In an effort to ease its falling vacancy rates and soaring rental prices, Vancouver became the first city in Canada to crack down on short-term home rentals. Here’s what you need to know about the new regulations.
New short-term rental regulations
On November 14, 2017 – following two days of public hearings in October – Vancouver City Council approved new regulations for limiting short-term rentals on Airbnb in a seven to four vote.
The new rules, which come into effect on April 1, state that:
- Short-term rentals of entire apartments or homes are banned if the property is not the owner’s primary residence.
- Basements apartments and laneway houses that could otherwise be rented out to long-term tenants can’t be listed as short-term rentals.
- All Vancouver hosts must buy a business license that costs $49 annually, plus spend $54 on a one-time application fee and display their license number in an online listing. If they don’t, they could face a $1,000 dollar fine.
What this means is it will soon be legal for the 80% of the owners and renters who currently list their principle residence on Airbnb, while they are on vacation for example. But buying or leasing a property and using it as a Airbnb rental full-time would be illegal. Of the approximately 6,000 short-term rentals listed in Vancouver, the city estimates at least 1,000 non-principle residences could be freed up for long-term rentals.
The new regulations have drawn both praise and criticism. Some Airbnb hosts say the rules will deprive them of much-needed income in a very expensive city. According to data provided by Airbnb to the city, the typical host earns $6,500 annually from the site. Some have also questioned whether city staff will have the time to track Airbnb use. Others proponents say the regulations will help with the availability and affordability of long-term rental housing units – especially in a city with a vacancy rate of around 0.8%.
Other cities in Canada are also trying to limit Airbnb. Toronto is proposing similar rules, restricting short-term rentals to primary residences and introducing a licensing system. The rules will come into effect July 1, 2018.
FACT: Average hotel night in Vancouver is $260, while Airbnb is $150.
New tax regulations
In addition to these measures, new regulations on taxes for Airbnb were announced by the BC government on February 7. The government will be moving toward similar agreements with platforms like VRBO in the near future.
- Airbnb will be collecting the 8% provincial sales tax (PST) and up to 3% municipal and regional district tax (MRDT).
- The BC government anticipates that the new tax will generate $16 million for the province (which is earmarked for affordable housing initiatives) and $5 million for municipalities (which will go toward tourism). Details of those projects would be announced in the new budget in late February.
- To streamline the process of collecting taxes, Airbnb will remit on behalf of its hosts in British Columbia so that no additional administrative burden is placed on them.
In terms of housing affordability, it’s unclear whether the tax will make much of an impact. What it will do, however, is ensure a fair tax system and create a more level playing field for Airbnb and hotel operators.
Vancouver is joining other major cities in taxing its short-term property renters. Airbnb currently collects a 3.5% tax on lodging on behalf of its hosts in Quebec, and collects taxes in Michigan, Nevada and California, as well as France and India.
Airbnb and your mortgage
If you’ve ever wondered about how Airbnb impacts your mortgage, here’s what some financial institutions say:
- At Royal Bank of Canada, clients must inform the bank of the intended use of the property, says spokesperson Jill Anzarut, “and if that use changes, it’s important that they contact us in advance, prior to proceeding with any changes.”
- National Bank of Canada requires the same notification.
- At Toronto-Dominion Bank, meanwhile, as long as the correct insurance is in place, occasionally renting a property through a service such as Airbnb would not have an impact on a mortgage holder or applicant, says a spokesman.
Even though such an activity could put homeowners in breach of their mortgage policies, it is not always clear what happens if you inform your lender that you are planning on using part, or all, of your home for short-term rentals. And whether anyone actually makes the effort to do so is also in some doubt.
What do you think of the new regulations to short-term rentals in Vancouver? Drop me a line to chat!