Short-term rental clampdown could cause chill, says developer

One of Victoria’s busiest developers is warning the city that changing the rules governing short-term vacation rentals has sent a chill through the development community.

David Chard, who has built five residential buildings in or near downtown, with four others planned or under construction, said developers may start to question the stability of the city’s policies after council voted to change the rules last week. The rules affect suite owners who have been renting their units through online platforms such as Airbnb and treating them like businesses.

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The rule changes will disallow in new developments short-term rentals of fewer than 30 days if they are in transient zones — the ones that include hotels, motels, and bed and breakfasts. Condo units currently being operated as short-term rentals can continue to be run that way, but will lose that status if not operated as a short-term rental for a six-month period.

The city also approved in principle a new regulatory framework that would see operators of short-term rentals have to pay for annual licences — $200 for units being rented while the principal resident is away, or a shared or private room while that resident is home; and $2,500 for entire units that do not conform to the use provisions of the Local Government Act or units zoned for transient accommodation.

“It’s disappointing that council has not considered grandfathering provisions or, I believe, realize the negative impact on housing affordability or accessibility for many persons in the housing continuum,” Chard said in an email. “Developers rely on stability and continuity for their long-term planning as projects generally take years of planning prior to a shovel being put in the ground.”

Chard said it could have a significant impact on projects in the planning stages. “Projects that have been pre-sold and individual homeowners or one-off investors that have purchased in anticipation of stable Victoria policies for their decision making have been side-swiped,” he said.

The Urban Development Institute had a similar stance Monday. In a statement, UDI Capital Region executive director Kathy Hogan said that understanding the impact of and finding the right regulations to implement for short-term rentals is a complex issue. “Council's broad-based approach of eliminating transient zoning ... removes certainty for developers and creates greater risk in an already risk-prone industry,” she wrote. “There are likely more effective ways to regulate short-term rentals and maintain the rental stock.”

But Victoria Coun. Geoff Young said the city is concerned about the lack of housing and the time has come for action, adding that council’s role is to establish a regulatory framework to make it happen. “We have studied (short-term vacation rentals) more than enough to recognize that it’s an issue and we know which direction we want to go,” he said, noting they could never know how many units currently being used for short-term rentals in the city are likely to revert to residential use.

“There’s not a world in which we could ever know that. What we do know is there are many units used for this kind of use, nor is it difficult to determine that a lot of people are finding it difficult to find places to live as permanent residents,” he said. “We made the value judgment that we would like to see the market shift over in favour of the permanent residents.”

As for not grandfathering developments that may be in the early planning stages, Young said they are past that point. He also said it should not have come as a surprise as for the last several months council has instructed staff to ensure new projects are not in a position to be zoned for short-term vacation rental.

“I think the feeling is we are probably overdue on this,” he said. If councillor had known the impact a computer reservation platform like Airbnb would have on how residential units are being used they would have changed things years ago, he said. Airbnb estimates there are 1,500 host units in Victoria.

Young said those who have used their units as short-term rentals have laboured under an artificial incentive as a result of not having to pay commercial taxes. But that is going to change.

Young said they will eventually have to pay for business licences, and be subject to provincial and federal taxes and the hotel tax, as well as having their units assessed as commercial entities rather than residential units. “All of those things I am hoping and expecting will change,” he said. “And I suspect and hope that as those taxes kick in, the people holding units will convert them back to what was expected their use would be — residential.”

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