Another government initiative for renters?
This week our BC premier made another move in his campaign to address the rental housing supply and affordability challenge.
It’s the third major move in the past year.
The first major move was to declare all rental and age restrictions removed from strata properties (except the 55+ age restriction). This overid the restrictions that many strata plans had, making almost all strata properties in BC rentable.
Then he declared that zoning bylaws prohibiting secondary suites in single-family homes would, henceforth, be overridden by new regulations that allow secondary suites on most such properties.
Both of these moves should increase the housing rental stock somewhat to meet the demand and, presumably, also put downward pressure on rental rates.
The legislation tabled Monday would regulate and vastly reduce the number of rental units currently available only as short-term rentals (STR’s), such as Airbnb’s, which takes them out of the rental pool for long-term rentals and puts upward pressure on rental rates—investors can make considerably more with STR’s than long-term rentals.
Specifically, the new legislation limits STR’s (defined as less than 90-day rentals) to the principal residences of the owners, to secondary suites in those residences, and to accessory dwelling units on their properties. It eliminates investment properties that are used strictly, or mostly, for STR’s. The province claims that there are more than 16,000 such properties–“entire homes being used as short-term rentals for the majority of the year in B.C.”
In addition, the province is ramping up fines and enforcement abilities for municipalities to enforce their own bylaws (some municipalities already have STR restrictions), and is also forcing the sharing of data across platforms such as Airbnb, VRBO, Expedia, FlipKey, Marketplace, Criagslist and Kijiji, so as to monitor and catch violators.
It should be noted that BC is following similar moves already made in several states and provinces, notably Quebec and New York, and already partially enacted by the City of Vancouver.
Will these measures work to address the supply and affordability crisis?
Here are my thoughts:
- Some of the (16,000) units will be converted from STR’s to long-term rentals, in accordance with the intentions of the legislation.
- Some of the units owned by investors strictly for their economic value as STR’s will be put on the market because they have no intention of becoming landlords for long-term rentals. (That is what I would do were I in that situation.) Some of them will be sold to other investors more interested in buy-and-hold investment properties serving long-term renters, others will be sold to owner-occupants. The increase in the supply of properties on the market will put some, but minimal, downward pressure on housing prices.
- There will be many “grey areas” and some investors will find creative ways to circumvent the rules, plus it will be a monumental challenge to enforce them, leaving some of the 16,000 units still in the STR pool.
- A plethora of civil servants will be hired, and bureaucratic structures established, to monitor and enforce the new regulations both at the provincial and municipal level. The costs of this will, of course, be added to the tax burden of British Columbians, including the investors who own LTR’s. Those costs will, of course, need to be added to the rental rates for those properties, thus offsetting some of the downward pressure on rental rates.
- The elimination of many of the 16,000 STR’s that are being targeted by this legislation will provide an opportunity for those not affected by it (basement suites, accessory dwelling units) to convert their long-term rentals into STR’s, reversing some of the effects that the legislation is intended to make in the supply of long-term rentals.
In summary, the legislation will likely help a little to increase the supply of long-term rentals and to put some downward pressure on rental rates. But don’t expect them to be dramatic nor quick to move through the system. Like most legislation, there are always unintended consequences that serve to offset much of the intent of any legislation.
At best, I see them moderating the increase of rental rates and, perhaps, getting a few more people into “affordable” housing (whatever that is). Afterall, an increase of even 1% in available rental stock increases the vacancy rate by that much, and every 1% change in the vacancy rate affects rental rates.
The biggest problem remains, that BC has the worst ratio of wages to house prices in the country. In a region of (comparatively) low wages and high housing prices, there is little that governments can do to have a major impact.
The best solution is to find any way possible to get out of the rental market and into home ownership.
Rent 2 own is one such way that works for some.
At least, that’s how I see it . . .