British Columbia cages Airbnb, as speculators cry foul

Some experts say a legal challenge is on the horizon, but renters and advocates are cheering for a crackdown
New condos and apartments being built in Victoria, British Columbia.

This reporting is part of the Investigating Airbnb project, a crowdfunded, multi-outlet effort to track the impact of short-term rentals on the housing crisis in Canada. You can donate now to fund more journalism like this.

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There’s a new sheriff in town out west, and it might just be high noon for Airbnb.

Last week, British Columbia’s NDP government introduced the toughest legislation yet in Canada to address the problem of short-term rentals.

Although cities and provinces across the country have spent the past year scrambling to pass new laws and regulations in the wake of a deadly fire that exposed the downside of unregulated hotels, the Short Term Rental Accommodations Act goes farther.

That already has property speculators bemoaning their loss of revenue, but renters and advocates are cheering for the new rules, calling them an overdue step to address the impact of those unlicensed, and often illegal, rental operations on the housing crisis.

‘The legislation is unprecedented’

The new rules, which won’t take effect until next year, will still allow you to rent a room on Airbnb.

But by May 1, 2024 the province will have restricted rentals to owners’ primary residences, secondary suites, or carriage houses in major B.C. cities — and contraventions could lead to hefty $3,000-a-day fines.

Resort communities, and communities of less than 10,000 with over 3 per cent vacancy rate, do not have to opt into the province’s legislation. Though, most resort communities, such as Tofino and Whistler have had their own short term rental bylaws for years.

Within a week of the B.C. government's new Short Term Rental Accommodations Act, investors, scholars, housing advocates, lawyers, tech platforms, and politicians have all come out either in favour of the policy, or opposing it.

B.C. Premier David Eby

Last Tuesday, the opposition’s housing minister, Karin Kilpatrick, introduced four amendments to act, including exempting short term rental units for medical travel and events such as the FIFA World Cup.

B.C.’s former Deputy Premier and Housing Minister, Richard Coleman, echoed the same sentiment a week earlier in regards to patients needing short term rentals while receiving cancer treatments in bigger cities. Meanwhile, B.C. Cancer offers travel and lodging for that exact reason.

It’s a policy that does not favour investors (a fact that has not garnered much sympathy online nor does it favour short term rental platforms, like Airbnb, whose stock is plummeting. The regulations and restrictions do not benefit people who have additional or multiple investment properties and profit off the short term rental market. And investors’ objections — that they stand to lose a lot more than they bargained for — have been covered extensively by the media.)

By May 1, investors will instead have the opportunity to rent out their suites to tenants looking for long-term homes or rentals, rather than reserve them for the, albeit more profitable, short term rental market. Already, a handful of listings in Airbnb “ghost hotels” in Victoria have hit the housing market, and at an affordable price.

Ultimately, this is what B.C.’s Housing Minister Ravi Kahlon had in mind with the newest legislation. “Homes are for living in — they’re not commodities for speculation and profit,” Kahlon tweeted last week after the announcement.

The legislation is unprecedented. Kahlon announced at the press conference that he's not aware of any jurisdictions in North America, or even around the world, that have set a principal residence requirement like this. And it’s a policy that Mayors across B.C. expressed support for. “We welcome the certainty that comes with a provincewide plan to move more units into long-term homes,” said Victoria Mayor Marianne Alto.

However critics say they’re not so certain the move will bring more units to the market. But the move is optimistic. Del Wilder, a University of Victoria law student, renter, and housing advocate who runs multiple online forums dedicated to fair housing practices with more than 10,000 members, says the newest legislation is much better than what she expected. “It’s so much more comprehensive — especially [for a government] that’s always favoured commercial investment in housing.”

On the other hand, investors, business owners, homeowners, and, unsurprisingly, short term rental platforms, like Airbnb, have scoffed and criticized the B.C. government’s naivety that it will contribute positively to its housing crisis.

“[T]he proposed legislation won’t alleviate the province’s housing concerns,” says Airbnb Canada policy manager Alex Howell.

It’s no surprise that B.C. has introduced a more robust short term rental legislation than what municipalities were already implementing themselves. The writing has been on the wall for months.

Across North America, cities and municipalities have been taking more steps to restrict short term rentals in an attempt by lawmakers to stabilize a housing market where renters have often been the sacrificial lamb in a predatory market with skyrocketing rents, and a lack of affordable housing options.

