Unintended consequences of Airbnbs are leading to new measures to deal with the loss of housing stock.
FOR $138 PER NIGHT, one can stay in a luxury two-bedroom condo in the heart of downtown Victoria. Located on Humboldt Street, the condo is within walking distance to a number of amenities and popular attractions. It’s also fully equipped with a concierge.
But the condo is not a hotel; it’s a residential building where many residents no longer know their neighbour. Instead, they see a string of new faces passing through the halls each week, people arriving late at night, making noise, not knowing where to go, or the rules of the building. Many are fed up with living in one of the city’s many “ghost hotels.”
“Living in the Downtown core, people always have safety and security issues and that’s kind of the impetus for people starting to question ‘why am I seeing strangers in and out of my building all the time?’” said Downtown resident Eric Ney, who’s part of a citizens coalition that’s trying to better regulate short-term rentals (STRs).
He believes the vast majority of Downtown condo buildings have STRs operating in them—and this is borne out by websites advertising them. He notes that about half a dozen strata councils have now brought in bylaws that restrict the short-term use altogether. “Unless the strata council takes action to bring in bylaws to essentially make STRs illegal, operators are just going to go ahead and do that,” added Ney.
The Janion, where nearly half of its 120 suites are used as short-term rentals
CONDO BUILDINGS WERE ENCOURAGED DOWNTOWN to bring in more full-time residents who would presumably help maintain a healthy core. The City of Victoria allowed all buildings within the “transient zone” (areas allowing hotels, motels, vacation rentals and bed and breakfast accommodation) to host condos that could be rented out by their individual owners, likely never imagining the disruptive blossoming of a new vacation rental industry. With people able to rent out a suite for $165 per night, they can earn a substantial amount during the tourist season alone—often enough to out-price a year-round long-term renter.
As a result, STRs have become a significant factor behind a rental vacancy rate that won’t budge from around 0.5 percent—the lowest in the country—despite the abundance of new developments built over the past half a dozen years. Due to STRs, many Downtown condo units that might otherwise have been rented out to local residents sit empty most days of the year. A recent City of Victoria report states there are close to 1,500 unique listings of STRs, with the bulk of them located Downtown.
In order to prevent precious long-term housing units from being gobbled up for brief stays, Victoria City council started looking at ways to regulate STRs. Last fall it finally took action when a new set of rules was approved that include prohibiting STRs for less than 30 days in transient zones and no longer allowing them in new Downtown developments.
A grandfather clause stipulates that property owners who already legally operate STRs as a business will be allowed to continue, but will lose that status if they are not operating for a six-month period. The only new STRs that will be allowed will be within the principle residence of the owner—one or two bedrooms in houses or condos. All operators will also have to purchase a business licence.
The next item of business to be decided is what the City of Victoria will charge STR operators for that business licence. City staff proposed a fee of $200 for a principal residence that rents out a bedroom—and $2,500 per year for a unit that is not one’s principal residence.
Besides the fees, STR operators would have to comply with a list of operating requirements such as getting a letter of approval from the strata council. The framework also calls for an enforcement strategy that involves a third-party monitoring service to identify STR addresses and non-compliant operators. The City recently found that many aren’t following the rules by operating outside of transient accommodation zones.
According to the staff report, the proposed fees were developed to recover the costs of administering the program (including the third-party monitoring), level the playing field between STR operators and traditional accommodation providers, and ensure operators pay a fee commensurate with revenue generated. But after considerable pushback from operators, officials are now collecting more data and considering alternative fee structures, including a flat fee that all STR operators would pay, regardless of the type of unit. (“The majority of feedback received was from STR operators or individuals employed in the industry,” states the staff report.)
Councillor Ben Isitt introduced the motion of STR regulations at council, pointing out that “These buildings were built, approved in this chamber, with people believing they were going to be ordinary, residential condominium buildings…We’ve found these buildings have evolved into something very different.”
Councillor Geoff Young has heard from a number of unhappy residents living in ghost hotels and can’t help but sympathize with them. He’d like to see the proposed business licence fees start low and escalate over the years.
