Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

Home Truths:

Implications of Short-

Term Vacation Rentals

on Victoria’s Housing

Market

An Independent Citizen’s White Paper by Victoria Adams

Victoria, B.C.

1/13/2017

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

Table of Contents

Executive Summary ...................................................................................................................................... 4

Chapter 1. Introduction .............................................................................................................................. 6

1.1 Overview .......................................................................................................................................... 6

1.2 Victoria explores options to regulate short-term vacation rentals ................................................. 8

Chapter 2. Situational Analysis .................................................................................................................. 9

2.1 The shifting housing landscape ....................................................................................................... 9

2.2 Victoria’s rental housing market context ...................................................................................... 11

2.3 Beyond the bravado, buildings and beautiful gardens ................................................................. 12

2.4 Airbnb and the “sharing” economy .............................................................................................. 14

Chapter 3. Victoria’s Short-Term Vacation Rental Market and Long-Term Rental Housing Market ..... 16

3.1 Salient features of the short-term vacation rental market in Victoria .......................................... 16

3.2 Victoria’s long-term rental housing market .................................................................................. 25

3.2.1 Population and housing tenure ........................................................................................ 25

3.2.2 Composition and location of the housing stock ............................................................... 29

3.2.3 Vacancy rates, rents, and demand for rental housing ...................................................... 33

3.2.4 The impact of Airbnb units on the secondary rental housing market .............................. 35

3.2.5 Household incomes of renters and owners ...................................................................... 37

3.2.6 Residential building costs and home prices ...................................................................... 38

3.2.7 Housing market changes and the impact of gentrification in James Bay ......................... 39

Chapter 4. Implications of the Expanding Short-Term Vacation Rental Sector

on Victoria’s Tourist Accommodation Market .......................................................................................... 43

4.1 A snapshot of short-term vacation rentals, long-term rentals,

and tourist accommodation in James Bay ..................................................................................... 45

4.2 What’s missing from this picture? ................................................................................................ 49

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

Chapter 5. Conclusions & Housing Policy Implications ........................................................................... 51

5.1 The social effects of increased tourism and the home-sharing economy on Victoria .................. 53

5.2 Grappling with the consequences of short-term vacation rentals ................................................ 54

5.3 Balancing the conflicting interests of home-owners, renters, and hoteliers ................................ 56

5.4 Recommendations and reflections ................................................................................................ 58

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

Executive Summary

Canadian author Yann Martel has characterized his homeland as “the greatest hotel on earth: it

welcomes people from everywhere”.

This is an apt description of why owners of this second-largest piece of real estate in the world are eager

to capitalize on every underutilized room, empty condo suite, or temporarily vacant home they can.

The question is: What happens to a community or indeed an entire country that sees itself as a

convenient impermanent waystation or a speculative real estate opportunity with no lasting

responsibilities attached?

If you’re Mark Zuckerberg, the immensely wealthy founder of Facebook’s 1.7 billion world-wide fan

club, you have the answer: “find a way to change the game so it works for everyone.”And the name of

the game in the 21

century is maximizing profit just as it has been for hundreds of years. The name of

the game may have changed, based new business models and technologies, but the game always

promises to deliver perks and premiums for all those willing to pay the price. Let no one forget however,

that like all games, there are winners and losers.

In the last decade, there has been an explosive growth in a new game - the online “home-sharing”

market that connects people seeking short-term lodging with those who wish to rent their property to

leisure or business travelers. These platforms charge a fee for hosting residential listings, managing

bookings and payment, and providing additional services such as insurance. Airbnb, the largest of these

home-sharing platforms, established in 2008, is now a company valued at more than $40 billion, with

more than three million listings worldwide and hosts in 190 countries and 34,000 cities.

In 2015, Airbnb hosts with more than 50,000 listings in Canada, provided accommodation to more than

327,000 guests from across the country and elsewhere. Some 935,000 travelling Canadians also stayed

with Airbnb hosts located in the country and beyond its borders. Airbnb says 85 percent of its global

hosts rent out their primary residences in large cities five or six times a month as a modest way to

supplement their income.

This “disruptive” peer-to-peer technology has changed the travel and accommodation landscape

significantly, increasing competition for large-scale commercial hotel operators and smaller

independently owned bed-and-breakfasts. It has also had a significant impact on the traditional rental

housing market in major urban areas which provide permanent accommodation for workers, families,

and retirees.

What these “home-sharing” ventures often overlook is the potential negative impact on permanent

accommodation availability in cities with affordable rental housing crises. In particular, what goes

unmentioned is the fact that the most significant source of home-sharing revenue for Airbnb, VRBO and

other tourist accommodation platforms comes from absentee multiple listing landlords and real estate

speculators who operate entire units or buildings as unlicensed, unregulated, and untaxed commercial

hotels.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

The new ‘collaborative consumer’ model espoused by Airbnb and others is based on leveraging the

existing housing market while generating income and retaining profits outside the formal regulatory and

taxation environment. This novel form of enterprise poses a challenge for local governments: (1) how to

address the severe shortage of shelter together with soaring prices of housing and rents in urban areas

and, (2) how to handle effectively and equitably the complex issue of regulating and taxing this new

transnational home-sharing enterprise.

A 2015 study by Chris Gibbs

of Ryerson University’s Ted Rogers School of Management and the

hospitality consulting group, HLT Advisory, showed the growth of Airbnb across Canada and its negative

impact on hoteliers particularly in four major cities: Toronto, Ottawa, Calgary and Vancouver. The

author concluded his findings with the recommendation that municipalities carefully consider regulatory

and licensing issues relating to the operation of Airbnb and other similar platforms.

This independent white paper explores the issue of home-sharing, in particular, the potential impact of

Airbnb on the rental housing market British Columbia’s capital city, Victoria. It draws on the timely

research of Karen Sawatzky, a former Victoria resident who has just completed her S.F.U. Master of

Urban Studies thesis, “Short-Term Consequences: Investigating the Nature, Extent and Rental Housing

Implications of Airbnb Listings in Vancouver.” Her thesis also considers the important research findings

of the Canadian Centre for Policy Alternatives on the impact of Airbnb in Toronto.

While this paper does not purport to be authoritative academic study, it nevertheless contemplates,

from a thoughtful citizen’s perspective, the overall changes that are taking place in the urban landscape

with a view to assessing the impact of home-sharing in a popular tourist destination. Today, the City of

Victoria has 955 active Airbnb listings, or one short-term vacation rental listing for every 87 inhabitants,

while the neighbourhood of James Bay has one Airbnb listing for every 60 residents

. In addition to

Victoria’s experience with the new lodging model, the author also considers the experience of local

governments expressed by members of the Union of B.C. Municipalities and Tourism Victoria. These

stakeholders try to balance the needs of permanent residents needing affordable, accessible places to

live, while recognizing the need to cater to tourists looking for accommodation be it in hotels and

motels, guest houses and bed-and-breakfasts as well as granny suites and condo units.

This paper provides no definitive answers. It does however create a foundation for citizens, urban

professionals, and decision-makers to discuss issues of home-sharing, the costs and benefits of short-

term rentals to individuals and to the community, and shed light on policy guidelines that may help

develop an appropriate regulatory framework to solve issues related to licensing, compliance, and

enforcement of a burgeoning new sector of the 21

century economy.

Dr. Chris Gibbs, “Airbnb…& The Impact on the Canadian Hotel Industry”, Ted Rogers School of Hospitality and

Tourism Management, (PowerPoint Presentation), June 2016.

http://www.ryerson.ca/content/dam/tedrogersschool/htm/documents/ResearchInstitute/CDN_Airbnb_Market_R

eport.pdf

Zohra Jamasi, Trish Hennessy, Nobody’s Business: Airbnb in Toronto, (Toronto: Canadian Centre for Policy

Alternatives), September 2016.

Data based on third-party analytics firm, Airdna (December 1, 2016) and Airbnb (December 31, 2016).

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

Chapter 1. Introduction

1.1 Overview

The City of Victoria is experiencing a significant redevelopment of its existing housing stock, involving

demolition of older single family homes and low-rise wood-frame apartment blocks, particularly in the

downtown core and in the adjacent neighbourhoods of James Bay and Fairfield.