Lindsay Tedds, a professor at the University of Calgary.

The province’s policy intends to curb the proliferation of short term rentals, and return “thousands of homes to the market,” said Premier David Eby upon its announcement.

If Canada follows suit — which it considered last week — it could bring more than 31,000 homes back to the Canadian market, according to a McGill University study (which was funded by the B.C. Hotel Association). But it may not lower rental prices, a study from the Conference Board of Canada, which was funded by Airbnb, found.

Lindsay Tedds, a professor at the University of Calgary, who penned a comprehensive study of short term rentals in Canada last March, has been a vocal critic of B.C.’s short term rental legislation. She told Ricochet that a blanket policy ignores the nuances of what communities need, and misleads the public into thinking more is being done for the housing crisis.

“The assumption is that with short term rentals—as soon as they’re banned— they’ll immediately flood onto the long term rental market,” she says. “What needs to happen is to spend billions of dollars on more housing.”

This March, the B.C. government pledged $4.2 billion towards more affordable and supportive housing — but unfortunately, the time it takes to build more homes, cannot keep up with the demand for immediate affordable housing.

The short term rental act appears to be one avenue the government is taking to fast-track way more housing supply — even if it is only marginal. It’s an uncharacteristic move, like Wilder says, for a government that only recently allowed landlords to increase rents by 3.5 per cent in 2024 — during a time when rents in Canada are at an all-time high.

Challenges and loopholes

One of the act’s marquee pieces was getting rid of the legal non-conforming designation to units that were “grandfathered in” under the Local Government Act. In places like Victoria, where short term rentals were banned in anything other than a person’s principal residence in 2018, this matters. In August, Ricochet reported on how legal non-conforming units operated in ghost hotels across downtown Victoria.

That will change this May, with 23 buildings in Victoria being revoked of their legal non-conforming status.

Already a handful of condos have been listed for sale in downtown Victoria, all of them in Airbnb buildings that have operated legally, under the legal non-conforming designation. In total, the province said there are about 1,600 such grandfathered units in Victoria.

A handful of condo listings in “ghost hotels” across downtown Victoria have already been listed for sale. SOURCE: Remax.

According to Zoltan Szoges, the province’s policy has an unintended consequence for him and his partner, who own a suite in the Janion Building: it devalues it (Though, he admits to Ricochet that he has listed it on Airbnb for a few months before, he and his partner now use it as their primary residence.) He told Ricochet he bought a home because that’s what success looks like — owning your own home. “We’ve all been trained to view [real estate] as a vehicle for wealth.”

Two weeks ago he listed his microsuite in the Janion Building, and since the announcement from the province, he says he’s had to drop the price of his suite. “All of our upcoming viewings have been cancelled.”

Szoges says he doesn’t anticipate profiting off the sale of his suite, something most people intend on when buying and selling a home. His suite is valued at almost $450,000, is currently listed at $395,000, and he bought it for $375,000. The most recent bid he received was for $300,000 from a “wealthy group of buyers looking to buy up a lot of units in the building,” according to the offer Ricochet viewed from Szoges’ real estate agent.

With his mortgage, Szoges says he and his partner pay $2,100 a month; and if it were to hit the rental market, he says it would likely need to be rented for more, based on market valuation and carrying costs. “I think $2,500 a month to rent [my suite] is ludicrous,” he said about his 385 foot square suite with a Murphy bed.

Szoges agrees with short term rental regulations. “Limiting short term rentals is a good outcome,” he told Ricochet. But he disagrees with the legal non-conforming aspect of the act, and says a few owners in his building will likely look for a legal challenge. Szoges hopes a challenge could result in him, and other non-conforming property owners, to be given 10 per cent cash buyout on the value of their unit.

“The assumption is that with short term rentals—as soon as they’re banned— they’ll immediately flood onto the long term rental market,” she says. “What needs to happen is to spend billions of dollars on more housing.”

Victoria lawyer John Alexander — who specializes in land use law — agrees and says the stripping of legal non conforming protections is likely to be challenged.

“I would expect that there will be some owners who will commit some kind of a challenge,” he told Ricochet. “It’s likely that there are some legal issues that probably give rise to a reasonable argument challenging the legislation.”

