THE RENEWAL OF TRUST IN
RESIDENTIAL CONSTRUCTION
Commission of Inquiry into the Quality of
Condominium Construction in British Columbia
Submitted to the Lieutenant-Governor in Council
Government of British Columbia
by Dave Barrett, Commissioner
June 1998


Chapter Three: Plan for Action Continued

APPENDIX THREE

Methodology for Estimating the Costs Related to Residential Repairs

The magnitude of the problem has been the subject of much speculation. This appendix reviews a variety of estimates and provides the Commission's analysis of the problem and estimate of its magnitude.

In 1996, CMHC published A Survey of Building Envelope Failures in the Coastal Climate of British Columbia which was prepared by Vancouver-based consulting engineers. Forty-six buildings were studied, 37 of which had experienced building envelope performance problems, while nine had experienced no problems. Often, the results of this study are used to extrapolate estimates regarding the magnitude of the problem in relation to the overall stock of buildings. The study, however, clearly states that this is an inappropriate use of its results.

"It should be emphasized that the conclusions drawn from this study are not necessarily representative of the general population of buildings constructed in the Lower Mainland over the past 10 years. The buildings chosen for the study represent a sample of buildings which experienced envelope performance problems and which had been investigated previously by the study team members. Extrapolating the results to reach similar conclusions regarding the overall population of buildings is not statistically valid. For example, it is not possible to address issues related to what water problem exist in the general population based on the results of this study".

The following table, which comes from the CMHC report, is the information summarizing the cost of repairs for different types of cladding.

Cost of Repairing Problems
CladdingCountMean cost/unitMedian cost/unitStandard Deviation
ALL37$7,153$3,333$10,918
STUCCO28$8,552$5,100$12,208
VINYL5$1,818$1,417$ 1,148
WOOD8$4,635$4,666$ 3,178

Source: A Survey of Building Envelope Failures in the Coastal Climate of British Columbia.

In its submission, the Canadian Home Builders Association of British Columbia estimates the repair costs for the province in the range of $200 million to $250 million.

"According to CMHC statistics and other sources, it would appear that approximately 35,000 low-rise multi-family units were built in the Vancouver Census Area between 1990 and 1997 ... If one assumes that the average repair bill is up to $10,000 per unit, as identified in a definitive piece of research undertaken by CMHC, and further assumes a worst case scenario that 50% of the units will leak, the repair costs are in the magnitude of $175 million in Greater Vancouver. Assuming a comparable rate in other climatic areas of the Province, the repair costs are probably in the range of $200 to $250 million. "

The above estimate, although it assumes a 50% worst-case-leak scenario, may be underestimated, due to some high-rise buildings with similar problems. As well, some wood-frame buildings were constructed between l983-1990. The $10,000 per unit figure from CMHC is not definitive nor representative, as explained above.

It should also be noted that, in a letter from the Homebuilders' Association to the Ministry of Municipal Affairs (April 8, 1998), it was estimated that 13,100 units require repairs totaling $262 million. The Homebuilders' Association assumed that projects most at risk are two-to-four storey, wood-frame common entrance units built in Vancouver, Victoria, and Nanaimo in the last ten years. The Association suggests that there are 26,200 units in this group and -- assuming worst-case scenario 50 percent of these units needing repair, and that the average cost of repair is $20,000 -- they arrive at $262 million. It is unclear why the Association changed its average cost of repair from $20,000 per unit in its earlier estimate to $10,000 per unit in their submission to this inquiry.

Gerry Fanaken, of Vancouver Condominium Services Ltd., reported to the Commission that his firm manages 13,000 units in the Lower Mainland. These have already paid out approximately $50 million in repairs.

David Ricketts, a building science specialist with RDH Building Engineering Ltd., and one of the authors of the 1996 CMHC Report, has performed hundreds of tests on exterior condo walls, and estimated during the hearings that "greater than 50 percent and less than 100 percent', of Lower Mainland condos, have problems.