Victoria is now ranked the second least affordable place to live in Canada. The 2016 Demographia

International Housing Affordability Survey indicates that a home in B.C.’s capital city now has a price tag

that is more than 6.9 times the median household income of the area. In their view, a home in this City

is “seriously unaffordable” to many buyers and is certainly well beyond the financial means of most

renters.

While Victoria may have been named by Conde Nast Traveler as the seventh best city to visit in the

world, tourism being its second largest industry, there remains an unanswered question: Can the City’s

infrastructure be sustained by hospitality alone? Must the City’s permanent residents and their quality

of life be sacrificed in order to attract the lucrative domestic and off-shore transient tourist trade?

According to Victoria.Citified.ca

, the real estate buying frenzy which has seen a soaring market over the

past two years is far from over. One of the top five-busiest months in the city’s real estate history,

reveals that pre-sale prices for new construction and resale homes are hitting new highs as inventory

falls. In other words, the demand for accommodation is outstripping supply in a tight housing market.

The median price for a single-family home in what Mayor Helps calls a “21

century world leading city”

is now $650,000. As for condos, the benchmark price is $371,300 up 22 percent over November 2015.

With a modest increase in the number of condos 171 versus 159 sold over this time last year, and a

consistently low inventory, it takes on average only 33 days to sell a condo unit now (compared to 62

days in November last year), according to The Condo Group

Victoria is now the recipient of affluent newcomers: Vancouverites cashing out on homes and buying

condos here, and Prairie retirees seeking a comfortable climate and cozy condos. The city attracts well-

paid civil servants and an increasing segment of high-tech millennials who like to bike or walk to work.

Added to the mix is a small but growing cohort of overseas investors who are seeking a safe place to

park their funds while their children pursue an education in the city.

Mike Kozakowski, “One year in, Victoria’s real-estate buying frenzy far from over”, Ctified.ca, November 2, 2016.

http://victoria.citified.ca/news/one-year-in-victorias-real-estate-buying-frenzy-far-from-over/

Lisa Helps, “A look back at 2016 with Victoria Mayor Lisa helps”, Victoria News, December 30, 2016, p. A5.

http://www.vicnews.com/news/408809005.html

The Condo Group.com, Victoria Real Estate: VREB Releases its November Numbers, December 2, 2016.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

In this growing capital region economy, we are witnessing increasing income disparities and uneven

distribution of wealth both of which are having a significant impact on the quality of life of residents.

And, as a popular island tourist destination, we are seeing profound impacts on this port city from

millions of tourists flowing through it, in addition to the growing in-migration of financially secure

retirees from the Lower Mainland and elsewhere across the country. Some of the most significant

impacts are felt by tenants who represent 60 per cent of the city’s households. In a tight rental housing

market with a vacancy rate of 0.5 per cent, one can expect to pay an average of a $1,000 a month for a

one-bedroom apartment in Victoria.

It is in this context we see the impacts of economic change playing out in the City of Victoria, particularly

in the competitive housing market. There is a growing trend toward infill densification, demolition of

older homes and low-rise apartments, and replacement with multi-storey condo developments in the

downtown area and surrounding neighbourhoods. In this urban environment, there is an increasing

displacement of tenants as property owners convert their units to cater to the rapidly growing and

highly profitable short-term vacation rental (STVR) market rather than the long-term renters (LTRs).

With more than 1,700 rental condos in the downtown area, many condo owners see a business

investment opportunity in renting out entire suites at premium prices to capitalize on the tourist

demand for non-hotel lodgings.

Not surprisingly, the growth of the short-term vacation rental market now referred to as the “alternative

accommodation” market is also having an impact on the existing hotel industry, half of which is located

in the City of Victoria. The general manager of the Inn at Laurel Point in James Bay says that competition

from Airbnb and other short-term rental services, which has grown to 1,000

or more units, is now a

threat to the hotel industry in Victoria

. To put this in perspective, this new accommodation niche now

represents the equivalent of one-third of the hotel room capacity for the City. (The Downtown and Inner

Harbour is home to 30 hotels with 3,186 rooms.)

The same hotelier pointed out that the STVRs have a distinct advantage over hotels. The Airbnb and

other similar home-sharing units don’t pay the City’s 3 per cent marketing tax on accommodation, the

Province’s 8 per cent room tax, Provincial and Federal Sales Tax or Income Tax. In addition to taking a

bite out of hotel industry revenues, he added that STVRs are now posing an additional concern,

increased pressure on employee housing. Apparently his new assistant manager who recently moved to

Victoria was unable to move into an apartment when the landlord decided instead to list it in on Airbnb.

Canada Mortgage and Housing Rental Market Report Victoria CMA, Fall 2016, p.8.

Insideairbnb.com http://insideairbnb.com/victoria/ on August 1, 2016 reported 1,691 listings for the Greater

Victoria area while Airdna LLC (US) https://www.airdna.co/city/ca/victoria on December 1, 2016 reported 937

Airbnb active listings for the City of Victoria.

Deborah Wilson, “Victoria hotelier calls for fair taxation of Airbnb rentals”, CBC, November 29, 2016.

http://www.cbc.ca/news/canada/british-columbia/victoria-airbnb-hotels-taxes-1.3871973?cmp=rss

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

Housing for hotel and resort industry employees is also a significant issue in the tourist town of Tofino,

B.C. which has recently taken steps to regulate Airbnb rentals.

1.2 Victoria explores options to regulate short-term vacation rentals

It is in this context that Victoria City Council received an October 27, 2016 report from staff on Short-

Term Vacation Rentals

assessing the impact of short-term vacation rentals on the rental housing pool

with options to regulate Airbnb and other similar short-term vacation rental platforms.

This report included a brief opinion on “Short-Term Vacation Rentals Policy” given by a Vancouver-based

urban planning consultant to the City, several personal testimonials relating the benefits of short-term

rentals to property owners. It is interesting to note that Airbnb has established more than 100 clubs for

hosts and guests globally, with the hope that these active home-sharing “community members” will

become a political force to shape local regulation in its favor.

In addition, the report also narrowed the discussion to four possible options for regulating short-term

vacation rentals and summarized their advantages and disadvantages.

1) Prohibit STVRs throughout the city. (This option was not recommended, without referencing the

experience of several tourist destinations

in Florida). Staff’s primary objection is based on the premise

that this option “removes property owners’ existing development entitlements”. There is no

consideration of whether the existence of what some see as ‘pseudo hotels’ in residential

neighborhoods, could lead to disillusionment with local government who may be perceived as

ineffective in protecting the interests of local tax-paying citizens including renters. Note: The City of

Richmond, BC voted on January 10, 2017 to ban short-term rentals, according to The Globe & Mail.

2) Continue to permit STVRs but with limitations.

3) Maintain current development rights in zoning, communicate licensing requirements for data

collection, and prohibit STVRs in affordable housing projects funded by the City.

4) Permit STVRs throughout the city.

Staff recommended option 3 as the best policy option, with a view to continuing to monitor the

situation and discuss it further at a workshop for Council in January 2017.

Jonathan Tinney, Director, Sustainable Planning & Community Development, City of Victoria, “Short-

Term Vacation Rentals”. Report to City Council, October 7, 2016.

https://victoria.civicweb.net/FileStorage/D755644EC04447E0876D7DB7C2D22B84-

report%20short%20term%20vacation.PDF

Chabeli Herrera, “How $20,000 fines have made Miami Beach an Airbnb battleground”, Miami Herald,

November 27, 2016, http://www.miamiherald.com/news/business/biz-monday/article117332773.html

and Gwen Filosa, “Key West cracking down on vacation rentals”, Miami Herald, May 19, 2016.

http://www.miamiherald.com/news/business/biz-monday/article117332773.html

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

Chapter 2. Situational Analysis

2.1 The shifting housing landscape

The United Nations recognizes housing as a fundamental human right; however, there is no guarantee

of the right to shelter for everyone in Canada. What can be said is that governments at all levels are

committed to improving the quality of life for residents by increasing jobs, the tax base, purchasing

power, diversity as well as availability of goods and services, amenities and infrastructure to serve the

needs of the community. At the foundation of this economic development rationale is the notion that

the ownership of private property will spearhead and sustain the growth of communities together with

the health and well-being of people.

