Victoria eyes regulating vacation rentals

Victoria could soon be taking a closer look at short-term vacation rentals, with an eye to bringing what some see as a growing “invisible” hotel industry into the open, subject to the same taxes and rules as traditional hotels.

City staff are looking for direction from councillors on options for regulating short-term vacation rentals, with the hope of having recommendations by fall.

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They also suggest that the city ask for short-term vacation rentals to be subject to the same provincial taxation policies and rules as hotels and that B.C. Assessment Authority designations reflect the commercial nature of the rental use.

In B.C., an eight per cent provincial sales tax is applied on rentals by hotels, motels, cottages, inns or resorts with four or more rental units.

In addition, many municipalities, including Victoria, charge a two per cent tax that is used to promote local tourism.

Victoria Coun. Geoff Young said “stealth hotels” have an advantage as they don’t have to charge those taxes.

The city probably has little choice but to look at regulation of vacation rentals, Young said. City staff estimate that 200 to 300 short-term vacation rentals are operating in Victoria.

“The fact is that nowadays with computer-operated reservation systems, it’s practical to run an invisible hotel with rooms spread out through the city and prebooked. People get instructions on how to enter the building and so forth,” Young said.

Yet “visible” hotels pay property taxes at a much higher rate than residential properties, he said. “I think the biggest direct concern of the city is the idea that by presenting property as residential and actually using it as hotel, you pay a lot less taxes.”

Young also cited zoning issues, saying many short-term vacation rentals are operating in residential areas where commercial operations are not allowed.

Paul Nursey, Tourism Victoria president and CEO, said a level playing field should apply between short-term vacation rentals and hotels, and the former should abide by all the same rules, laws, regulations and taxation policies.

“I think it’s something that needs to be dealt with,” Nursey said. “These things are not going away. Home sharing has been around forever. Airbnb is just a new platform, just like Expedia and others were platforms 15 years ago.

“It goes without saying that these things have to come in from the cold and be taxed and regulated.”

Nursey, Young and Coun. Ben Isitt all said the loss of long-term rentals to short-term vacation rentals is also a concern.

“I think we are seeing a negative impact on the rental-housing market. I think it’s important to bring in regulations,” Isitt said.

City staff say Victoria has about 27,000 rental-housing units and a vacancy rate of 0.6 per cent. If all the estimated short-term vacation rentals found their way back into the rental market, the vacancy rate would increase to between 1.2 and 1.7 per cent.

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