing met all the approvals and policy requirements for the purchases of the nine properties between 2020 and 2021, and no recommendations were made.

With that, I’d like to open it up for questions.

P. Milobar (Chair): Anyone?

N. Sharma: I mostly have a comment and kind of a question — to congratulate B.C. Housing. From what I read and what the Auditor confirmed, it was very quick work to address a very urgent need but also done in a way that was, I think, 8 percent below the market value — so good value for the properties and following all the due diligence. I can’t imagine that was a small feat. Congratulations to you.

Is there something we learned about how this happened and how you were able to do things so quickly that you are keeping with you when it comes to future purchases?

I guess the second one that I was curious about is the comment you made, Angela, about the fact that these buildings are not a long-term solution for certain housing — why that is and what kind of piece they fit in the future for housing.

A. Cooke: Thank you, MLA Sharma.

I’ll pass it over to Shayne to answer those questions.

S. Ramsay: Great. Thank you for the question, and thank you to the Auditor General and their team. It was an audit that happened during extraordinary circumstances. We really appreciate how you recognized that and worked with our teams.

Hotel and motel purchases. If you look at page 7 in the main report, you’ll see that over the past six years, we have actually purchased hundreds of buildings. They do provide good short- to medium-term solutions, but they’re not purpose-built.

All of the new units that we construct for supportive housing are all purpose-built from the ground up, so they provide a much better housing environment than, typically, hotels and motels. But hotels and motels have the advantage of their own washroom, where many of our single-room-occupancy hotels always have shared washrooms. This provides a more dignified form of housing over the short to medium term.

How we look at these purchases over the longer term is…. Many of them were also assessed for their long-term redevelopment potential. If you noticed, on a few those, when you look at places like the Comfort Inn, the properties that we purchased on Main Street in Vancouver, the one on Hastings in the Patricia Hotel, the Howard Johnson on Granville Street — they all have larger footprints than just the hotels.

A few of those actually had lots next door purchased as part of that so obviously provide some really great long-term redevelopment opportunities. In fact, the Capital City Centre Hotel, which was purchased in May 2021, was already in discussions with the adjacent owner around a long-term redevelopment there.

The benefit of that property is that partnering with a private developer, we’re able to replace all of the units we acquired at the Capital City Centre in a phased redevelopment, so folks won’t have to be displaced. The new supportive housing will be built on the private sector site, and then folks will just simply move across and transition into that. Then we’ll be looking at additional housing opportunities on that site for rental housing and more forms of affordable housing.

P. Milobar (Chair): Thank you for that.

Anyone else?

B. Banman: Thank you very much, and thank you for the report.

I guess you can help clear up…. I’m absolutely thrilled to see that, according to the appraisals, they’re 8.5 percent under market value. I think it serves an urgent need for people that are homeless to get them a place that’s, as you say, dignified and, I would say, safe. I would say that having your bathroom, especially if you are vulnerable, would be better than having to share a bathroom.

I want you to unwrap for the public…. What we hear and what we say is one thing, but the general consensus of the public, or the assumption of the public, is that government is actually overpaying.

[8:20 a.m.]

Can you unfold for us what’s involved in the appraisal and how one gets to the numbers that you did so that somebody that’s going to go through the Hansard reports later can get it in their own heads that this is actually value for money, that it’s good use of taxpayer dollars? It’s a great need. That one alone is…. How do you unpackage how we get to 8.5 percent under market value?

S. Ramsay: The report goes into a bit of detail about the difference between appraised versus assessed value. Maybe I’ll turn it over to Patrick, who will talk about the components that we build into the appraisal, the terms of reference, and then how the appraiser goes about conducting that work.

P. Murphy: We’ve got a pretty standard approach for appraisal, pretty standard instructions for every appraisal. In this case, we were pursuing a very specific product in the market, which was hotel rooms — which wouldn’t be our normal, necessarily the most inexpensive, route to go. Again, because of the need to have washroom facilities within each unit…. We’re talking about a product that in Vancouver can command $300 a night in rent.

I think, in the public’s mind, that’s maybe not what they’re quite understanding. In these select markets, these are high-demand properties. They happen to have a lot of utility to B.C. Housing at the same time. That is taken into consideration in terms of the appraisal — what these properties command in the marketplace.

S. Ramsay: A part of that would be a series of…. Typically, appraisals look at comparables, and then the comparables would be built up as part of that standard approach on each appraisal. That’s how the appraiser gets to a market value for those sites. It’s primarily looking at all other product in the market that may have sold or may be up for sale at that current time.

B. Banman: When you say some of the comparisons, could you give a few examples. What exactly are they comparing it to? I don’t know if it was within this audit spectrum or not, but in my riding, there was a hotel that was purchased. It was converted for exactly the same reason.

It actually was used for housing prior. There were people that had rooms. Some of those rooms were being used for…. I’m struggling for the words exactly what for. But those that would have been on needed assistance were living in some of them already, and some of them were actually for the market.

If you’re talking about one of the ones in my area, would that be in comparison to…? Would a comparable be like a Marriott Hotel that sold, for instance? It’s a hotel, but it’s a total different product.

S. Ramsay: In that particular case, and I don’t know the exact circumstances, the comparables would be like to like. When we’re looking at a motel in say, Penticton, the comparables would be other motels in Penticton. Then there would be adjustments for things like location, age, the quality of the building. All of those would be built in by the appraiser to get to a final appraised value.

B. Banman: In other words, if it’s a two-star hotel or a motel, let’s say, we’re not using a five-star to compare it to.

S. Ramsay: No.

B. Banman: We’re in the same realm of property…. Like you say, condition of the building, what they’re able to charge for room rates, for instance, etc. We’re not comparing the high end to necessarily a lesser quality product. We’re getting comparables within the existing marketplace…

S. Ramsay: That’s correct.

B. Banman: …which I would imagine, in some cases, would be difficult to do. These particular products don’t change hands very often, is my understanding. How old would some of those comparisons be to be able to get at that number?