In fact, this “home-ownership” ethos is one of the primary guiding principles to ensure the economic

vitality of British Columbia according to the real estate industry:

“Realtors believe home ownership is the dream of most British Columbians and

deserves a preferred place in our system of values. Home ownership contributes

to community responsibility; civic, economic, business and employment stability;

family security and wellbeing.”

It also appears that this thesis of the real estate industry is the rationale behind the City of Victoria’s

housing strategy, particularly with regard to options for regulating short-term vacation rental properties.

The staff report

indicates the preferable option is one that “maintains existing property owners’ rights

in the downtown core where transient accommodation use is permitted” and avoids “removing

property owners existing development entitlements.”

The 2011 National Household Survey (NHS) indicates that housing for 87 per cent of Canadians is

provided through the private market, with than two thirds of households owning their own homes while

31 percent rent. In the province of B.C., 70 percent of households own homes while 30 percent rent.

What is significantly different in the City of Victoria, is that 60 per cent of households (24,820) rent

compared to 40 percent who own their own homes.

Home-ownership in Canada has been consistently subsidized by all levels of government through the tax

system including home-owner grants for improvements such as energy conservation, disability

alterations, etc. From a housing perspective, the introduction of a capital gains tax (with the exception

of a principle residence) and the elimination of investment real estate as a tax shelter for other income

(that resulted in the boom in the construction of apartment buildings prior to 1972) were said to have a

The Victoria Real Estate Board http://www.vreb.org/about-vreb/quality-of-life, p. 4.

Tinney, City of Victoria Short-Term Vacation Rentals Report, p. 6.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

profound effect on the housing landscape across the country.

Removing the incentives to build rental

accommodation encouraged a market shift towards home ownership in the 1970s, particularly with the

rise in popularity of the fragmented home-ownership model, known as strata title properties or

“condominium” units.

During the early 1980s, with a downturn in the economy, the federal government offered interest free

loans to developers in order to increase jobs in the construction industry and subsidize a small portion

of units for low-income and special needs tenants. Increasingly however, the responsibility for housing

has been devolved from the federal and provincial governments to local governments. This shift in the

allocation of increasingly limited tax dollars onto municipal authorities is now placing ever greater

pressures on taxpayers who must also carry the growing and costly infrastructure upgrades for roads,

bridges, and ports, as well as utility, water, and sewage systems.

The housing market in this country has consistently favored home-owners. Canadian housing policy

researcher, David Hulchanski, points out that Canada’s housing system is comprised of a primary and

secondary group, each with its own distinct and unequal range of government activities and subsidies.

The primary part of the housing system represents the majority of Canadian households including most

home-owners and those tenants who live in the higher end of the market. The secondary housing part

consists of tenants in the lower portion of the rental market and lower-income home-owners in rural

areas.

This dual housing policy recognized by all three levels of government assists home-owners and neglects

tenants. Hulchanski suggests that because Canada has never had a policy of tenure neutrality, i.e.

providing assistance to home-owners and tenants equally, the consequence is that the housing policy

has subsidized home-ownership for the past 45 years.

Today’s home-owners in the country, on average have twice the income of tenant households. So, it is

not surprising that housing developers and the municipal authorities, who regulate them, are

committed to supporting the flow of benefits and amenities to wealthier homeowners. These may

include re-writing bylaws such as those in the City of Victoria to encourage urban agriculture revenue-

generating opportunities for property-owners, rain-water rewards to reduce stormwater user fees for

home-owners, segregated off-leash dog walking parks for canine owners who live in private homes as

well as the provision of property tax deferrals for senior home-owners. Few if any of these benefits are

available to tenant households in the City of Victoria, 25 percent of who currently spend more than 50

percent of their before-tax household income on rent plus utilities

What is apparent in this cursory examination of the rental housing market is the dearth of information

available on the status of renters, particularly their current needs and gaps in services. While Canada

Mortgage and Housing (CMHC) collects rental housing data, it does so in a limited fashion, focusing on

The Rental Housing Index, Examining the Rental Housing Market in British Columbia, Hannah M. McDonald, UBC

MSc. Planning Thesis, U.B.C., 2015, p. 5.

Ibid., p. 13.

Ibid., p. 23

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

larger purpose-built rental structures and the break-down of units by key neighbourhoods. However,

CMHC fails to identify smaller purpose-built rentals: apartments (with fewer than 3 units), rented

single-family dwellings/duplexes/triplexes, rented condos, and secondary suites and accessory garden

suites by neighbourhood or by age of structure. As a consequence, the private sector rental housing

market profile remains incomplete at best, ignoring for the most part smaller non-corporate landlord

properties. These house seasonal tenants, particularly students, 80 percent of whom cannot find

accommodation on campus at the University of Victoria.

2.2 Victoria’s rental housing market context

The months-long presence and plight of homeless people living in tents on the grass outside the B.C.

Law Courts in downtown Victoria in 2016, covered by the local and national media, drew attention in a

profound manner to the unresolved crisis of providing shelter for many of our most vulnerable citizens.

Although raised in a family home in the Lower Mainland, I have spent my entire adult life as a renter in

many towns and cities across Canada. Based on my own experience as a tenant for 17 years in my

father’s birthplace, Victoria, I have witnessed the growing gentrification of my own neighbourhood,

James Bay. I have also seen the growing displacement of hundreds of tenants due to the extensive

refurbishment of high-rise apartments and the demolition of older homes replaced by multi-storey

condominiums, well beyond the ability of many middle-income residents to buy or even to rent.

It is disconcerting to live in a place where home-ownership is an unattainable dream for many young

working families. If city centres are transformed into high-rise “smart” glass towers with high security

systems that welcome only well-heeled tourists accommodated in suites owned by absentee landlords,

whose quality of life does the city really support and sustain?

As housing costs soar, even here in a quaint colonial outpost on the southern tip of Vancouver Island,

tenants, who form the majority of the City’s households, are facing a chronic rental shortage,

exacerbated by consistently low vacancy rates. When not faced with eviction due to condo conversions,

hundreds now are threatened by a growing ‘renoviction’ trend in the City. These factors are also

compounded by sharp increases in rents for upgraded apartment units and luxury-priced condos, and

an increasing trend among landlords to impose costly fixed-end leases to avoid rent controls. Not

surprisingly, this precarious state of affairs weighs heavily upon students, seniors, and moderate income

working people whose only affordable option is renting as opposed to buying a roof over their heads.

As if this were not enough, many new condo owners are now purchasing units as investment properties

in the core area and surrounding neighbourhoods, while owners of single-family “character” home are

building garden flats and converting their secondary suites. This is not being done to accommodate

long-term tenants, but rather short-stay vacationers willing to pay premium prices for places near

tourist attractions. This growing trend by property owners, property managers and corporate housing

investors in major cities around the globe who use online platforms, like Airbnb, VRBO and others to

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

market short-term vacation rentals, is now another factor reshaping the urban housing landscape. This

notion of freedom to use one’s property as an investment vehicle rather than a principal residence has

potential negative consequences for many neighbourhoods by potentially limiting options for non-

homeowners to find appropriate and affordable shelter.

This context has prompted me to ask: What is the extent and nature of Airbnb listings in the City of

Victoria? What are the implications of that information in relation to the rental housing market here

as well as possible regulatory options for short-term vacation rentals in the City.

2.3 Beyond the bravado, buildings, and beautiful gardens

The City of Victoria’s Strategic Plan 2015-2018 states that: “Victoria is a leading edge capital city that

embraces the future and builds on the past ... Victoria is a city that is liveable, affordable, prosperous and

vibrant, where we all work in partnership to create and seize opportunities and get things done.”

Prior to the arrival of the European explorers in the late 18

century, Victoria was inhabited by the Coast

Salish Nation including the Songhees and Esquimalt indigenous people. In 1841, the Hudson’s Bay

Company established its first trading post. Later a fort and settlement was built, followed by the City’s

development as a port, supply base and outfitting center in the Gold Rush of the 1850’s. Victoria’s

position as a commercial center gradually diminished with the expansion of the trans-Canada railway, as

roads and infrastructure for the province and growing international trading hub of Vancouver emerged

in the early 20

century.

