KELOWNA — A provincial and municipal crackdown on short-term rentals took shape in 2023 and looks likely to reach its full extent next year.
The City of Kelowna has stopped accepting licensing applications for such rentals, and the province announced plans to prevent people from renting out secondary properties, typically to tourists, on a short-term basis.
The changes have the potential to drastically impact the investment strategies of many Canadians, particularly in tourist hotspots like Kelowna. Government officials say the crackdown is aimed at freeing up more homes for long-term renters, but some experts question whether that result will be achieved.
Between 2015 and 2018, the amount of revenue earned by the owners of private, short-term rental homes in Canada rose to $2.2 billion – a nearly tenfold jump in just a three-year period.
Before the licensing application moratorium was imposed by city council, there were about 1,200 approved short-term rentals in Kelowna.
About 500 are in a property that is the owner’s principle residence and 700 are owned by people who don’t themselves live at that address.
But the NDP government estimates there are actually as many as 2,400 units being offered on a short-term basis in Kelowna, and 28,000 across B.C.
“The number of short-term rentals in B.C. has ballooned in recent years, removing thousands of long-term homes from the market. That’s why we’re taking strong action to rein in profit-driven mini-hotel operators, create new enforcement tools, and return homes to people who need them,” Premier David Eby said when the new provincial rules were announced.
Not only does the government intend to greatly restrict future short-term rentals, it is considering removing a grandfathering clause in the Local Government Act that would allow short-term rentals if that was the property’s previous use.
A Victoria lawyer says that part of the government’s plan represents a significant change from established practice.
“That’s a first in this province, at least since the mid-1900s,” lawyer John Alexander, a specialist in land-use law, told the Victoria Times-Colonist newspaper.
A class action lawsuit is possible, he suggested, considering many thousands of B.C. property owners depend on the income they get from short-term rentals to pay their mortgage payments, which have spiked over the past year because of rising interest rates.
In Kelowna, short-term rentals were largely unregulated until a few years ago. While a city-commissioned survey found a majority of responders were in favour of allowing short-term rentals, either as an alternative way to travel or as an income booster, the city took the opposite track and introduced regulations.
Short-term rentals not involving an owner’s principal residence were allowed in some downtown buildings and in the South Pandosy waterfront area, in part, because of those district’s appeal to tourists.
Licensing fees were established, along with rules intended to ensure short-term renters didn’t cause problems related to noise, parking, and other concerns.
But many people offered their principle or secondary properties they already owned on platforms such as Airbnb and VRBO without getting the necessary approvals. Others bought secondary properties with the express intention of renting them out on a short-term basis.
They were hoping to capitalize, in part, on the fact that the pandemic had limited foreign travel while increasing interest in domestic destinations.
“They thought they were going to make a mint because they saw what was happening in the gold rush. And now they’re realizing, ‘Oh, big mistake’,” said Deana Steele, founder of Keys to Kelowna Properties Inc., a luxury vacation rental management agency.
Now, with the new regulations on the way, Steele says she has never seen as many condo and vacation homes for sale as there are in Kelowna right now.
Given the chance to provide input directly to the city on the topic of short-term rentals over the past few years, the majority of people who’ve done so have spoken in favour of the practice.
“Short-term rentals have become an essential part of our city’s tourism industry, allowing homeowners to generate additional income helping them cover the historically high cost of ownership,” Devon Olson wrote in a letter to the city before a recent public hearing.
“We own one rental in Kelowna – which forms an important part of our retirement income (neither of us have pensions). We rent to university students for eight months and then do short-term over the summer,” said Olenka Bakowsky.
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There were some criticisms in correspondence received by the city. “We have houses full of (short-term renters) here to party for week after week and there is no possibility of asking them to be quiet after 11 p.m. A family neighborhood is not the place to party every night,” said Charles and Mary Lund.
For its part, the Opposition BC United Party says it won’t implement the government’s planned ban on the short-term rental of homes that aren’t an owner’s principle residence if it wins next year’s provincial election.
Leader Kevin Falcon says people will be allowed to offer one secondary property for short-term rentals. “There’s a small percentage of individuals who own a multitude of Airbnb units that are really the ones generating most of the revenue for Airbnb,” Falcon said in an interview with The Daily Courier.
“That’s where we suggested the government target their efforts as opposed to the small Mom-and-Pops that may own one unit that they’re Airbnbing,” Falcon said.
The NDP government rejected the suggestion. Critics noted a study that purported to show the negative effects of short-term rentals was sponsored by an association of hotels and motels.
Perhaps less surprising is the opposition to the effective ban on short-term rentals from Airbnb, which issued this statement after the government signalled its intentions.
“It will take money out of the pockets of British Columbians, make travel more unaffordable for millions of residents who travel within B.C., and reduce tourism spending in communities where hosts are often the only providers of local accommodations,” the company said in a statement.