A couple of days ago Premier David Eby announced sweeping changes to the rules around short term rentals typically provided through companies like Air BnB, VRBO and Expedia.
They will also apply to people posting privately on sites like Facebook Marketplace, Kijiji, Craigslist as well as classified ads in newspapers.
That was taken right from the BC Government website, yes it did say newspapers and referenced Craigslist!
These changes will not apply to reserve lands, hotels and motels as well as any treaty lands or treaty first nation unless the nation decides to opt into all or part of the legislation.
That last part will be interesting to see, if I were a betting man, I would probably put my money on them deciding not to opt into the legislation.
So how will this legislation take effect?
This right from the BC Government website: “There are parts to this new legislation that will take place immediately, like the ability of regional districts to issue business licenses and increase maximum penalties. Other changes like the Province's principal residence requirement and registration system will come later.”
So here’s what will take place immediately:
The maximum fine will increase from $2000 to $50,000
In areas where a business license is required, short-term rental hosts will be required to display a valid business license number on their listing.
Platform Accountability: If a listing does not include a valid business license, where a business license is required by the local government, the short-term rental platform must remove the listing at the request of the local government.
Under the new rules, short-term rental platforms will be required to share information about short-term listings with the Province. The Province can then share this information with local governments. The Province will keep the short-term rental information confidential and will not disclose it to the public.
Alright here is what will likely take place in the new year:
Short Term Rentals will be restricted to the host’s principal residence as well to any secondary suite at the residence
This will apply province wide with municipalities with a population of 10,000 or more
The Province will establish a short-term rental registry. This will help ensure that short-term rental hosts and platforms are following the rules and provide local governments and the Province the information needed to follow up when they don't.
In order to ensure the rules are being followed, the Province will establish a provincial compliance and enforcement unit
Alright the timelines the government is putting in place is as follows:
Immediately after the proposed Bill receives Royal Assent: Increased fines and tickets, business licensing authority for regional districts
May 1, 2024: Principal residence requirement (including definition of exempt areas or accommodations), changes to legal non-conforming use protections
Summer 2024: Data sharing
Late 2024: Provincial registry launch, requiring platforms to remove listings without valid provincial registry numbers
Recently, in a statement, AirBnB said the legislation will not alleviate the housing crisis but instead will take money out of people's pockets, inflate the cost of accommodations for visitors and decrease tourism revenue.
Quote: "We hope the B.C. government will pursue more sensible regulation and listen to the many residents – hosts, travellers and businesses – that will be impacted by the proposed rules,"
Ok so let’s talk about how this is and what kind of an effect it’s going to have on the market, specifically here in the Okanagan.
According to AirDNA, a platform that tracks short term rental statistics, there are approximately 1727 total STR listings in Kelowna and the surrounding areas including Lake Country and West Kelowna.
The vast majority, approximately 1599 are listings of the entire home and not just a room in the home.
Now this data is just restricted to AirBnB and VRBO, the two major platforms in the area when it comes to short term rentals. This does not include those that are running their own STR on sites like Facebook Marketplace or Kijiji.
I am sure the actual number of units is probably closer to 2000 if you factor in all platforms and private listings.
So think about the Okanagan in the summer, our population here almost doubles during July and August, the short term rental market is going to dry up by May of 2024.
This will put a ton of pressure on the hotels and motels in the area that are already booked up through those summer months.
When supply is restricted, what happens to pricing?
It will increase. And likely to a level that will price individuals and families out of the market.
It is already expensive to visit here, gas is high, price of groceries is higher than ever before and now our tourism industry is going to be hit hard because of the restrictions being put into place.
My estimation is that well over half of those units will be gone from the short term rental pool which will drive the cost of hotel and motel rates through the roof. Lack of supply and the same demand as previous years and this will absolutely become a reality.
This will have an effect on every business in the central Okanagan that relies on tourism to pay their bills and to turn a profit.
Now let’s look at this from the governments side, they want to open up long term rental options for people, which incidentally, I don’t disagree with.
In order for these AirBnB operators to shift to a long term rental model they are going to have to charge rents that cover the cost of their mortgage, utilities, taxes and provide some kind of cash flow or profit margin.
According to RentFaster dot ca, the average rent for a single family home in Kelowna and the surrounding area is $3700.
Now I would expect rents to come down just a little bit as more inventory hits the market, but look for rents to likely increase as a result of owners and landlords that will look to cover the costs of keeping a single family home in the central okanagan.
The vacancy rate in Kelowna according to CMHC is sitting at 1.2%, the increase of rental units by restricting AirBnB and forcing these units into the rental pool will have a negligible effect on the vacancy rate here.
Even if all 1727 units come into the rental pool, which is highly unlikely, the vacancy rate likely wouldn’t even touch 2%.
Realistically, out of those 1700 units we will probably see a lot of these homes being listed for sale as they won’t be able to stay net positive without the air bnb model.
If that happens, there would be even less inventory going into the rental pool, so one would have to wonder why the province is moving forward with such a punitive plan.
According to the government, they think that this new legislation will bring 16,000 new rental units into the pool and they hope that it alleviates the pressure on the housing crisis.
Based on the Okanagan model, I don’t see this happening. I think it looks good as a white paper and would certainly be a good discussion for experts and pundits alike.
Time will tell if the theory works to alleviate some of the stress, in the meantime, there will be a lot of people and businesses affected by this legislation.
The one big unknowns right now, after having had a quick chat with city planning, is how developments like Playa Del Sol will be affected. Will the city be allowed to apply for an exemption for these kinds of properties because of how they have been approved by city of Kelowna bylaws?
Also an unknown is how exemptions will play out, what if a city already has a healthy vacancy rate? Take West Kelowna as an example, their vacancy rate is 3%. Could they or better yet, should they be exempt from these rules as a city with a population over 10,000?
The legislation seems rushed and not really that well thought out.
I feel that it is punitive and is not going to have the desired effect that the government is hoping for.
What do you think about the legislation? I am interested to hear your comments below!
As always, if you are thinking of making a move into or out of Kelowna then we should talk, you can reach me on my cell at 403-827-7527 or by email at email@example.com