The provincial capital, incorporated in 1862, is home to a population of 83,000 and serves a

metropolitan administrative center for a region comprised of 360,000 inhabitants. Greater Victoria’s

population is projected to grow by 4.5 percent every 5 years between 2010 and 2025,

while the City’s

population is expected to increase by approximately 20,000, reaching 100,000 by 2041. The most salient

changes in demographics over the next three decades

are the proportion of residents over the age of

65 forecast to increase dramatically from 17% to 29% of the total population. A BMO Wealth Study

recently indicated that 15 percent of Canadian baby boomers are planning to retire in Victoria. During

the same time frame, the proportion of children and young adults is anticipated to decline; families are

encouraged to seek accommodation on the booming West Shore or Saanich peninsula rather than in the

city.

Today, the city’s economy is based on providing jobs in government services, health care, and education

and retail services. The City continues to fulfill its traditional role as a pre-eminent tourist destination

and maritime service sector through its naval base and private sector shipyard maintenance work.

City of Victoria Strategic Plan 2015-2018, Amended February 2016, p. 1.

Mayor’s Task Force on Economic Development and Prosperity, p. 29.

City of Victoria, Official Community Plan – July 2012 (Updated June 23, 2016), p. 21.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

However, the thrust of new economic initiatives is based on diversification through the expansion of a

its preeminent high-tech industry comprised of more than 800 firms with 23,000 employees generating

an annual revenue in excess of $3.5 billion dollars.

Today more than 39 percent of the total income in the region depends on public sector employment,

whereas tourism accounts for six percent of the regional income. Non-employment sources of income

such as pensions, investments, and government transfer payments account for slightly more than one-

third of Greater Victoria’s total income.

The “City of Gardens”, boasts of more than 1,000 hanging flower baskets in summer, offering residents

and more than 4 million visitors annually a taste of its temperate climate, based on more than 2,000

hours of sunshine and 66 cm of rainfall yearly. Among its assets are: Victorian heritage architecture, a

scenic Inner Harbour cityscape, natural green spaces including the venerable Beacon Hill Park, numerous

walking and bike paths, not to mention its historic museum and other cultural amenities that invite both

residents and visitors from afar to enjoy them.

The most pressing urban issues facing the City are those related to land management and development,

significant infrastructure upgrades and transportation network redesign. But more importantly, one of

the critical questions is how to accommodate the anticipated growth in population and changes in the

regional economy over the next several decades. This is no small matter when the city and region are

facing major natural hazards such as earthquakes, wind and storm surges, as well as climate change—

which represent a significant threat to life and property. Little attention has however been paid as to

how to mitigate such risks while furiously expanding high-priced residential development in the core.

Without a serious emergency plan for the City, or a long-term development plan (taking into

consideration high-risk areas and extensive reconstruction following a major disaster re ports, roads,

bridges, utilities and underground services)—citizens and tourists alike would be left to fend for

themselves.

Victoria’s economy has traditionally relied on public administration jobs but these may be curtailed

during long-term slow growth periods, while the tourism sector faces numerable challenges: a strong

Canadian dollar, demanding cross-border security, higher energy costs associated with an island location

and increased competition from the dozen surrounding regional municipalities offering greater supplies

of commercial and industrial land and major retail expansion opportunities.

The most noticeable test, however, will be felt in the capacity of the City to integrate new ground-

oriented housing under the existing zoning structure in a well-built environment. This is also

compounded by the question of how to accommodate high to medium densities in the core area and

housing within the neighbourhoods that is more affordable, and development in village areas that also

supports shops, services and amenities within walking distance of households.

Viatec http://www.viatec.ca/cpages/about

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

Few purpose-built apartments have been constructed over the past four decades. As a consequence, the

market for condominiums, new multi-storey buildings and those converted to condos in high-rise

apartment blocks (particularly in the downtown urban core areas) has increased the competition for

both potential homeowners and real estate investors. Meanwhile, the older rental housing stock (built

prior to 1971) is deteriorating or reaching the end of its life cycle and will eventually need to be

replaced.

With the cost of land and construction in urban areas increasing significantly over the past decade, and

growing servicing costs, municipal governments are expanding their tax base primarily through higher

density, premium-priced multi-storey condominium properties. The growing trend toward

neighbourhood gentrification poses a dilemma. Can affordable rental housing units be built in cities to

fulfill the growing demand for 1) workforce housing, and 2) accommodation for many seniors on fixed

incomes or those with special needs living on modest incomes. There is however a growing divide

among home-owners and tenants when it comes to quality of housing in the city. While new housing

units conform to the new seismic building codes, the old rental housing stock may be receiving a

premium makeover but they are not being upgraded to seismic standards. After a major earthquake, it

will be rental properties that will sustain the burden of catastrophic loss, and it will be tenants who will

be obliged to live without shelter on the streets.

2.4 Airbnb and the “sharing” economy

The fast-growing “sharing” economy is emerging as a disruptive force reshaping the economy in

transportation (Uber and Lyft ride-sharing/delivery services, or Google’s driverless cars), online retail

platforms such as Amazon, social-media information sharing platforms like Facebook and Twitter, or

shared travel accommodation platforms such as Airbnb, VRBO, and HomeAway.

Airbnb, one of the brightest stars of the ‘sharing economy,’ was established in 2008 after their American

founders rented out an airbed in their spare room in San Francisco to bring in some extra cash. Almost

ten million ‘shared’ lodgings listings later, this $40 billion (US) home-sharing digital platform now does

business in 190 plus countries and 34,000 cities— soundly trouncing the business valuations of their

main competition, hotel chains like Hilton, Marriott, and Hyatt, while operating with limited regulation

or oversight.

21, 22,

And, while many celebrate the arrival of juggernaut Airbnb on the urban landscape,

(the largest lodging company in the world, with more than 3.1 million rooms), some see the heart of

their cities imploding, like the people of Paris, France.

Matt Egan, “Hilton: We’re not scared of Airbnb”, CNN, October 28, 2015

http://money.cnn.com/2015/10/28/investing/airbnb-hilton-hotels/

Brian Solomon, “Airbnb Raising More Cash at $30 Billion Valuation”, Forbes.com, Sept. 22, 2016.

http://www.forbes.com/sites/briansolomon/2016/09/22/airbnb-fundraising-850-million-30-billion-

valuation/#540496eb66f2

Alison Griswold, “Paris is blaming Airbnb for population declines in the heart of the city”, Quartz, Jan. 5, 2017.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

This year the company will have booked $12.3 billion

in rentals all over the globe, while the number of

guests is expected to soar to a half-billion by 2025 according to the investment firm Cowen & Company.

Billed as an alternative accommodation service, this privately held company that does not disclose its

revenue or losses, reportedly reached $900 million in revenue in 2015.

This is remarkable for a “gig economy” company, almost a decade old that offers a digital platform

linking home-owners looking to rent out surplus space with travellers seeking a local, non-hotel

experience. Not your average home-sharing short-term sub-letting business, the Airbnb model

promotes and facilitates a variety of financial services including insurance-like products to hosts and

guests, while maintaining centralized control of all listings. In return, Airbnb takes a 3 percent

commission (before fees and taxes) from home-owner “hosts” while “guests” pay Airbnb an additional

service charge of approximately 6-12 percent on all bookings.

The company makes a number of claims concerning its positive impacts on the quality of life in cities

whose “people-to-people platform ...by the people and for the people that was created during the Great

Recession to help people around the world use what is typically their greatest expense, their home, to

generate supplemental income.”

In November 2015, Airbnb launched its “community compact” as a first step in establishing relationships

with the cities in which it does business. The purpose of such a commitment is to “work with our

community [of hosts] to help prevent short-term rentals from impacting the availability and cost of

permanent housing for city residents”.

It is precisely this underlying pledge to its home-sharing partners which is at the heart of whether this

business model serves only homeowners and short-term vacation renters at the expense of long-term

local tenants. Slee (2015)

argues that while the “sharing” economy allows its members “access” to the

use of a variety of assets such as cars, power tools, talents of others and homes (whose owners are

members of a self-regulated network) linked to each other by way of a peer-to-peer platform, the

business model is a form of unregulated monopoly to maximize profits for the platform owners,

intermediaries and retailers.

