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Owners struggle to sell short-term rentals as B.C. sets new rules

by Ibrahim Daair, Municipal World
in Housing, Management, Planning
January, 2024

Owners of short-term micro-units in B.C.’s largest cities are struggling to find buyers for their properties amid an increasingly sluggish market. Property owners in the province are offloading their short-term rentals in the wake of new regulations that are set to come into effect later this year.

Short-term rental properties, rented through sites like Airbnb and Vrbo, have become commonplace in Canada’s largest cities over the years. Those include places like micro-units – small apartments of a couple hundred square feet designed for the short-term rental market.

New Legislation

This May, the B.C. government’s new Short-Term Rental Accommodations Act will come into effect. The legislation is aimed at regulating the short-term rental industry. Starting May 1, short-term rentals will be limited to the host’s principal residence plus one secondary suite. In addition, hosts will have to display a valid business licence number on their listing in areas where one is required by the local government.

Transformative Incrementalism: A journey to sustainability

“The short-term rental market is creating serious challenges in B.C. and around the world,” said Ravi Kahlon, B.C. Minister of Housing. “The legislation is comprehensive and designed to target areas with high housing needs.”

The limitations will apply in all B.C. municipalities with a population over 100,000 people. The provincial legislation will act as a minimum requirement, meaning individual municipalities are free to enact stricter regulations.

By early 2025, the provincial government says it will establish a registry of short-term rental properties to ensure hosts and platforms are following the rules. Hosts will be required to include a provincial registration number on their listing. Platforms will be required to validate registration numbers on host listings against the province’s registry data.

Experts signalled that B.C.’s move is a step in the right direction. The legislation “sets a new Canadian standard that the rest of the country should be emulating,” said David Wachsmuth. As Canada Research Chair in Urban Governance at McGill University, Wachsmuth studies the impact of short-term rentals.

Municipal leaders also signalled their approval, with the mayors of Vancouver, Kelowna, and Tofino welcoming the news.

“These proposed changes lay a strong foundation for municipalities to build upon through our own bylaws and regulations, so that current and future residents will be able to quickly access more long-term rentals and housing solutions,” said Kelowna Mayor Tom Dyas.

Impact on Long-term Rental Market

Cities across the province have taken note of growing frustration more recently, taking steps to curb the number of short-term rentals. About 30 municipalities, including Vancouver, Victoria, and Kelowna, have introduced bylaws and licence fees to regulate the short-term rental market.

Internationally, cities with big tourism industries have also been taking action to regulate short-term rentals.

“This is also quite the global issue,” said Andy Yan, director of the City Program at Simon Fraser University. “You see various jurisdictions around the world – some even stricter in terms of their legislation.”

From July 2024, homeowners in the Austrian capital Vienna will only be allowed to rent out their homes for a maximum of 90 days per year. In Paris, the limit is 120 days. London, Amsterdam, Rome, Florence, and Berlin are among other European cities to introduce restrictions of short-term rentals.

In 2021, Barcelona became the first European city to ban short-term private room rentals, though renting out an entire property is still allowed. Hosts there can only rent out a room for a maximum of 31 days.

A report from last summer found that short-term rentals have increased the amount of rent B.C. tenants are paying. The report, authored by Wachsmuth and commissioned by the B.C. Hotel Association, found that between 2017 and 2019 short-term rentals increased average rents in the province by just under 20 per cent. It also stated that in June 2023 short-term rentals were taking 16,810 housing units off of B.C.’s long-term market. This was a 19.1 per cent increase compared to June 2022.

The report recommended that B.C. consider a principal-residence requirement and develop a mandatory registration system to regulate the industry.

“Anyone who’s looking for an affordable place to live knows how hard it is, and short-term rentals are making it even more challenging,” said Premier David Eby. “The number of short-term rentals in B.C. has ballooned in recent years, removing thousands of long-term homes from the market.”

Eby said the province was taking action to rein in “profit-driven mini-hotel operators” and creating enforcement tools to regulate the market.

A Comprehensive Review

In 2019, Wachsmuth published a comprehensive review of short-term rentals In Canada. The review analyzed Airbnb rentals across Canada. If found that around 46 per cent of Airbnb listings were in Montreal, Toronto, and Vancouver. Almost two thirds (71 per cent) of Airbnb listings were in one of Canada’s census metropolitan areas. These are metropolitan regions with populations above 100,000.

Yan said the concern isn’t about the “casual Airbnber” who wants to supplement their income by renting out their extra space, but rather, how the short-term industry is taking away from rental stock.

Wachsmuth’s review also found that a relatively smaller share of short-term rental operators was making money in the industry.

“In 2018, hosts across the country earned $1.8 billion, which was a 40 per cent increase in revenue over the previous year, despite the fact that the number of active listings only increased by 25 per cent,” the review states. “Revenue is highly concentrated amongst a small number of hosts at all scales of analysis.”

The review concluded that the short-term rental industry had likely “removed approximately 31,100 units from Canada’s long-term rental markets.”

Dissenting Voices on Short-Term Rentals

However, not everyone agrees with those findings.

Another report from the Conference Board of Canada suggests that short-term rentals haven’t played a significant role in rising rental costs. The report from last October focused on the impact of rentals provided through Airbnb.

The study said that provincial legislation and municipal bylaws brought in to regulate short-term rentals had reduced the number of Airbnbs but hadn’t reduced rental costs.

“Policies introduced by municipalities and provinces regulating Airbnb activity have not been successful in reducing rents, though they were associated with a significant reduction in Airbnb activity,” the report stated. The study went on to say, “Airbnb activity, at its current levels, has not resulted in an economically meaningful increase in rents across 19 of the largest Canadian cities.”

However, Yan said it was important to bear in mind that Canada’s cities are very different from one another. Rather than taking an overall view, it is important to zero-in on how short-term rentals are impacting regions with the most activity like Vancouver or Montreal.

“In Canada we have very housing situations and visitor economies across the country,” Yan said. “The Airbnb effect in Vancouver is going to be very different than it is in say Saskatoon.”

The Conference Board’s report acknowledged that places with more short-term rentals were likely to seem a bigger impact. “Neighbourhoods that have higher concentrations of Airbnb tend to also have higher rents,” it stated. The report also found that in Quebec “Airbnb activity has put some upward pressure on rents.”

Yan added that municipalities needed to also consider the impact beyond a squeeze on rental units. Municipalities need to ensure that large corporations that benefit from operating in their cities also pay their fair share of local taxes.

“The larger picture in all this is also understanding what municipalities do with the emergence of the platform economies,” Yan said. From ride-hailing to food delivery and short-term rentals, online platforms and their services have become ubiquitous in our cities.

“What are their obligations to help pay for infrastructure?” Yan said. “Do they end up being free riders?”  MW

✯ Municipal World Executive and Essentials Plus Members: You might also be interested in Thomas Sanderson’s article: Managing gentle density and defining what is “minor”.

Ibrahim Daair is Staff Writer at Municipal World.

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