As you have likely already heard about, the City of Vancouver has become the first City in North America, and only the second in the world, to require a city license to list your property for short term rental on Air BnB.
Not surprising for this extreme left wing city that is struggling with low vacancy rates and affordability. Let’s also keep in mind that this is the same city that still doesn’t allow Uber…
The regulations are extremely onerous, essentially limiting those that can list to rooms in primary residences, or your entire property as long as you live there for more than 180 days/ year. If you’re a tenant, you need permission from your landlord, and if you’re in a strata building, you need permission from the Strata Corporation. That means no basement suites, laneway houses, etc.
Add all of these conditions up, including very strict fire code restrictions, and most of the current 6000 listings on Air BnB will vanish, unless they can come up with a viable work-around. The City claims that only 1000 or so don’t meet the current criteria, but it will likely end up being the majority of listings that feel it simply isn’t worth the time and effort to pursue this license.
Ok, big deal. What effect are the new rules going to have on me and my real estate business? Well, here are a few predictions;
1. As we are entering the key summer tourist season, expect vacancy rates to push up as many of the current 6000 listings hit the long term rental market. This should drive down rental rates slightly over time, which is exactly what the City wants to do. Landlords, get ready for more competition in the market, and to potentially lower your rents.
2. Hotels rejoice! They will be the real winners in this race. Tourists who perhaps would have preferred the convenience of a having their own apartment will now be forced into booking a hotel, and simple economics tell us that the hotel rates will increase along with the increased demand. Add to that a weak loonie, and business should be booming for the hoteliers of this City!
3. Higher rental rates for those Air B n B owners who are able to work through the regulations and come up with a license. Increased demand along with a shortage of supply will without a doubt push up rates for those who are able to come up with workarounds.
4. Opportunities for other short term rental websites to flourish. Air BnB holds over 85% of the market, but there are others. I would expect Expedia to follow suit, but that leaves opportunities for others such as VRBO, HomeAway, Flipkey, and new websites that haven’t even been created yet.
The fact of the matter is that consumers are choosing to rent short term apartments over hotels for a number of reasons. Price, location convenience, comfort, etc all come into play.
Historically, any time that government attempts to intervene in consumer choice, it creates other opportunities, as the consumer demand doesn’t simply vanish, it just gets re-directed. Think Napster being brought down by the industry, only to see digital music take over in other forms.
Ultimately, consumers will vote, and consumers will win, and it’s your job as an investor to see where the opportunities lie, as the demand for home sharing is not going to shrink up and vanish!
Interested in hearing about our property management services for short and long term rentals? Contact our property management company here.
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