Last week, Victoria city council heard, for the fourth time, the variety of voices in the short-term vacation rental debate. Council made a policy-based decision that favours long-term housing and helps level the playing field with traditional accommodations in terms of business licences.
Some local media reported a “crackdown” on short-term vacation rentals, but the city took a very balanced approach using the tools and levers available at the municipal level.
STRs will continue and be welcomed in primary residences. Owners of existing investment properties will be “grandfathered,” using the legal nonconforming tool available to local governments.
Snowbirds and people on vacation will be allowed to use their primary residence as an STR when they are not home, provided they have a licence.
Once the regulation and framework are in place, all permitted STRs will require a business licence and permission from their strata or landlord to use their primary residence as an STR.
This will avoid those terrible stories of owners and stratas not knowing what the heck is going on with their rental properties. There are too many examples of tenants who list on Airbnb and end up giving the keys of their rented home to random guests and partiers who have no consideration for the residents around them.
Council had to make a policy-based decision on what the city’s inventory of garden- and secondary-suite housing will be used for — long-term rental or STRS. They sided with long-term rentals.
The new rules will help put an end to rampant speculation and get-rich-quick schemes, and stop speculators from continuing to suck rental housing out of the inventory.
These policy moves will also help prevent “over-tourism,” by assuring the new condo towers sprouting like mushrooms across the city are not packed with STRS. This will mitigate problems happening in cities such as Amsterdam, Reykjavik and Monterey, California, where residents are being pushed out of their downtowns as landlords favour more lucrative STRs.
Victoria council’s measures will effectively encourage owners of strata units to choose long-term rentals over STRs. A very elegant solution to a very complex and nuanced policy issue.
City staff deserve to be commended for delivering a thorough and balanced analysis in the briefing package presented to council.
What is often confusing is the provincial sales tax and the municipal regional district tax on accommodation. PST and MRDT are both provincial taxation tools, but cities, towns and regional districts must support MRDT in their jurisdiction. The two taxes are linked.
In British Columbia, all fixed-room accommodation of more than four rooms must pay PST and MRDT where applicable. Many — though not all — commercial Airbnb operators are not paying PST and MRDT. Provincial taxes are used to deliver programs such as health and education, while MRDT contributes to local marketing through Tourism Victoria as well as tourism infrastructure programs. The MRDT is key to Tourism Victoria’s financial contributions to the David Foster Harbour Pathway and Phase 2 of Belleville Terminal project.
At council, I read out the names of the five STR and vacation-rental companies obeying the laws and paying PST and MRDT. Five companies representing fewer than 100 of the 1,700 STR units in Victoria. Most STR operators, including many who spoke, are actively avoiding their legal responsibilities under the provincial sales tax act. This is why the City of Victoria’s enforcement scheme on its forthcoming business-licence program is so important.
This debate, including public input, has been ongoing since June 2016. The City of Victoria received broad input, held workshops, took submissions on three separate occasions and came to a balanced decision permitting some STRs, but placing a priority on housing and local long-term rentals. The city is protecting existing investors but putting a cap on runaway growth in short-term vacation rentals.
Council used the tools and levers available, including zoning, business licences and the elegant use of the legal non-conforming provisions. A very balanced approach to a very complicated and nuanced situation.
There is more work to do provincially on PST, MRDT, commercial property tax and consumer protection, as well as federally around the goods and services tax.
When it comes together, we will be able to welcome STR operators out of the underground grey economy and into the open as contributors to society through fair and equal taxation and regulation.
Paul Nursey is president and CEO of Tourism Victoria.
