As has been widely reported, Victoria city council approved their internal staff report to enact sweeping new regulations on short term vacation rentals (i.e. AirBnB and VRBO). The goal of the change is to bring properties that could have been used by regular occupiers back to the market (or if you are more cynical, to boost the hotel industry). As we’ve seen some confusing information in the news coverage, I read through the staff report to check first hand what the changes actually are*.
*I believe the information below is accurate however it should not be used for investment decisions without verification.
What will no longer be allowed?
- Short term vacation rentals (STVRs) would no longer be a permitted use in transient zoned buildings (like the Janion or 595 Pandora). Note however that STVRs would then become a legal non-conforming use and would continue to be allowed in those buildings (as per Division 14 of the Local Government Act).
- Operating a STVR without a business license and displaying the information on the ad for the unit.
- Short term renting out properties that are not your primary residence (except as in 1 above).
- Short term renting out a self-contained suite in your primary residence.
- Short term renting out your entire primary residence (except if on vacation).
What can you rent on AirBnB/VRBO going forward?
- Up to 2 bedrooms in your principal residence (same as currently).
- Your primary residence while on vacation.
- A unit in a transient zoned property as a legal non-conforming use.
All of those uses will require a business license as below.
Note that it appears their plan is to eradicate STVRs in transient zoned properties by charging them the commercial business license fee. In fact they say one goal of the fees is to “discourage casual operators who are unwilling to pay to operate”. So while STVRs will continue to be allowed in transient zoned properties, the license cost will likely discourage all but the most profitable ones.
When is this coming into effect?
City staff will prepare the bylaws for this change by end of year, and complete the full implementation plan by Q1 2018.
How will it be enforced?
The city has estimated it will cost $512,000 for new staff and a third party monitoring service. Given that the nature of STVRs requires public advertising, it shouldn’t be too difficult to enforce these changes. In fact the proposal specifically mentions ease of enforcement as a priority.
I know I’m late to the game here and this change has already been extensively discussed in the previous article but before reading the report it wasn’t clear to me what would happen to units in transient zoned properties so I thought it might be useful to have a summary up.
It’s hard to tell how many of the some 1500 STVR units in Victoria might be “liberated” as either long term rentals or sold in response to this change. Some are just shared spaces and will be either taken off the market entirely to avoid the hassle of a business license, or fall into line and keep operating. Some are entire units but only rented out seasonally. They could end up being rented for longer periods, left empty, or sold if the owners can’t afford them without AirBnB income. The dedicated investment properties are the most likely to return to the rental or resale markets with their use either being banned entirely or subject to costly license fees that will erode most of the profit.
What else could happen?
- Even if only a few hundred units return to use as primary residences, we should see a small increase in rental selection and condo inventory on the resale market.
- AirBnB units in municipalities around Victoria will probably be able to command a somewhat higher price (quick! snap up condos in Esquimalt!).
- BC Assessment could reclassify some STVR operations as commercial on the city’s request which would mean the city could charge commercial taxes. I doubt this will happen as the number of truly commercial operations will be probably close to zero after these changes.
- The resale value of condos used and marketed as AirBnB businesses in non-transient buildings will likely drop. I suspect enforcement will shut those down first and there is no grandfathering for those.
- Some units in transient zoned properties will continue to operate as AirBnB but I suspect many will close down as the $2500 annual fee will destroy the majority of profit above simply renting them out longer term. Resale values of these units will likely drop.
- Victoria residents will be paying some more taxes to cover the cost of enforcement.
- STVR management companies might have a lean year.
- We won’t see any more of these kinds of articles.
These regulations aren’t a done deal yet. The city is asking for feedback from stakeholders, but the signs are clear, this or something close to it will be brought into effect. What do you think it will mean for affordability and rental availability in Victoria? Will it move the needle?