NewsUnderstanding British Columbia’s New Short-Term Rental Regulations
British Columbia has recently introduced new regulations governing short-term rentals (STRs), significantly altering the landscape for property owners, renters, and platform operators like Airbnb. These changes mark a departure from previous practices, notably differing from the regulations in Vancouver. Understanding these changes is crucial for stakeholders in the province’s rental market.
Key Changes in the New STR Regulations
- Required Information for Listings: business license number if required and valid registration number
- Where this regulation applies: Everywhere in BC, including Vancouver, aside from exempt locations. Exemption criteria will be set by regulation, currently set as municipalities under 10,000 population, except those within 15km of larger municipalities, and most resort regions. Those municipalities meeting exemption criteria need to request to the provincial government to be added to the exempted list.
- What properties are allowed: principal residence, and no more than one secondary suite or accessory dwelling such as laneway house. The new rules also permit tents, RVs, and lodges for STR.
- When: into effect by late 2024
- Rental Duration Limit: The new provincial legislation defines STRs as rentals shorter than 90 days. This contrasts with Vancouver’s STR regulation, which sets the limit at 30 days.
- Increased Fines: Penalties for non-compliance have been substantially raised, with fines increasing from $1,000 per day to $3,000 per day.
- Data Sharing Requirements: Platform operators are now required to share rental data with municipalities, enhancing oversight and enforcement capabilities.
- Provincial vs. Vancouver Regulations: The provincial legislation allows for the rental of laneway homes (LWH) and secondary suites, a practice not permitted in Vancouver unless the LWH is the homeowner’s principal residence. This is likely due to the enforcement mechanism being the speculation and vacancy tax, which treats each property title as a single property. Hence the enforcement mechanism of checking that the name of STR licensee equals the name of person listing that property as their principal residence would not work for laneway homes and secondary suites. Furthermore, there is no current requirement for secondary suites or laneway homes to be rented out, and allowing their use as STR should not materially decrease long term rental housing supply.
- Provincial Registry: A provincial registry for STRs is slated to be operational by late 2024. This registry will be cross-referenced with speculation and vacancy tax disclosure forms.
- Collaboration with the CRA: Information will be shared with the Canada Revenue Agency (CRA) to confirm principal residency and for tax purposes, increasing the risks associated with non-compliance.
Context and Rationale
- Tight Housing Market: B.C. as a whole has a very tight housing market characterized by supply not increasing as fast as demand, leading to perpetually low vacancy rates, and high rates and prices relative to incomes.
- Municipal Regulations Lacked Teeth: Municipalities, such as city of Vancouver, acting on its own lacked regulatory capabilities to efficiently and effectively police and enforce its short term rental regulations.
- Industry Reports: The regulations follow reports, including one sponsored by the hotel association, asserting that Airbnb has significantly increased rents. However, a study by the Conference Board of Canada found no meaningful increase in rents due to Airbnb.
Market Impacts and Possible Outcomes
- Impact on Rental and Hotel Housing Supply: If these regulations significantly reduce the supply of STR properties, it could alter market dynamics, whereby shifting housing supply into the long term rental market and away from the tourism market. It may reduce upward pressures on long term rents, however also increase upward pressure on hotel rates and negatively impact the tourism sector. This would limit the ability of residential accommodation to act as hospitality accommodation, moving in and out of that market as rents and hotel rates fluctuate. Without this supply of hospitality accommodation, hotel rates may become more volatile as demand meet more inelastic supply. However, over the long run, this regulation may encourage hotel operators to invest more in additional hotel capacity as they know they would not face competition from STR operators.
- Economic efficiency: It’s unclear what the impact on economic efficiency is. On one hand, decreased flexibility of people operating STR during periods of super strong demand such as global events or major concerts can lead to lower economic efficiency. However, it is unclear whether operation of STR are productive uses of time and resources. In a way STR is similar to other parts of the Gig economy, in which the ex-ante returns are far too optimistic for the ex-post result. Anyone operating STR should ask why they would be far more efficient running a hotel than a professional hotelier?
- Preventing Large-scale Operations: The regulations aim to curb the practice of larger entities owning multiple properties for STR purposes and will likely be very successful in this.
Potential Challenges and Problems with the regulations:
- Housing Availability for Shorter Stays: The 90-day threshold may create difficulties for individuals seeking accommodations for durations like summer school or short work assignments.
- Legal Status of Short Tenancies: There’s uncertainty about the legality of tenancies shorter than 90 days and how these will align with the Residential Tenancy Act (RTA). For example, individuals looking for a 2 month rental may need to enter into convoluted arrangements where they enter into a month to month rental agreement at a rate higher than long term rental rates, followed by giving notice to the landlord prior to the first month is concluded, whereby ending the tenancy in 2 months. In this case, there is no real concern for the landlord about the tenant staying longer than usual due to higher than market rents.
The new STR regulations in British Columbia represent a significant shift, aiming to balance the needs of tourists, residents, and the housing market. Stakeholders must familiarize themselves with these changes to navigate the evolving rental landscape effectively. As these regulations are implemented and their impacts become clearer, further adjustments and clarifications are likely.