These alleged benign on-demand home-sharing platforms do more than disrupt the economies of

expensive hotel chains. They foster a new form of privileged consumption, and market ‘lifestyle as a

service’. Locals will find themselves expelled from their homes to satisfy the self-serving needs of short-

term property owners catering to an influx of tourists. This will lead to a precarious, unsustainable state

of affairs for all cultures and subcultures. As contradictions sharpen, politicians and citizens alike will be

asked to choose sides; however, this matter is never addressed in the new STVR policy for the city.

Katrina Brooker, “Airbnb’s Ambitious Second Act Will Take It Way Beyond Couch-Surfing”, Vanity Fair, November

2016, http://www.vanityfair.com/news/2016/11/airbnb-brian-chesky

Tom Slee, What’s Your’s is Mine – Against the Sharing Economy (OrBooks, January 1, 2015)

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

Chapter 3. Victoria’s Short-Term Vacation Rental Market

and the Long-Term Rental Housing Market

3.1 Salient features of the short-term vacation rental market in Victoria

The City of Victoria Staff Report, October 7, 2016 to Council on “Short Term Vacation Rentals”

contains

a selection of testimonials from local residents extolling the benefits of this new tourism industry in

town. These remarks focus, among other things on, ”12 Reasons to support Airbnb and the home-

sharing economy”. These include everything from:

 assisting new home-buyers entering the housing market to pay off their mortgages,

 creating new service jobs as housekeepers, part-time maintenance contractors,

 relieving shortages in hotel space, and

 helping visitors stay in large family mansions that “might be sold, or bulldozed and replaced

(often by foreign owners).

Other Airbnb supporters highlight the “nurturing community” virtues of the Airbnb experience for

visiting grandparents who can stay nearby their families in neigbhourhoods, as well as offering respite

places for hospital patients, home-stay locations for visiting students and as “affordable getaways after

exams”. They go further by suggesting that by sharing secondary suites in homeowner-occupied houses

and making connections with guests near and far, hosts can make an income that allows them to keep

their homes and make a valuable contribution to local economy without any measurable negative

impact on the existing rental stock in Victoria.

Apparently the Airbnb data shared by these supporters revealed that 539 hosts earned an average of

$5,700 annually for 49 days worth of tourist accommodation, generating more than $3 million in

revenue for the hosts and additional guest expenditures of $5,128,000 for the local economy.

However, what these testimonials didn’t say is that if these tourists came to Victoria, they would have

spent their money on a host of goods and services whether or not they stayed in Airbnb units or in a

hotel. Furthermore, where is the evidence to assert that a tourist in Victoria is worth more than a

permanent resident? Tenants pay rent, buy groceries and other goods and services, pay income taxes,

property taxes and utility fees. Airbnb tourists pay no lodging taxes, no sales tax - in fact, many receive

GST rebates on their expenditures if they live outside of Canada.

Whatever one may think of the ‘home-sharing’ philosophy, the ever expanding mission of Airbnb is not

only to become the premier if not global leader in the home-rental business but also a travel

Liza Rogers, Community Connector & Consultant attachments and testimonials regarding support for Airbnb

enterprises and the home sharing economy in Jonathan Tinney’s, Short-Term Vacation Rentals Report, City of

Victoria, October 7, 2016.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

entertainment and activity broker to sell all sorts of services such as guided tours, musical outings, as

well as transportation services which could put Airbnb in direct competition with other gig economy

transport companies like Uber, Lyft and Google.

While there are no doubt many benefits that hosts derive from operating Airbnb rooms, suites, and

entire homes, there is a growing body of anecdotal evidence that many of these alternative rental

accommodations are located in the same areas that have a higher proportion of rental housing stock in

the core areas and surrounding neighbourhoods. In an environment of soaring land values and

premium-priced high-density multi-storey private developments in popular seaside tourist destinations

(e.g. Victoria, Vancouver, San Francisco, Barcelona, or Venice), and skyrocketing rents due to a dwindling

supply of affordable rental housing stock, long-term tenants (LTRs) are facing displacement pressure

from new condo-dwelling investors and corporate Airbnb operators in these areas.

Enterprising property owners are seeking ever more profitable ways to maximize their return on their

investment by converting affordable housing to unlicensed online hotels. The short-term vacation rental

model, promoted by companies like Airbnb, poses serious questions as to whether long-term tenant

needs are being sacrificed in favor of a city that expands its tax base by rewarding home-owners. Those

without security of housing tenure are increasingly sent to the periphery of cities if not the hinterlands,

where even less rental housing stock is available.

They City of Victoria’s short-term vacation rental (STVR) market, (approaching almost 1,000 units) is

approximately 15 percent the size of the Vancouver market.

Table 1 - Growth of Airbnb Active Listings in Victoria 2008-2016

2008 1 2013 133

2010 5 2014 256

2011 22 2015 535

2012 62 2016 938

Source: Airdna LLC (US) https://www.airdna.co/city/ca/victoria - December, 2016.

Victoria has seen the spectacular growth of Airbnb units since the founding of the company in 2008.

Particularly since 2012, the number of Airbnb listings has grown 15 fold consistent with a sharp increase

multi-storey condominium construction projects in the downtown core and VicWest as well as mid-rise

condos in James Bay.

Why do landlords prefer Airbnb guests to long-term tenants? Owners maintain flexibility and control in

deciding who, when, what length of time, and how much to charge the occupant. They are not governed

by any rent controls or tenancy legislation nor are they subject to any taxation or health and safety

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

licensing requirements. Furthermore, payment is upfront and guaranteed by the booking platform;

reviews are given for both prospective tenants and landlords, and through Airbnb’s liability insurance

option, any damage and repair costs related to guests are covered up to a value of one million dollars.

A Report to Council by the City of Victoria’s Economic Development Office, dated October 16, 2014,

indicated a recommendation by staff to “continue strategic discussions with Airbnb towards a possible

working partnership to address the core areas of concern.”

This report summarized a few salient Airbnb statistics underlining the importance of this new revenue

generating segment of the market benefitting homeowners with implications for the tourism industry.

Apparently after Airbnb announced its first partnership with Portland, Oregon, the City of Victoria

contacted the company “to express an interest for Victoria to be a partner in Canada”.

In 2014, it was reported that more than 1,019 hosts used Airbnb since 2008, of whom 354 had active

listings in 2014 serving 7,336 guests (April 2013-March2014), equivalent to 30,017 guest nights with an

average length of stay of 4.1 days. The staff report further reported that “the demographic using this

site is just the type of visitor we want in our downtown.”

The report also highlighted the City’s “core areas of concern” in order to:

 “adapt and evolve as and where necessary the wording of our relevant zoning and bylaws

covering the needs of those home owners providing their homes for short term rentals through

sites such as Airbnb”;

 “working to ensure a more even playing field for short-term accommodations by evolving

towards a fair taxation approach (i.e. applying something similar to the hotel tax for Airbnb

listings)”;

 “working to ensure that Airbnb listings are available for emergency accommodations if required

in the event of a disaster”;

 “shared promotion of the city and neigbourhoods and local businesses as a leading tourist

destination”.

In 2016, the City of Victoria adopted amendments to the Zoning Regulation Bylaw to reduce parking

requirements for secondary suites. It also revised regulations for such suites “to develop and implement

programs and events to assist homeowners who may be interested in adding a new secondary suite—or

legalizing an existing secondary suite—to understand the benefits and possibilities associated with

secondary suites, and the requirements that must be met to establish them.”

Sage J. Baker, Economic Development, City of Victoria, Memo to Council: “Update re possible partnership with

Airbnb”, October 16, 2014.

Jonathan Tinney, Director, Sustainable Planning & Community Development, City of Victoria, Memo to Council

Re: Secondary Suites – Part I Regulatory Changes, October 28, 2016, p. 1.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

While these changes were made ostensibly to increase the number of livable, safe and affordable

secondary suites as a rental option in the City, the thrust of this initiative was to offer developers a

“proven way of adding gentle densification to neighbourhoods” as well as “improving affordability for

homeowners by increasing their buying power at time of purchase, and offsetting mortgage costs

through the course of ownership”.

