Well I thought I'd tried this already but it worked very simply.

Are Letters of Assurance required?
=IF(F8="Calgary","No",IF(F8="Vancouver","Yes",""))
And then I applied the data LIST validation to the cell as normal.

It allows me to choose from the list (for any other city) when it doesn't choose automatically and accepts my choices when I need to.

Also the cell that references this cell (and repeats whether or not an inspection is required based on this first answer) understands the blank, the yes or the no. So I'm golden!!

Thanks for your help anyways!