Time's up for some short-term rentals in B.C., as new housing rules transform scene

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Nancy Paine's short-term rental business is dead in the water.

As co-founder and CEO of Victoria-based Superhost, Paine said she had been at the forefront of the Airbnb revolution for seven years, acting as a “liaison” for homeowners needing help with the logistics of running a listing on the accommodation site.

At the peak of business, her staff managed 65 properties, welcoming thousands of guests from around the world to what Conde Nast Traveller magazine recently rated as the “best city in the world.”

“I have such great relationships with my homeowners,” Paine said.

But Paine said that will all come to an end next spring when British Columbia enacts a law restricting short-term rentals to a homeowner's principal residence. It's among new housing regulations being rolled out over two years, with the government saying it wants to stop short-term rentals “taking away homes people need.”

“I expect business volumes to really plummet as of January and then, basically, I won't have a business as of May 1,” said Paine.

“I'm planning to close my business as of May 1. It's really sad because I've worked really hard … I have 15 staff that I'm going to have to lay off,” she added.

Short-term rental managers like Paine across B.C. are lamenting the demise of their business model, while real estate agents say owners of investment properties are being forced to sell at a loss or risk being unable to pay their mortgage.

Supporters of the policy agree about some of those impacts - the difference is they think it proves the policies are a success.

The government said the suite of reforms gives local governments stronger enforcement tools, and establish the province's role in regulating short-term rentals. Details released Thursday said local governments could “opt out” of the principal-residence requirement annually if their community had a rental vacancy rate of three per cent or more for two consecutive years.

B.C. Minister of Housing Ravi Kahlon said in an interview on Tuesday that the number of former short-term rentals going up for sale in Vancouver, Victoria and Kelowna showed the policies were working.

He said Airbnb property managers should find new jobs.

“We know also that there's a real shortage of property rental managers across the province … and so there are opportunities for those that are looking to stay in that field. But we need the housing for people in British Columbia.”

Asked if he had compassion for owners forced to sell, or short-term rental managers going out of business, Kahlon said other people were “struggling to find a place (to live) because of a shortage of spaces.”

But Paine said that not all the housing that will be forced off Airbnb is suitable for long-term rentals.

She pointed to units in The Janion - a four-storey downtown Victoria building built in 1891 - where some of her clients own units. It was given a “transient zoning” designation ahead of the 1994 Commonwealth Games, when the city was short of space for visitors.

The building was among properties exempted from a 2017 municipal ban on short-term rentals on non-primary-residence units. City of Victoria spokeswoman Colleen Mycroft said buildings already let out short term at the time were allowed to continue operating on a “non-conforming” basis.

She said that in 2023, about 650 business licences were issued for units with “non-conforming” status and there were a total of 1,600 such units in the city.

Mycroft said the new provincial legislation will eliminate the non-conforming exception for buildings like The Janion.

But Paine said the small units in the building aren't ideal for long-term rental.

“You are literally opening up your bed in the living room … and then the beds flip out and is either turned up to a table or a couch,” she said.

Paine said some of her clients aren't bothering to spend about $1,500 renewing their short-term licenses in January.

She said some units are returning to the long-term market. Others will be used occasionally by owners.

Orion Rodgers, another short-term rental property manager in Victoria, manages about 30 properties. He said he also worried his business will be “erased” under the new law.

“And all of my staff, they'll lose their jobs and I'll lose my business, which was a lawful business to operate,” said Rodgers, who has seven employees.

Rodgers is also a spokesman for the Property Rights Association of B.C., a group representing about 2,500 property owners that he said was “born out of this legislation.”

He said members are mostly middle-class, and aren't “sitting on the beach … drinking margaritas.”

Rodgers said the government was using the timeline for the new legislation to “manipulate” owners into renting them out long term or put them up for sale.

“People will face heavy losses … and the people that are going to buy them are not there. No one's there yet because the interest rates are so high and the bar for entry to purchase is so high,” said Rodgers.