This newly minted regulatory change simply means the City will not only allow homeowners to enhance

the value of their property but also offer them a new income stream by legalizing the rental of

secondary suites. The highest rate of return these days is a short-term vacation rental (the average

being $118/night in Victoria versus the average long-term rental of $33/night).

In the absence of a housing inventory for Victoria or the Capital region, there are no statistics on the

actual number of secondary and garden suites in the city. Time will tell whether these changes in bylaws

will house more long-term renters in a market with 0.5 vacancy rate or whether they will simply

enhance the income of home-owners at the expense of tenants. It also remains to be seen whether

supporting online platforms that support the independent travelling public is simply a way of facilitating

high-profit short-term rentals for landlords in urban centres while doing little to contain rising rents and

protect dwindling rental housing stock.

The City may have expressed its concerns about the growing presence of an alternative accommodation

industry; clearly, it has a keen interest in facilitating the growth of its residential tax base. Civic

politicians have many expectations to meet. These include satisfying the complex needs of real estate

development interests, a growing number of personal and commercial home-sharing enterprises, as

well as promoting its traditional hospitality industry partners.

Many of the Airbnb listing photos and descriptions reveal they are located primarily in recently

constructed premium priced high-rise condos with panoramic views of the Inner Harbour and the U.S.

Olympic peninsula. Still others are located in larger “character” homes with self-contained suites or

accessory garden cottages in the city’s upscale neighbourhoods of James Bay, Fairfield and Fernwood.

These patterns in the Victoria market reflect similar Airbnb results world-wide, where their lodging

portfolio is comprised of two-thirds full-time entire units (almost half of which are condo or apartment-

like accommodation) and the remainder are rented as private rooms.

While modest growth in new housing units has occurred in many of Victoria’s neighbourhoods with the

exception of the Downtown core, Harris Green, and VicWest (2006-2011), the largest concentrations of

Airbnb units has occurred in neighbourhoods with the highest proportion of rental units: Downtown,

Harris Green, Fairfield and James Bay. (See Table 2 below.)

Ethan Wolff-Mann, “The Big Reason why Airbnb terrifies the hotel industry”, Yahoo Finance, Jan. 5, 2017.

http://finance.yahoo.com/news/airbnb-dwarfs-hotels-in-room-availability-162135372.html

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

Table 2 - City of Victoria Neighbourhood Analysis of Airbnb listings versus Total Number of

Housing Units, % Change in Number of Housing Units 2006-2011, and Housing Tenure

No. %Airbnb

Airbnb Entire

Listings Listings/

(Ave. % Multiple Total No. % Change (%) Units

Price Units Housing Housing Units Rented

Neighbourhood per night) Listings Units 2006-2011 Owned

Burnside Gorge 10 ($120) 90/0 2,795 1 1,755 (63%)

1,040 (37%)

Downtown 134 ($127) 87/40 1,425 68 1,040 (73%)

385 (27%)

Fairfield 85 ($117) 75/31 6,780 1 3,735 (55%)

3.045 (45%)

Fernwood 66 ($ 97) 71/70 4,840 -2 3,095 (64%)

1,750 (36%)

Gonzales 22 ($120) 73/41 1,710 1 500 (29%)

1,205 (71%)

Harris Green 15 ($108) 87/20 1,350 11 875 (65%)

475 (35%)

Hillside-Quadra 28 ($ 81) 50/14 3,685 -1 2,205 (60%)

1,475 (40%)

James Bay 123 ($141) 75/58 6,695 0 4,645 (69%)

2.045 (31%)

Jubilee 22 ($101) 73/41 2,945 -1 1,780 (60%)

1,165 (40%)

North Park 32 ($ 88) 69/28 2,120 1 1,640 (77%)

480 (23%)

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

Oaklands 24 ($ 94) 67/29 3,115 1 1,315 (42%)

1,800 (58%)

Rockland 34 ($139) 53/47 1,830 -2 1,025 (56%)

805 (44%)

Victoria West 45 ($117) 71/40 3,675 16 1,860 (51%)

1,815 (49%)

TOTAL 640 ($118) 74/41 42,995 3 25,475 (59%)

City of Victoria 17,485 (41%)

Sources:

Murray Cox, InsideAirbnb.com – Victoria Airbnb listings, August, 1, 2016

Statistics Canada 2011 National Household Survey (City of Victoria website)

This data reveals that neighbourhoods with the highest proportion of rental units, also have the highest

Airbnb rates per night (with the highest proportion of entire units in either newly built condos

downtown and neighbourhoods within walking distance of the core area or in large character homes

situated in Rockland).

As the Table 3 below indicates, there are several noticeable differences between the Victoria and

Vancouver Airbnb statistics provided by Murray Cox (insideairbnb.com):

 higher proportion of Airbnb units in Victoria are for “entire homes”;

 higher proportion of multiple listings in Victoria (indicating they are likely to be operating as

commercial enterprises as opposed to mortgage helpers);

 higher percentage occupancy, longer stays, and higher estimated monthly income for Airbnb

hosts in Victoria.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

Table 3 - Vancouver & Victoria Comparative Airbnb Statistics – 2015/16

Area Total % Entire % Occupancy Price/ Est. Mthly. % Multiple

Listings Homes (days occup.) Night Income Listings

CRD 1,691 66.6 31 (114) $124 $1,041 40

Victoria 640 74.4 38 (139) $118 $1,277 40.5

James Bay 123 74.8 35 (126) $141 $1,328 57.7

Downtown 134 87.3 45 (165) $127 $1,681 39.6

Vancouver 4,728 67.2 24 ( 87) $127 $ 844 33.3

Downtown 999 80.9 32 (116) $157 $1,386 42.6

West End 593 70.3 26 ( 98) $118 $ 832 28.3

Kitsilano 567 71.8 20 ( 72) $140 $ 745 25.6

Sources:

Inside AirBnB – Vancouver (neighbourhoods) published Dec. 3, 2015 -

http://insideairbnb.com/vancouver/

Inside AirBnB - Capital Regional District and City of Victoria (neighbourhoods), published Aug. 1, 2016 -

http://insideairbnb.com/victoria/

What both Victoria and Vancouver Airbnb listings show is that the majority of listings are for “entire

homes”. Many of these units are rented for more than 100 days per year (consistent with other

metropolitan areas where Airbnb operates), suggesting that the owners are not using these units as

their primary residences. Furthermore, the largest concentration of the home-sharing listings is in the

downtown core and contiguous neighbourhoods that are in close proximity to major tourist attractions,

entertainment, and restaurants.

A case can be made that those who are offering “entire homes” to travellers as opposed to long-term

tenants are now fuelling a growing Airbnb sub-economy comprised of third-party property management

companies. The purpose of these intermediaries is to help absentee owner “hosts” maximize their

return on their assets by offering “guests”, concierge and security services as well as housekeeping and

personal transportation and guide services.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

While it is true that over 80 per cent of Airbnb hosts in Victoria offer single listings, as is shown in Table

4 below, the most lucrative segment of the short-term rental business (now euphemistically called a

“home-sharing club”), comes from multiple listings. These are property owners or management firms

offering two to five or more listings with higher-occupancy rates than single unit owners. These

commercial interests, representing real estate developers or investment firms, often purchase multiple

units in large residential strata title complexes are now operating flexible accommodation enterprises

that rival the existing lodging industry. They have little incentive to serve the housing needs of long-term

tenants.

Table 4 - A Profile of City of Victoria Airbnb Active Listings, December 2016

Total Number of Airbnb Active Listings (Dec/16): 937

 337 in Downtown (36%); 140 in James Bay (15%)

 (49%) other neighbourhoods

Total Number of Airbnb Hosts: 647

 532 hosts – single listing (82%)

 115 multiple listing hosts (18%)

o 73 hosts – 2 listings

o 18 hosts – 3 listings

o 10 hosts – 4 listings

o 14 hosts – 5+ listings

694 listings (74%) are available for rent 4-12 months a year

243 listings (26%) are rented 4-12 months a year

Total Number of Airbnb Listings

Victoria (August 2015-August 2016) 955

Source: Airdna LLC (US) https://www.airdna.co/city/ca/victoria - December, 2016.

