B.C.’s new short-term rental rules won’t favour homeowners struggling to pay mortgages
When Nick Reynolds and his wife bought a one-bedroom apartment near Victoria’s Chinatown a year ago, they thought they’d found a way to make that city’s out-of-reach housing market work for them at last.
They spent just under $600,000 and another $40,000 renovating and furnishing it. They put the unit on Airbnb, calculating the revenue would give them enough income to pay for a mortgage they’d never be able to afford otherwise. They would continue to rent a modest apartment elsewhere for much less and eventually, they might live in the unit or accumulate enough equity to buy elsewhere.
“We’re quite keen on getting into the housing market and the market was on a long-term trajectory of going higher. The only way we could really afford it is to run it as a business,” said Mr. Reynolds, a professional forester.
Mr. Reynolds and his wife, along with thousands of others in the province, are now caught in the local version of a fierce international debate over the impact of short-term rentals and whether restrictions on them are part of the solution to a housing crisis.
At the start of the month, B.C.’s new rules limiting short-term rentals to a principal residence and requiring everyone to register on a provincial platform went into effect. A short-term rental was defined as any property that rents for less than 90 days.
Premier David Eby and Housing Minister Ravi Kahlon have been adamant the new law will make a noticeable improvement in the province’s housing situation. The move has support among those who blame short-term rentals for turning apartment buildings and detached-house neighbourhoods into mini-hotel zones.
“The effect of short-term rental apps like Airbnb, Vrbo and others has been the loss of thousands of long-term rental homes in the midst of a housing crisis, driving up the cost of housing,” Mr. Eby said in a news release touting the May 1 rule changes.
But for people like Mr. Reynolds and his wife, the new regulations have cut off an avenue to get into over-priced markets in service to a policy with an uncertain outcome.
A host of operators, realtors and representatives from vacation-rental platforms argue the benefits of restricting short-term rentals have been exaggerated and misrepresented.
“These short-term rentals will not increase housing affordability,” says Orion Rodgers, executive director of the newly formed West Coast Association for Property Rights, which is going to court to get an injunction to halt the rules and to challenge whether the province has the authority to create the new law.
Scholarly research in Europe, North America and Australia has shown mixed results in whether clamping down on vacation rentals results in lower rents or improved rental availability.
Several studies note regulations can lower home-sale prices. They also indicate the regulations can reduce the amount of “professionalization,” whereby a large portfolio of short-term rentals is run by commercial operators as a full-time business, rather than single units owned by people like Mr. Reynolds.
A Globe and Mail search in 25 academic-journal studies or thesis papers on the topic published since 2020 shows that conclusions are mixed on what happens when a city or higher order of government puts in new restrictions.
A study of 12 European cities done by two British professors, published by Britain-based Property Research Trust in May, 2021, found that based on a growing body of research, growth in short-term rentals produced “a decrease in long-term rentals, an increase in prices and displacement.”
Those effects are likely to appear to be small when looked at city-wide but are significant in the neighbourhoods where short-term rentals are predominantly located, the study noted.
But a study from Australia, published in the Academy of Marketing Studies in 2022, found that new regulations resulted in lowered investment in new residential projects.
An article by a University of New Orleans professor in Cities journal examining restrictions in that city, one of the first to put them in, concluded that the explosive growth of owners converting residences to short-term rentals was slowed by the regulations. But growth later resumed because short-term rentals weren’t banned entirely. New listings started to proliferate in the neighbourhoods adjacent to the popular French Quarter once vacation rentals were limited there.
Other studies, in Hawaii, Europe, New York and Washington published between 2020 and 2023, showed new regulations led to higher hotel prices and greater hotel-room occupancy, especially for lower-end establishments.
Similarly, recent news stories about New York’s restrictions have noted hotel prices have skyrocketed in the months after strict new regulations on short-term rentals were instituted last September, while rental rates continue to increase and vacancy rates have remained unchanged.
Concerns over skyrocketing hotel costs are among the things Penticton Mayor Julius Bloomfield is worried about. He said he ended up paying $1,000 a night for a hotel room in Vancouver this fall.
“It’s obvious they’re taking advantage,” said the mayor.
He tried unsuccessfully to have some zones in his city designated as a tourist resort. Cities with populations under 10,000 with such designations – Osoyoos and Whistler among them – are exempt from the new rules.
In Victoria, where some short-term rentals had been operating for years with the explicit approval of the city, Mr. Reynolds is left to ponder what to do next.
He is awaiting the outcome of the lawsuit and is angry the provincial government appears to have examined only some of the research into the impact of short-term rentals on local rents.
“There is a measured way of regulating a sector. Yes, it has to be regulated and capped. But in a thoughtful way.”
This article was first reported by The Globe and Mail