Alexander says the fact that hotels are exempt, despite many being governed by an elected strata council who represent owners of the property and are managed by a management company, could aid an argument.

“They are a group of residencies,” Alexander says. “They have a kitchen, a bedroom — they’re suite hotels.”

The Oswego Hotel in downtown Victoria, for example, lists an investment property with a functional 547 square foot one bedroom suite with a kitchen, full appliance package, and coin laundry.

“Enjoy your suite for up to 150 days per year (up to 90 days in the low season and 60 days in the high season),” the listing says. If these suites were to fall under the new legislation, they would risk fines. The Oak Bay Beach Hotel and the Victoria Regent also sell strata units.

“There’s no doubt there’s a missing piece in our housing market here,” Alexander says. “But to think that a high end strata lot is going to become a rental for a UVic student is unlikely.”

Ricochet reached out to Housing Minister Ravi Kahlon about whether the province is prepared to defend a potential challenge, but did not receive a response in time for publication.

Leo Spalteholz — who analyzes Victoria real estate with Homes For Living — expects that the government is ready for the legal challenge. “[The province] has obviously looked at it and decided that they can make and can defend it in court — that's what surprised me the most about the regulations,” he told Ricochet.

Alexander says it’s the retroactive nature to the policy — particularly the legal non-conforming ban — which is heavy-handed of the government. He would have preferred a tax policy instead. Both him and Szoges say they fear the precedent it sets for future policy or governments.

“Whether or not it's legal, it’s certainly draconian,” Alexander says. “If you have a government prepared to make such substantial changes, you run the risk of a replacement government swinging the pendulum back the other way.”

Beyond the policy, critics also say there are practical challenges.

Tedds says she worries about the impact this policy could have on smaller communities like Tofino or Ucluelet, who can choose to opt into the legislation. With very limited space for rezoning, even minor changes in resort communities like Tofino have big impacts on the community.

“If we push out short term rentals in larger cities, then we push more and more of these short term rentals to [resort] communities,” she says. “Then there isn’t any housing for locals.”

Tofino has operated with significant short term rental regulations independently from the province since 2018. Mayor Dan Law says that, for a tourist town, the goal of the original bylaws were to create regulations that benefitted Tofino locals.

“When the council decided to allow short term rentals, create regulations, and bylaws and business licensing and enforcement, it was to give the average homeowner in Tofino the ability to benefit from the tourist economy,” he told Ricochet.

Law says he supports the recent legislation, and says that Tofino council will have firm conversations about whether the municipality will opt into it this winter.

“Whether or not it's legal, it’s certainly draconian,” Alexander says. “If you have a government prepared to make such substantial changes, you run the risk of a replacement government swinging the pendulum back the other way.”

Another challenging aspect will be enforcement.

Starting next spring, a new provincial short-term rental enforcement team will crack down on illegal Airbnbs. The province's unit will consist of 10 people, and act as an Airbnb police. Earlier this month, Montreal established the first Airbnb enforcement team, and Ricochet has been following them on their excursions.

Despite a more thorough policy than what she expected — especially the requirement for platforms to share their short term rental listings with the province — Wilder has her doubts that the province, and its municipalities, will be able to robustly enforce the newest legislation.

Already Victoria does have some level of enforcement — between six and seven full time people, city councillor Dave Thompson told Ricochet. But even with its own team, the city has struggled to enforce the proliferation of illegal Airbnb’s.

If Victoria doesn’t have enough resources to tackle the issue of unlicensed Airbnbs or other short term rental platforms — or even black market listings, such as this one, on platforms such as Facebook or Craigslist — Wilder is suspicious about whether the province will either.

“I’m mostly concerned they might stay up on websites like Airbnb and that there simply won't be enough resources for enforcement,” she said.

Enforcement and the fear of contravening orders resulting in the newly-minted $3,000 fine is the biggest aspect this policy can do to curb illegal short term rentals. But it’s important to consider that getting illegal Airbnb cases to court is often a long drawn out process, since contracts involving illegal activity are not enforceable in court.

Wilder warns the optimists, “It’s unlikely short term rental regulations are going to have the overnight impact some are hoping for.”

And that’s something investors, critics, and housing advocates, each can agree on.

Investigating Airbnb is a bilingual, multi-outlet investigative journalism project focused on short-term rentals and their impact on the housing market. If you want to see more journalism like this, please make a donation right now.

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