Strict new short-term rental regulations will prevent many from making money on their units
The strict new regulations on short-term rentals – such as AirBnB, HomeAway, VRBO etc – were announced last week by Vancouver mayor Gregor Robertson and approved by council this week to go to public hearing in the fall.
To recap briefly, the new rules ban short-term rentals on investment properties, second homes, secondary suites and laneway houses. Only those homeowners and renters who want to rent out their principal residence – whether a room or the whole residence (if the owners are away) – are permitted to use short-term and vacation rental services. Those doing so will be required to get a $49-a-year business licence from the City, and non-homeowners will need permission from their landlord to get a licence. There will also be a transaction fee applied as a tax for the City.
Somewhat amusingly, the City is positioning its new measures as more lenient than the current status quo, since strictly speaking, all short-term rentals of less than 30 days are currently prohibited in City bylaws. However, this rule has not been in anyway policed or enforced, whereas the new rules certainly will be when they are enacted, which is scheduled for April next year.
And for most people who rent out their units on a short-term basis at the moment, the new rules will certainly feel more onerous. Sure, it’s fine for those homeowners with a spare bedroom or two who are supplementing their income with short-term visitors. They’ll easily be able to get a licence and continue to run their little business.
But what about those people who genuinely rely on short-term rental supplementary income, who will be prohibited under the new rules? The City’s proposal document, presented to and approved by council Tuesday, helpfully lays out several scenarios in which short-term rentals would be allowed… or not.
One example is clear. “Dev” has an investment condo that he doesn’t live in and he wants to rent it out short-term as it makes way more money than long-term renting. No way, Dev – this is exactly the kind of unit that the City – rightly – wants to see in the long-term rental pool. Even I, as an owner of an investment unit myself, can see this is fair.
But a more questionable example is the couple (“Rick and Andy”) who built a laneway home on their property for family and friends to stay in, but want to rent it short term when they have no guests – especially now that they are retiring and have more time to run it as a business. Tough luck, Rick and Andy. You have to rent it out long-term, make way less money to supplement your meagre retirement income, and your family and friends will just have to stay at the exorbitantly priced nearby hotel, or in a room in someone’s house. Serves you right for building a home that someone could live in – it belongs to the people now.
The City of Vancouver’s reason? “Laneway homes are very important to Vancouver’s long-term rental stock, and should be rented for 30 days or more.”
What about “Marissa”, who short-term-rents out her rented apartment when she’s away, without her landlord’s knowledge? Tut-tut, Marissa. You’ll have to stop that, and get your landlord’s permission in order to secure a business licence. Which, of course, no landlord in their right mind will grant. As a landlord myself, the idea of a parade of tourists staying in my Vancouver studio when my tenant is away, vetted only (or not) by my tenant, give me the shivers. Not a chance, Marissa.
And the City does not set out this scenario, but let’s say “Jon and Sara” have a finished basement in their home, or perhaps a nanny suite in an apartment or townhome. If it has a separate entrance and can be locked off, then bad luck, Jon and Sara. Long-term renters only for you. But if it’s part of your house and the bedrooms just happen to be in the basement, no problem – AirBnB away.
Which of course will presumably lead to a whole bunch of people either a) lying on their licence application forms about whether their suite is locked off, or b) removing locks, and facilities such as full kitchens, from suites so that they are arguably no longer secondary suites and become eligible.
(Side note: I’m not sure that if I’m inviting strangers to stay in my home that I would want to be removing the locks, but I guess it’s still OK to put locks on your own residence’s doors…)
My point? With the possible exception of Marissa, who really should be transparent with her landlord, these are people who own their homes, should be able to do with them what they like, and oftentimes bought them with the expectation of being able to supplement their incomes. And most of the units in these regulatory grey areas will not end up in the long-term rental pool. Rick and Andy will probably keep their laneway home for exclusive use by visiting friends and family, thereby removing an affordable short-term rental option from the vacation market. Same goes for Jon and Sara’s suite. And they won’t even have to pay the Empty Homes Tax, as properties with multiple units such as these are exempt if one of the units is the principal residence.
The City’s hope that around 1,000 units will be freed up for long-term rentals is, I believe, highly optimistic. AirBnB itself agrees, with Alex Dagg, public policy manager, saying recently, ““We think there is a mistake or assumption here that all of those units will be placed in the long term rental market. We don’t think that is the case.”
What’s more, city staff expect that the cost of implementing and operating the rules will be $1.644 million in the first three years, and that it won’t break even (through licence fees and taxes imposed) until 2024.
Will it be worth it for a few hundred new rental units?