According to the documentation provided in the Staff Report to Council in the Fall of 2016 on Short-term

Vacation Rentals

, 539 hosts in 2015 hosted 16,070 guests (more than double 2013-14), typically about

49 days during the year for an average stay of 3.5 days generating an annual income of $5,7000 for a

typical host. This is however only a partial picture of the Airbnb “sharing” economy in Victoria.

Using the December 2016 Airdna statistics (based on 937 active listings) and a nightly average price of

$125 for units in Victoria, the smaller multiple listing hosts generated more than $10 million for their

owners, while the single unit hosts representing more than 80 percent of the owners generated slightly

Tinney, City of Victoria Short-Term Vacation Rentals Report, Attachment 2, October 7. 2016.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

more than half of that total. In other words, this novel home-sharing industry is putting more than $15

million annually into the pockets of homeowners, yet it remains untaxed and unregulated.

What these short-term vacation rental statistics show is that in the traditionally low-season for the

hospitality industry, in December 2016, there were 937 Airbnb listings and 410 Vacation Rentals By

Owner (VRBO)—i.e. a minimum of 1,347 home-sharing listings for the City of Victoria.

On December 29, 2016, the Airbnb website indicated 300+ listings for Victoria, showing an average

nightly rate of $125 for shared rooms and entire units, and an average of $129 per night for entire units.

In the upscale neighbourhood of James Bay, there were 180 listings with an average nightly rate of $137.

More significant is the fact that 76% of these Airbnb listings were for entire units that garnered an

average nightly premium of $159.00.

The most lucrative Airbnb units are those operated as multiple long-term vacation rental listings. These

“hosts” do not reside on the premises and operate these units as commercial accommodation

enterprises through a property management or real estate development company. These multiple

listing owners represent more than 20% of all listings that generate almost 70% of the revenue,

estimated to be more than $10 million annually for the City of Victoria market.

It remains to be seen whether those engaging in enterprising home-sharing activities (i.e. homeowners

and online peer-to-peer accommodation platforms like Airbnb and VRBO) are willing to “share” both the

benefits and the burdens of taxation and regulation like other sectors of the economy.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

3.2 Victoria’s long-term rental housing market

3.2.1 Population and housing tenure

The City of Victoria, with a population of 80,017 as of the 2011 census

is the 14

largest city in British

Columbia and the capital of the province.

It represents 22.2 percent of the Capital Regional District population of 359,991, occupying only 2.9

percent (19.47 sq. km.) of the region’s land base. The proportion of the city’s population to the region

has dropped only slightly since the turn of the millennium when it registered 22.8 percent (74,125).

The second largest muncipality by population in the region after Saanich, Victoria has population density

of 4,109 per sq. km., and a growth rate of 2.5 percent, lower than the region’s (4.3 percent).

The boundaries of Victoria’s 12 neighbourhoods provide bearings for situating the population, and

residential dwellings, and hotel zones within the city (see Figure 1 below).

Figure 1 – Boundaries of Victoria’s 12 Neighbourhoods

Source: City of Victoria website

Focus on Geography Series, 2011 Census, Subdivision Victoria CY - https://www12.statcan.gc.ca/census-

recensement/2011/as-sa/fogs-spg/Facts-csd-eng.cfm?LANG=Eng&GK=CSD&GC=5917034

City of Victoria

Permanent Rental

Housing and Short-

Term Vacation

Rentals found in all

neighbourhoods

but concentrated

in Downtown &

James Bay which

are also the

primary Hotel

Zones.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

The 2011 Census reveals that the age group 0-14 years (7,285) accounted for 9.1% of Victoria’s

population, while the working age population 15-64 (58, 025) represented 72.5%, with the largest

cohort being those aged 25-29. Almost 15,000 seniors – those aged 65 plus accounted for 18.4% of the

population, almost 4% higher than the national average. The median age of Victorians is 41.9, which has

increased slightly from 41.6 in 2006.

Of the 42,960 households residing in the City in 2011, approximately 34% lived in family units (with or

without children). However the largest segment of Victoria households 21,070, were single-person

households representing 49% of all households, a considerably higher proportion than live-alone

households in B.C. (28.3%), and Canada (27.6%).

As Table 5 below indicates, the two most populous neighbourhoods in the city are Fairfield (11,650), and

James Bay (11,240), (both of which lie adjacent to the Downtown core sharing access to Beacon Hill Park

and views of the Inner and Outer Harbour) and comprise almost 30 percent of the City’s population.

Table 5 - City of Victoria 2011 Population by Neighbourhood

Neighbourhood

2011

Percent

Burnside

5,860

7.3%

Downtown

2,740

3.4%

Fairfield

11,650

14.6%

Fernwood

9,425

11.8%

Gonzales

4,175

5.2%

Harris Green

1,870

2.3%

Hillside Quadra

7,245

9.1%

James Bay

11,240

14.0%

Jubilee

5,240

6.5%

North Park

3,050

3.8%

Oaklands

6,825

8.5%

Rockland

3,490

4.4%

Victoria West

6,805

8.5%

Total

80,015

100.00

Source: Statistics Canada Census 2011

According to the City of Victoria’s 2012 Official Community Plan, it is anticipated that over the next three

decades “at least 20,000 new residents and associated housing growth is shared across the city in the

following approximate proportions: 50% in the Urban Core; 40% in or within close walking distance of

Town centres and Large Urban Villages; and 10% in Small Urban Villages and the remainder of the

residential areas.”

City of Victoria, 2012 Official Community Plan, p. 34.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

As seen in the map below, the Urban Core area (peach through burnt umber/red hues), includes a

significant portion of Victoria West, Downtown, Harris Green, part of North Park, and the Inner Harbour

side of James Bay. This is also the area that has seen the highest concentration of new condo

construction and Airbnb growth in the City of Victoria since 2012.

Source: City of Victoria, 2012 Official Community Plan, p. 36

The City of Victoria reported in 2015

that of the new housing development units applied for from 2012

to 2015, 64% were located within the Urban Core, while 21% were located in or within walking distance

of a Town Centre or Large Urban Village, 15% were located in a Small Urban Village or the remainder of

the residential areas. In 2015 alone over 80% of the new development occurred within the Urban Core.

City of Victoria, Official Community Plan Annual Review 2015, p. 12.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

This is the high-growth, high-density condo development target area, as well as where one also finds a

concentration of premium-priced short-term vacation rental units.

It is anticipated that Victoria will accommodate a minimum of 20% of the region’s cumulative new

housing units over the next three decades, while the urban Core is expected to accommodate a

minimum of 10 percent of the region’s cumulative new housing units to 2041. In 2015, Victoria had

accommodated 51% of the region’s new housing units (total new units = 1,986), while the Urban Core

had accommodated 22% (436 units)

Despite the rising cost of housing during the last three decades, the trend of ownership in Victoria has

been increasing from 34% in 1986 and 1981, 37% in 1996, 37.5% in 2001, 40.5% in 2006 and 41% in

2011. Tenants currently represent 59% of all Victoria occupied dwellings, which is the highest proportion

in of all municipalities and towns in the Capital Regional District which has an average 34%.

As Table 6 indicates the neighbourhoods with the highest proportion of rental units are in the Urban

Core (including Downtown, Harris Green, and North Park), as well as Fairfield, Fernwood, and James Bay.

Table 6 - City of Victoria 2011 Housing Tenure by Neighbourhood

Neighbourhood

Total Units 2011

Rented Units (Percent)

Burnside

2,795

1,755 (63%)

Downtown

1,425

1,040 (73%)

Fairfield

6,780

3,735 (55%)

Fernwood

4,840

3,095 (64%)

Gonzales

1,710

500 (29%)

Harris Green

1,350

875 (65%)

Hillside Quadra

3,685

2,205 (60%)

James Bay

6,695

4,645 (69%)

Jubilee

2,945

1,780 (60%)

North Park

2,120

1,640 (77%)

Oaklands

3,115

1,315 (42%)

Rockland

1,830

1,025 (56%)

Victoria West

3,675

1,860 (51%)

Total

42,955

25,475 (59%)

Source: Statistics Canada 2011 National Household Survey

Tenants are being squeezed in terms of a dwindling housing stock, vacancy rates below 1 per cent, and

consistently high rents. And, it is long-term tenants who are also facing the impact of a growing “Airbnb

effect”. In fact, alternative short-term lodging is now seen as a more profitable business opportunity

than providing long-term accommodation to the majority of the population: working households and

modest income seniors who live side by side with tourists in nearby Airbnb units, licensed bed and

breakfast, and hotels.