As well, a number of individual condo owners and strata councils gave testimony regarding their repair bills and special levies. The Commission analyzed the details of the strata council submissions and created a data base. Forty strata councils submitted sufficient information to build a consistent data base. The average per-unit cost of repairs was $23,300. The total amount spent on repairs, to date, plus future estimated costs, was $30,639,000, or an average of $766,000 per complex.

There is no question that the phenomenon of leaking condos in the lower mainland is pervasive and significant. However, because of a lack of dependable information on its magnitude, the Commission requested use of CMHC's extensive residential housing data base. CMHC was extremely helpful in this regard. The information included the dwelling type (single, semi detached, row, and apartment); the intended market (owner, rental, condo, or co-op); the number of stories (1 - 4 and 5 plus); and the municipality during 1983 to 1997.

Buildings four stories or less are predominantly wood frame; whereas, buildings over five stories are concrete. The following, developed in consultation with CMHC analysts, provide the most extensive compilation of housing data and, therefore, the most reliable approximation of housing at risk. This data was provided on an annual basis by municipality. The aggregated results are provided below.

Residential Completions
BC
1983-1997
Units
Apt. <5 StoriesCondo <5 StoriesApt >5 StoriesCondo > 5 StoriesOtherTotal
28,61369,3729,32429,398270,933407,640

Source: CMHC, Urban Centres

The next step was to identify groupings, by type of structure, into reasonable time frames. The Commission decided, after discussion with RDH Engineering Ltd., that the period 1983-1987 has fewer structures at risk than during the last decade, because of different design features and slower economic activity. A risk rating was determined for each of the following groupings of tenure type: four stories and less, over five stories, and all other residential structures.

Estimation of Risk Weighting
1983-1997
Units and Structures
  1988-19971983-1987
 Scenario 1Scenario 2Scenario 1Scenario 2
Condo 4 storey or <50%75%30%50%
Condo 5 storey or >30%50%15%30%
Apt 4 storey or <50%75%30%50%
Apt 5 storey or >30%50%15%30%

Scenario 1 assumes that 50 percent of wood frame and 30 percent of high-rise buildings are at risk for the years 1988-1997; while 30 percent of wood frame and 15 percent of high-rise are at risk for 1983-1987.

Scenario 2 assumes that 75 percent of wood frame and 50 percent of high-rise are at risk for 1988-1997; while 50 percent of wood frame and 30 percent of high-rise are at risk for 1983-1998.

The per unit repair costs are estimated to be $15,000 for wood frame while high-rise is estimated to cost $10,000 per unit. These estimated costs are a result of the range of analysis that has been done to date.

When this risk weighting is applied, 90 percent of the stock of multi-family units (which allows for the difference in risk for buildings built outside the coastal climate), the repair cost estimates are as follows:

Estimated Repair Costs per Unit
$millions
  Scenario 1Scenario 2 
Type of Building1988-19971983-19871988-19971983-1987Range
Condo <5 stories$403$19$605$39$422 - $644
Condo >5 stories$ 73$3$122$ 6$ 76 - $128
Condo Total$476$ 22$727$ 45$498 - $772
Apt. <5 stories$120$22$180$44$144 - $224
Apt. >5 stories$ 8$ 9$ 27$ 15$ 17 - $ 42
Apt. Total$128$ 31$207$ 59$159 - $266
Grand Total$604$53$934$104$657 - 1,038

The estimated cost of the repairs necessary in multi-family residential construction is between $650 million to $1,000 million. Since rental housing is owned by primarily one owner, and the costs to repair will be bome as a business expense, for purposes of estimating the impact on individuals, and strata councils, the estimated cost to repair rests in the range of $500 - $800 million.

The analysis in Chapter Three which examines the financial support from government and industry has assumed the $500 - $800 million by taking the mid-range of $650 million.

<-- Previous | Contents | Next -->


This electronic version is for informational purposes only.
The printed version remains the official version.

Copyright © 1998: Government of the Province of British Columbia