(This article is sponsored by the B.C. Real Estate Association.)

Strata Insurance:

The Lower Mainland and other areas in B.C. have presented affordability challenges for years. Rent and real estate prices climb higher year over year, while food, car insurance, and the array of sundry life expenses creep ever-upward. Factored against low per-capita wages and a steady influx of new residents drawn from across the country and around the world, British Columbia, and in particular Vancouver, presents clear economic challenges for residents.

These challenges have only worsened during the COVID-19 pandemic. Layoffs, job loss, displaced office environments, lost opportunity, and economic uncertainty abounds. At the same time, the rapid rise of strata insurance has caused further hardship by increasing monthly strata fees for many. For people on fixed or limited incomes, and those facing sudden unexpected unemployment, the addition of hundreds of dollars out of their monthly housing budget can be simply too much to bear. Worse still, this is a complicated issue that could take years to fix.

As we head into this provincial election, there are plenty of issues for politicians on all sides to debate. The British Columbia Real Estate Association (BCREA) expects housing affordability to feature as an election issue. With more than 30,000 stratas in B.C. and approximately 1.5 million people living in these units, strata insurance should be part of the conversation.

This is an issue that effects the living budget of thousands of British Columbians and many B.C. residents and housing advocates not only want, but need a quick fix to this situation. Public dialogue often results in calls for government intervention.

Unfortunately, this is a significantly complex issue and there’s no quick fix. It will take detailed research, and a multi-pronged approach to make strata insurance more easily available and to drive prices back down toward a more affordable level. For example, data from the insurance industry suggests that while the total number of water-related claims has remained relatively stable from 2017 to 2019, the average value per claim has increased dramatically, from just over $5,000 to over $15,000. Coupled with a reduction in the number of “players” in the market (insurance companies offering policies to strata corporations) this results in less competition and higher premiums.

Major increases to strata insurance first appeared in fall 2019. The issue was further complicated and slowed by COVID-19 as everything was sidelined with an emergency on top of an emergency. To its credit, the provincial government moved quickly to gather industry stakeholders, and set about identifying the causes of the problem. The provincial government has done significant research into the issue and made a series of interventions into insurance-industry commission structures and client notification practices as first steps.

The government continues to research the root causes of rising strata insurance costs. At this point, there appear to be several core issues, including fewer insurers providing their services to B.C. strata corporations, possibly a high percentage of water damage claims in buildings across B.C., and poorly maintained buildings.

Finding solutions to these challenges won’t be easy and it won’t happen quickly. But we believe the best way to do so is to work together, and that’s what we expect from the next government. Bring stakeholders together to understand the causes and then come up with ways to deal with the current high strata insurance prices and try to make sure they don’t happen again.

Many buildings are made up of residents whose primary concern is keeping their strata fees low. This is a common theme and a logical one in a province with high living costs and many residents on low or fixed incomes. However, it still falls to a well-run strata to balance the needs of residents against the ongoing maintenance of the building. As buildings age, ongoing investment, capital expenditures and planned maintenance are critical to the long-term viability of the structure.

Failure to make prudent investment in critical infrastructure such as water pipes and roofing can lead to costly repairs, which transfers the financial stress to the insurers. While this certainly hasn’t been the sole contributing factor to the sudden increase in strata insurance, it is a likely contributor.

While there are multiple contributing factors at play here, let’s give some consideration to who makes up stratas across B.C. This is volunteer work made up of building residents or owners of varied backgrounds, many of whom have little to no business, financial or building maintenance experience. Stratas are often stocked by well meaning residents who are willing to donate their time and efforts to assure their building, or their property investment is being well run. Yet with such responsibility sitting upon their shoulders, it would be logical that in-depth oversight and training for these people should be firmly in place. While there is a variety of services available and on offer from the Condominium Home Owners Association of B.C. (CHOA), these services are not mandatory.

Serving on a strata council requires financial acumen, experience, and skill. Without equipping strata council members across the province with these skills, it’s going to be largely impossible to ensure that buildings are better run in the future. Mandatory education for strata council members is necessary to significantly elevate knowledge levels and best practices.

We’re not suggesting a significant burden for those who already give up their free time to manage their buildings. Instead, a streamlined mandatory education process could be administered online, cost free and kept to a focused minimum of several hours.

In addition to education, the other area that requires strong governmental intervention is the oversight and regulation of the Strata Property Act. The Civil Resolution Tribunal handles disputes related to the act, but there’s no dedicated oversight body within British Columbia to monitor strata practices and ensure buildings are being run well.
In comparison, the Condominium Authority of Ontario provides detailed oversight of stratas across that province. It offers training, dispute resolution and other services to help improve strata living. It’s a much stronger environment in terms of consumer protection and it’s one that British Columbia should emulate. While there is cost and infrastructure involved here for government, it’s a necessary step to ensure better practices across the province. It is worthy of note that we are not hearing of issues relating to strata insurance cost increases in Ontario.

As the election dialogue heats up in coming days, the issues of mandatory strata education and a new regulatory oversight structure are topics that we all need to ask politicians about as part of a positive outcome in ensuring affordable strata insurance.