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Thoughts from someone who has pondered Airbnb: Don’t allow tenants to do it; limit the number per neighbourhood

September 30th, 2016 · 2 Comments

Got this by email from a former Nelson city employee and SFU grad student who has spent some time thinking about Airbnb.

As the former City of Nelson employee responsible for preparing its upcoming short-term rental regulations (Nelson is one of the case studies that Vancouver staff reviewed) and as a tenant in Vancouver, I would like to provide my own comments on the proposed STR regulations for Vancouver. I spent four months this summer working nearly exclusively on the STR file for the City of Nelson and I crafted the amending bylaws that Council has tentatively approved. I had a lot of time to reflect on various issues surrounding STR regulation, to say the least.

1. Seriously reconsider the prospect of tenant-run STRs

While I would not go as far as urging you to disallow tenants from operating STRs, I would urge you to give it some serious thought. It is not insignificant. Nelson staff decided, after much thought, not to permit renters to operate an STR. Most leases disallow it and LandlordBC urges its members to ensure their tenants do not do STR. While it is ultimately the tenant-operator’s responsibility to secure permission, by accepting applications from tenants the City is potentially exposing imprudent tenants to the risk of eviction.

The best way to preserve long-term rental stock is to preserve long-term rental stock. One solution is to offer only one or two 31-day licences per tenant, per year, so as to ensure that they have equal opportunity to make use of their space while away, but that they do not convert a room that could potentially be let to a roommate on a long-term basis. The equivalent of one month’s rental income can be made with only 8 nights of guest stays with Airbnb, providing great incentive not to rent long-term. This is particularly of concern in below-market, affordable housing units.

Be it apartments or condos, there is also the issue, as reported in local media in recent years, of neighbours’ concerns of STR guests being given keys to common facilities such as pools, fitness rooms, and storage. Nelson will require written permission from the strata council before issuing an STR licence to a strata property.

(Ontario has a largely unenforced rule that a tenant may not sublet their rental for more than their landlord charges them, as this is basically rental property flipping and unfairly taking advantage of reasonable rents from (perhaps) reasonable landlords. This means that a $1,000 apartment could not legally be rented for more than $32 per night on a site like Airbnb.)

2. Restrict the number of licences and regulate density

There are surely at least 200,000 primary residences in Vancouver, but Vancouver does not need 200,000 STRs.

It is true that there are not licence caps on other types of business licences, but other business types are subject to geographical restrictions through zoning in a way that STRs are not. There are only so many square feet in the city where zoning allows for retail space; once those are occupied, any prospective future player must wait their turn to get in. STR’s theoretical capacity is practically the entire city, or nearly unlimited, essentially giving STR an unfair advantage and endangering the integrity of Vancouver neighbourhoods.

Nelson is imposing city-wide caps but also density caps. For a city the size of Vancouver, I would recommend taking the census tract approach that Austin and Durango, Colorado, have experience with, limiting the number of STR licences per census tract based a metric such as population, housing availability, etc. per census tract. The density cap is extremely useful in evenly distributing STRs across the city, which benefits local businesses outside of the downtown core. Currently, STRs are concentrated downtown and in the West End, in some of Vancouver’s most livable, walkable neighbourhoods. Surely these neighbourhoods that provide better transit access and a healthy walkability should be opened up a little more to actual residents of the city. Many American cities, big and small, are facing the dire “dark block”, which means a block where nearly all dwellings are STR, leaving literally only a couple actual residents behind, who no longer have any neighbours. STR guests are attracted to the idea of living in an actual, vibrant neighbourhood. Neglecting to impose a density cap puts authentic neighbourhoods at risk.

In Nelson, our consultations with STR operators revealed that most of their guests are not tourists. Rather, they are visitors, coming to visit friends and family who live in average neighbourhoods. As such, those guests do not wish to stay downtown; ideally, they’d be on the same block as the friends or family they are visiting.

Caps, and a clause of non-transferability of the business licence (as recommended by Host Compliance, I believe), help to reduce the risk of STRs contributing to real estate inflation. The case of a Victoria Airbnb condo’s 60% price surge is an example of this risk ( If someone can build up a successful STR over the course of a couple years, and then sell the home with the well-reviewed, 5-star STR listing, which is essentially a guarantee of steady revenue (think of the added-value of selling a successful restaurant brand versus a mere restaurant space), this contributes to real estate creep. STRs should not be considered an of-right land use in residential neighbourhoods. If the next homeowner can be assured that they will easily obtain an STR licence, that property could be worth tens of thousands more because of its profit potential. If the next homeowner potentially may not be issued a licence because of licence caps, the added value disappears and there is no impact on the house price.

