by Darrin DeRoches O

Student Housing

by Darrin DeRoches October 14 - 20, 2010

I had an interesting day taking Toronto investors on a tour of our fair city.  They are considering investing in student housing and we started out viewing student houses in the $200,000 range and ended up looking at homes in the $350,000 range – big difference.     Student housing around the McMaster area has grown as the school has grown. McMaster students are mostly from outside Hamilton and need affordable, safe student housing. Every third or fourth house is either a student rental or being converted into one.  The investors asked about the city zoning and legalities about all these homes.  Answering to those questions was hard, since the city seems to be gearing up to start cracking down on landlords while the school has a shortage of places for the students to live.  The basic homes need smoke detectors and windows in the basement bedrooms, but who is really stopping landlords from jamming seven, 10, or 11 students into three bedroom houses renovated to double or triple their capacities?  The city is always after the landlords to clean up their yards and clear their snow, but what limit is their when the porch, dining room, den and basement add five bedrooms to a three bedroom house?  Eight students are living in a three bedroom house.  They can afford it, the landlord is making a small profit, and the student needs a place to live.  Where is the limit, and where does the city stand on these issues?      Student houses are going for $50,000 to $60,000 a room, so a three bedroom house converted into a six bedroom house will go from the low $200,000s to $350,000.  Seems crazy, but if you spend $20,000 to convert the basement and the dining room into bedrooms which rent for about $400 each a month, the home now brings in $2400 to $2800 every month.  When you do the math, the house can now sell for $350,000 since the $2800 pays everything and brings in a monthly profit. But is it legal?     I am totally behind the landlords in providing the affordable space, but when will the city step in and enforce the standards?  We viewed a house where the description stated that there was “a separate basement apartment,” but it had no windows – none.  My investors loved the house and I had to point out the legalities and the safety issues.  The owners were asking near $350,000, and the house wasn’t even close to code. The city is starting to hire more staff to write tickets and enforce bylaws, which seems like a money grab. They really should be working with the landlords to bring the homes to a level which is safe and financially viable.  The zoning requirements, red tape and scare tactics of the city are hurting student housing instead of making it safe and affordable for the student.   V                         Darrin DeRoches is a local real estate and mortgage broker. He can be reached to answer questions, comments or stories about real estate experiences through this weekly column at mail@uniquerealty.ca.