The group had sent letters to Kahlon and municipalities in the hope of having their views reflected, but haven't heard back.

In Kelowna, Amanda Van Der Lee's company, How to Host Property Management and Design, manages properties, gives advice on interior design and provides other resources for short-term rental hosts.

She said most of her clients purchased condos in Kelowna to get into the real estate market and if forced to convert them to long-term rentals, they would have no or negative cash flow.

“For someone's mortgage to go up $1,000 to $1,500 a month and not be able to get the amount of rental income on a monthly basis, if they go long term … it would force a sale and properties aren't selling right now,” said Van Der Lee. “There are so many properties that are hitting the market.”

Van Der Lee said owners are having their rights stripped away.

“God forbid people buy a vacation home in Kelowna and they're able to subsidize some of the costs of that home by renting it out. Like, when did that become such a crime?” asked Van Der Lee.

Tsur Somerville, associate professor with UBC's Sauder School of Business, agreed the new rules are going to make some people suffer, but he has less compassion for investors.

“You invested in the unit, there is risk in real estate and this was part of the risk. Nobody guaranteed an investor with the return,” said Somerville.

Somerville said places including Vancouver and Toronto have raging housing crises and the notion of using a unit as a hotel instead of long-term rental housing strikes him as “very, very problematic.”

A recent McGill University report, prepared by David Wachsmuth, a professor in the School of Urban Planning, said there was an average of 28,510 short-term rental listings active each day in B.C. in June 2023, a year-on-year increase of almost 18 per cent.

The report said short-term rentals were taking 16,810 units off the province's long-term market, 19 per cent up on the year before.

“The COVID pandemic caused a massive decline in STR activity, but as of 2022 growth is strong across all regions of the province, and B.C.'s STR market is now at an all-time high,” said the report.

“If the province's STR market remains on its current trajectory, we expect STR-induced housing loss to increase 15.6 per cent to 19,400 by summer 2024, implying a further $23 increase in average monthly rents in medium and large cities in the province,” the report continued.

Nathan Rotman, policy lead for Airbnb in Canada, said the report isn't “credible” and was paid for by the B.C. Hotel Association “with an interest in spreading negative information” about short-term rental.

Rotman said Airbnb doesn't oppose regulation and is willing to work with the province on implementation, but the new legislation goes “a little bit too far” and it will not “alleviate the province's housing crisis.”

“It's going to make travel less affordable for one million British Columbians across the province while reducing the income for some short-term rental hosts,“ Rotman said in an interview last week.

Wachsmuth couldn't be reached for comment, but Andy Yan, director of the City Program at Simon Fraser University, said the report was solid and was “leading public policy in Canada.”

Yan said when the concept of short-term rental began, it was “casual” - it could be someone's spare room or an air mattress. Then professional players entered the industry and started to distort the rental market, he said.

There have been other problems - Yan described a “horrible” case in which a man described taking over strata councils to maintain the right for Airbnb listings in certain downtown Vancouver buildings.

He said the new technology represented by Airbnb's online platform “affects our economy and our housing market.”

A Desjardins report released last week seems to agree. It said short-term rentals likely contributed to the housing affordability crisis in Canada.

The report said the proliferation of short-term rentals on platforms such as Airbnb and Vrbo had a significant effect on the affordability and availability of homes, reducing the number of units for long-term rentals and resale.

Kahlon said the report “confirms” the need to “take action.”

He said the government was now working with local governments on how to implement the new rules.

He said by later next year, the province would have a full registry of short-term rental hosts in B.C., and they would be required to ensure their data is correct.

Kahlon said owners who broke the rules would face fines of up to $3,000 per day and companies in violation would also be punished.

Paine said for now she is trying to keep her team “upbeat and positive” and they would be working throughout the holiday season.

“We're gonna have a really fun Christmas party,” said Paine.

“I told them it's business as usual until May because I want people to still be engaged in their jobs.”

This report by The Canadian Press was first published Dec. 8, 2023.