S. Ramsay: Do you have a sense of that, Patrick?

P. Murphy: Actually, there was quite a bit of activity just leading up to COVID. It actually wasn’t a problem finding comparables that were within a 12-month period, in most of the marketplaces.

[8:25 a.m.]

B. Banman: Okay, good. Thank you.

P. Milobar (Chair): Maybe following up on the appraisal so that I’m clear in my mind. Especially with hotels and older hotel properties, B.C. Housing has acknowledged, essentially, that they’re tear-downs and redevelopment sites. Simply, was the appraised value based on if you were a developer coming in to buy a development site, or was it based on what the books of the hotel said the property was worth because of it being an aged-out hotel?

There’s a big difference, so I’m trying to get a clear sense of what the parameters on the…. It’s one thing to say appraised value, but how was the appraised value actually developed? Was it on the development potential, or was it on the actual operational side of the books?

P. Murphy: It would depend on the property itself. You look for the highest and best use value. In some cases, the building’s a tear-down, and the value’s all in the redevelopment. In other cases, the building is not a tear-down, and probably the most economic thing would be to do a minor renovation and continue the hotel use.

A. Mercier: I’d like to echo comments that have already been made about the quality of the work that B.C. Housing and folks in the Ministry for Housing have done over this ten-year period of time, an obviously very difficult time. These are significant purchases that happened very quickly and clearly demonstrate, I think, very good value for money for the public.

I have a follow-up question on Niki’s questions about redevelopment. You mentioned short-, medium- and long-term potential for the sites. I’m wondering if you can give us a sense of B.C. Housing’s horizon for redevelopments — on average, to the degree that you can speak about it — of the sites.

In particular, how much additional capacity do you think that these sites could add upon redevelopment? What are the thoughts in terms of swing space? I know you talked about one hotel where you’re looking at phased redevelopment. Obviously, there’s going to be a component of needing to house people while it’s being developed.

S. Ramsay: It depends on the properties themselves. I would say most of the purchases that the Auditor General looked at are probably in the neighbourhood of at least eight to ten years of current operation. Capital City Centre provided a different kind of alternative, just because of the developer ownership next door. This developer has also worked in Victoria, and we’ve actually partnered with him, so we have a good relationship with the developer. That one just worked out because of the nature of the contiguous land ownership.

Most of the other ones would be in that eight to ten years. When you look at the hotels purchased over the last six years, a number of those have already undergone redevelopment. In many cases, you see a significant densification. That’s what we would be looking at as also part of the up-front purchase: how much additional density could be added.

P. Milobar (Chair): Any other questions?

Michael.

M. Pickup: If I could make a comment. This audit was a reminder to me that we pick topics, we select topics of things that are important, of things that need to go well that we go into. This one here happened very quickly, but given the size of it, we thought it was important to look at.

I’ll remind folks that once we start on these audits and get working our way through these audits, we don’t throw them out the window if we think everything is going to work out well, if it looks like it’s going to be positive results. We keep through the subject, and we get to the end of the audit.

In this case, it is an excellent audit report. I don’t think this will come up at any of your Trivial Pursuit nights, because I don’t think AG trivia probably is high on the list. But as I roll back over my eight years as Auditor General in different parts of the country, this is probably the first audit I’ve been a part of that hasn’t had recommendations. It is rare to find an audit with no recommendations.

To some of the points that have come up, my hope is that it doesn’t go on a shelf somewhere.For all of the audits we do, people learn from these audits in terms of what didn’t go well, but also, people learn from what went well. There are audit criteria here. It lays out what we did. This is an opportunity, I think.

[8:30 a.m.]

I think some of the questions, Chair, that I’ve heard today alluded to that. There is opportunity here for not only this organization but, I think, other organizations to reflect on some of the things that are in here so that people are adopting best practices, not only learning from things that don’t go well but also learning from things that go well.

I did want to offer that final comment.

P. Milobar (Chair): Okay. Before we close things off, Mike, you had a question.

M. Starchuk: Chair, I’m sorry for delaying it to this point. There was something that was said earlier on.

Michael, I think that that trivia night is Thursday nights. It’s on the ferry on the way home.

Daria, you made a mention in your report that some things are going to get done now, and then we’ll look at it later. There’s a column on page 18 where it shows that some items were just simply deferred until a later date.

You had said, Michael, that there are no recommendations that are inside of here, yet there’s a whole category of a hazardous materials survey. What stands out is that there is one that has been done. I’m curious as to the property at 225 Russell — why it’s the only one that wasn’t deferred.

M. Pickup: I think that question probably should go to B.C. Housing to offer upon.

S. Ramsay: The Russell Street purchase was an interesting one. It was in Victoria. It was an industrial-type building. Through discussions with the city, we ended up acquiring it with the long-term goal to convert that non-residential into residential. Because we had plans to do that renovation quite quickly, we carried out a hazardous study at that point. It was a different kind of acquisition.

Subsequently, because of the need to move folks from Pandora, from Beacon Hill, we actually have converted that space to a temporary shelter. The agreement we have with the owner is that we have the money held in trust. That money will go to convert that building to self-contained suites in the near future.

M. Starchuk: That makes a lot of sense. Great. Thank you.

P. Milobar (Chair): Carl, do you have anything else to add?

C. Fischer: No further comments, Chair. Thank you.

P. Milobar (Chair): Great. Well, thank you so much.

I guess we’re done.

A motion to adjourn.

The committee adjourned at 8:32 a.m.