Caps do not have to be set in stone; they can be reviewed annually or biannually as the situation unfolds.

3. Create business licence categories for different durations

I completely agree with staff’s recommendation to not impose an unenforceable limit on the number of nights per year. But I strongly urge you to not only issue annual, year-round business licences. Nelson’s consultations with STR operators found that most do not operate year-round. It cannot be considered a typical business. Using technology like Host Compliance, enforcing time-specific licences such as a licence only valid to advertise space for short-term rental for 31 days, is enforceable. For example, if one has a licence valid from August 1st to August 31st and they are found to be advertising space for rent available on September 1st (which Host Compliance can detect), this would be an enforceable violation. Not only is this a gesture of good faith towards the typical STR operator that might only engage for a few weeks or months a year (and should not be expected to pay the same business licence fee as someone who rents 365 days a year), but exclusively issuing year-round licences increases the likelihood of someone doing STR for longer than they would otherwise. That is, once you already have a year-round licence that you bought because you’re going on vacation for two weeks, why not taking full advantage of it, not bother to find a long-term roommate, and do STR year round? Year-round licences are perhaps the biggest threat to long-term housing availability.

Nelson is planning on introducing year-round licences (capped at 110 per year), summer-only licences (May-August; an additional 40 issued per year), and 31-day licences (unlimited, at staff discretion; but only one per property, per year).

4. Licence fees, parking, and residency burden-of-proof

Further down the road, when staff and Council consider the cost of an STR business licence, I strongly urge you to consider a much higher business licence fee than the current $46 B&B licence. Even Nelson’s current B&B licence costs $80 per year, but its upcoming 2017 year-round, entire dwelling unit business licence will cost $800, plus a $30 inspection fee. I will not elaborate by email how staff, Council, and most STR operators who involved themselves in consultations deemed this to be an appropriate figure, but in short, it is justified by the very resource-intensive nature of STR enforcement. (The Nelson Short-Term Rental Owners Association was practically begging the city for $1,000 business licences, providing that most of the money fund affordable housing initiatives.) Some members of the public were also considered about getting STRs to mitigate the wear-and-tear on local infrastructure that they induce through increased tourism, but, as they only pay residential property taxes despite potentially hundreds of paying guests coming to them every year, cannot be recovered when business licences are only $40 or $80. Cities need to consider cost-recovery. A study by the City of Hamilton a few years ago determined that the cost recovery for a B&B business licence was around $270 per year.

I would also recommend reducing parking requirements from the City’s current one additional stall requirement for B&Bs. There is a delicate balance between a community’s needs, enforceability, and maximizing voluntary compliance to facilitate enforcement. Consultations revealed that a principal barrier standing between (currently illegal) STR operators and compliance with existing regulations was a lack of ability to provide parking (i.e. no room on-site, or topographical conditions that would require tens of thousands of dollars to mitigate). As the City does not require additional parking if one acquires roommates, Council agreed to test no additional parking for STR guest rooms. It was acknowledged that in the case of entire-home STRs, the resident household typically vacates the property when guests arrive, meaning—theoretically—no net increase in parking demand. What’s more, Vancouver policy should help to proactively dissuade visitors and tourists from bringing vehicles into the city and having a car-dependent stay!

I encourage you to be careful to not set the burden of proof of primary residence too low. Producing a driver’s licence and a utility bill alone, I believe, opens up the system to considerable fraud. STR operators, by virtue of continuing to operate illegally, have proven to be rather insistent on their right to do STR and their willingness to skirt around regulations to exercise that right. While the principle residency requirement ensures that one person will probably not have more than one STR, it would be fairly easy to buy up a second property, claim primary residency on it, and operate it as a dedicated STR. Nelson decided to up the burden of proof. One example is to rely on the homeowners grant records.

I would like to point out a final finding from Nelson’s consultations with STR operators. The number-one reason for them entering the STR market was because they ‘had had enough’ of ‘dealing with’ long-term tenants and the Residential Tenancy Branch. Any STR regulation strategy that legalises and legitimises STRs must be coupled with added incentives to rent long-term, in order to balance out the market. As a result of this finding, the City of Nelson is proposing a resolution this week at UBCM to help fix the Residential Tenancy Branch.

All the best in your deliberations!


Alex Jürgen Thumm
Graduate student, Urban Studies
Simon Fraser University

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