The owner occupant term is not "abusive" as you put it.

Each time I more vehemently denied it than the first.  

My concern is whether the city could deny permits for these modifications, such as removing walls or converting a garage, or if they are mainly just concerned with safety and habitability.

Proper denied me already.

@Marita Jojo, clearly I don't know this specific deal to confirm or deny any of your assumptions.  

People with good credit scores can even be denied.

I tried getting an umbrella policy to protect myself in case something happens but was denied since not everyone in my household is under my auto insurance. 

I can legally deny them or other business.

Other group homes for abused, veterans, and mental challenged usually have less opposition. 

Obviously if the value is low that's one thing, but what if I pay and they deny me for some other reason?