What council would really like to see, he noted, are changes in the provincial legislation regarding the classification of those units. Hotel rooms are classified as commercial while STR accommodation is classified as residential, he explained. It’s important because commercial users pay three times the property tax that residential users do.
Besides providing greater fairness among hosts, new property tax regulations would be fairer to the City. As Young explained, “We’ve been losing real hotel rooms once paying commercial property tax rates…at the same time that this Airbnb use has been burgeoning. The Airbnbs are paying much lower taxes than the hotels and we would like to see a fair, even playing field with everybody who’s operating a hotel paying the same taxes.”
Another big change council would like to see is the grandfathering done on a unit-by-unit basis instead of building-by-building. “If a unit continues to be used for STRs, that’s fine, but you can’t take other units in the same building that have been used for residential accommodation and transfer them into STRs,” said Young.
KEN HANCOCK LIVES IN THE JANION BUILDING where nearly half of the 120 suites are used as STRs. But he likes it that way—it’s one of the reasons he made the purchase, noting it’s the same story for many property owners in the building. Most of them, he said, either live Up-Island or in Vancouver and purchased their property as a place to retire or stay whenever they come to Victoria.
Besides being the strata council president, Hancock also works as a concierge for a select group of condo owners in the Janion to assist travellers coming and going from various suites. Sometimes he feels like he’s living in a hotel, but he knows most of his neighbours and loves meeting new people from around the world.
As for the proposed $2,500 business licence fee that could soon be required to continue operating many of the STRs at the Janion, Hancock shakes his head. “You have a group of people who specifically bought, invested and set up these little micro businesses because they were legal. The zoning has been in place since 1994,” said Hancock, who believes most people will keep their place if they don’t want to pay the fee, but won’t use it for long-term rentals.
“They specifically bought it because of the Downtown location and as a retreat from their regular home. It’s for their use much more than an investment. Everybody I deal with is quite happy to have some sort of regulation as the industry matures and that’s not a bad thing. It just needs to be recognized that these are, for the most part, micro businesses.”
But for Eric Ney, the proposed rules are a good first step. He’s pleased to see that STR owners must get permission from the strata in order to get a business licence, but he’d also like to see the elimination of STRs in multi-dwelling buildings.
A strata council, however, is not likely to be able to disallow STRs or put strong bylaws into place if a good portion of owners are engaged in the practice themselves—like those at the Union in Victoria’s Chinatown where about half of the 130 units are used as STRs.
Johanna Merth has lived in the Union for three years and noticed at the last AGM that those who own multiple units in the building, but do not live there, are able to vote en masse on issues that impact permanent residents. One person who owns multiple units, but doesn’t live in the building, holds a position on strata, which doesn’t sit well with Merth.
“They are voting on issues that may not affect them directly, but affect their business prospects. As a resident and owner in a building, that’s a problem. I think some people who run business operations can sometimes forget there are people who live there full time,” said Merth, who didn’t realize the impacts of STRs when she purchased her condo.
“It’s brutal. It does affect the culture. When I look out at night, I just see a wall of black windows because it’s not peak season so people aren’t renting the units. This is altering the structure of our city.”
What impact the City’s new regulations will have on long-term rental housing remains to be seen. But with an expected growth of 20,000 residents by 2041, the City of Victoria needs an additional 13,500 apartment units and 2,700 ground floor homes sooner than later (as per Victoria’s Official Community Plan). Privately-owned condos are an important source of housing, including rental housing—they represent almost 14 percent of the total rental units in Victoria.
But the City is slowly making strides. Since Victoria’s Housing Strategy was approved in June, 25 action items to improve housing affordability have been achieved, leading to an increase in the number of rental and non-market housing units developed and retained in the City (590 rental units are now under construction). There are, however, still a number of issues left to tackle in order to get a grip on the growing housing crisis. STRs are just one piece of a complicated puzzle.
In early 2018, council will be presented with options for business licence fees, along with the short-term rental business regulation bylaw and amendments to the zoning bylaw. The new rules would come into effect shortly after.
A journalist since 2003, Pamela has spent the bulk of her career covering court and crime for various newspapers in western Canada, including five years at the Edmonton Sun. An avid traveller, Pamela also specializes in travel writing and recently published a true crime book called Deadmonton.