City of Victoria, Official Community Plan Annual Review 2015, p. 14.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

3.2.2 Composition and location of the housing stock

As of the 2011 Census, there were 42,955 private dwellings in Victoria’s 12 neighbourhoods with a

modest growth of 3 percent in the city’s overall housing stock since 2006. Approximately 70 percent of

the City’s housing stock was built prior to 1981, with half of that construction occurring prior to 1961.

Little new housing stock has been added to the City, only 4,995 units (12%) between 1981 and 1990,

with a slower rate of increase (10%) in the period 1991 and the turn of the century when 4,240 units

were added. The years 2001-2011 saw a further decline to 8% in new construction, with only 3,550 units

added to the housing stock.

Figure 2 below reveals that apartments account for the majority of Victoria’s housing stock, with slightly

more than 50% comprising low-rise multi-family rental accommodation with approximately 17 percent

representing more than five storey apartment complexes.

Source: Statistics Canada Statistics Canada Census 2011

What these statistics do not reveal is the fact that in 2016, the City of Victoria lost 158 housing units in

its apartment pool, while 289 units were added to the condo rental pool, and more than 400 units of

accessory housing were added to the Greater Victoria housing stock.

What is often overlooked is the fact that between 2015 and 2016, Airbnb, a growing competitor in the

rental housing market, leveraged an additional 403 units from the existing City of Victoria housing

inventory to satisfy the needs of vacationers.

Figure 2 - City of Victoria - 2011

Percentage of Housing By Type

Single/Semi-Detached

House (18.3%)

Town/Row House

(5.2%)

Apartments (76.5%) ,

51 % of which are

fewer than 5 storeys

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

The table below presents a snapshot of the rental housing type in the Victoria Market, in 2010 and 2016.

Table 7 - City of Victoria Rental Housing Market Breakdown, 2010 and 2016

Housing Type

2010

2016

Change

Apartment

Bachelor

2,161

2,268

+107

1 Bedroom

9,378

9,615

+237

2 Bedroom

4,111

4,238

+127

3 Bedroom

175

189

+ 14

Total

15,825

16,310

+485

Condominium

All rented units

2,506

3,195

+689

Other Secondary

Rentals

Single Detached

Semi-Det., Row, Duplex

Other Secondary Suites

5,400

6,000

+600

Total

23,731

25,195

1,774

Source: Canada Mortgage and Housing, Victoria CMA Rental Housing Market Reports, 2010-1016

1,2

Estimated number of Victoria households living in rental houses, secondary and garden suites based on Victoria

households representing 28% of the total Victoria CMA households identified in the CMHC Rental Housing Market

Reports 2012 and 2016.

Purpose-built apartments represent about 65% of the private rental accommodation market, rented

condominiums - 13% of the market, with the remaining 24% representing secondary rentals in houses

(single detached, semi-detached, row houses, as well as accessory suites and garden suites). The most

significant growth has taken place in one-bedroom units comprising almost 59 percent of the purpose-

built rental apartment stock.

One business publication

in June, 2016 reported that Victoria’s hot real estate market is making it

much more difficult for tenants to find accommodation in an already chronically tight rental market,

with a vacancy rate now below 0.6%. There may be 50,836 rental units in the Capital Region but not

enough to meet the demand. Often 30 to 40 prospective tenants turn up at open houses for new rental

housing units.

According to the City of Victoria’s 2012 Official Community Plan and Victoria’s Housing Strategy 2016-

2015

, over the next decade, the city will need an additional 13,500 apartment units (of which 3,000 are

expected to be new market and affordable rental units with 550 units allocated for families while the

remainder will be private condo units). In addition to the addition of apartment-type units, the city

Business in Vancouver, “Victoria landlords swamped by tenant demand”, June 26, 2016

https://www.biv.com/article/2016/6/victoria-landlords-swamped-tenant-demand/

City of Victoria Housing Strategy 2016-2025, p. 4.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

expects to build more than 2,700 ground-oriented units to accommodate another 20,000 residents by

2041.

With 1,524 rental apartments currently under construction in Victoria and another 1,070 approved by

the City, according to a survey conducted by Colliers International, tenants should be relieved. But often

they are in for a surprise when they learn that the new rents for these small units often exceed $1,775 a

month in a building designed to meet the needs of a moderate-income work force.

The changing landscape for rental housing means that the average price “per door” for a Victoria rental

apartment building is now $185,500, up from $152,200 a year ago, while the average capitalization rate

on smaller Victoria rental buildings is 4.3 percent, about one percent higher than the average in

Vancouver, where the per-door price for apartment buildings is now in excess of $240,000.

While other secondary rental units estimated to represent less than one-third of the rental housing

stock in the city, little is known about this sub-component of Victoria’s rental housing market.

Victoria has seen a growth in construction of residential strata title (fragmented ownership) units or

condominiums, particularly since the turn of millennium. By 2010, there were 11,064 condo units in the

city. And, by 2016 condos represented the largest segment of the new housing market in the City of

Victoria with an additional 1,400 units, bringing the total to 12,553 strata title units.

Between 2010 and 2016, there has been a steady growth of rental condo units in Victoria from 2,506 to

3,195. The number of rental condo units built now exceeds the number of new apartments and

secondary unit increases recorded between 2010 and 2016. And, over the past five years, the

proportion of condos in the City’s strata title rental pool has gone from 22.7% to 25.5%.

According to the Canada Mortgage and Housing Corporation’s Fall 2016 Rental Market Report for the

Victoria Census Metropolitan Area, there were a total of 16,310 rental apartment units in the city, 158

less than the previous year.

The current CMHC neighbourhood apartment rental distribution breakdown is as follows:

 17% is located in Cook Street Area (Fairfield neighbourhood with 2,793 units);

 21% is located in James Bay with 3,461 units;

 29% is located in Fort Street Area (Downtown with 4,606 units);

 33% is located in the remaining 9 neighbourhoods, accommodating 5,450 apartment units.

While the City shows a general increase in housing units overall for the period 2010 to 2016, what is

however significant in this year over year CMHC apartment rental housing data is the loss of 5 per cent

(179 of the apartment units) in the James Bay area between October 2015 and October 2016.

Rental Market Statistics, City of Victoria, Fall 2016, based on previous figures reported from CMHC Rental

Market Housing for Victoria CMA, 2010-2015.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

In fact, this neighbourhood has seen a steady decline in the total number of purpose built apartment

units from 3,656 to 3,461 over the past four years. This neighbourhood is also witnessing an average of

5 demolitions dwelling units annually to make way for mid-rise condo developments as well as major

condo housing projects like Capital Park and the growth of Airbnb rental units in the same

neigbhourhood.

While the CMHC statistics provides a general breakdown of apartment rental housing units by general

areas, there is no similar breakdown of the condo rental housing market.

As can be seen by the table below, by far the most predominant form of housing development in the

period 2012-2015 has been the increase in multi-storey condominium developments focused in four

neighbourhoods:

 Downtown,

 VicWest,

 James Bay, and

 Fairfield.

These neighbourhoods are also those with the highest proportion of rental units in the city, and the

highest concentration of short-term vacation rental units in Victoria.

Table 8 - Condo Unit Development Permits Issued in Victoria 2012-2015

Neighourhoods 2012 2013 2014 2015 Total

Burnside Gorge 19 13 21 0 53

Downtown 290 33 113 221 657

Fairfield 9 36 13 104 162

Fernwood 2 2 36 35 75

Gonzales 1 24 0 0 25

Harris Green 93 0 0 0 93

Hillside Quadra 0 0 0 0 0

James Bay 57 92 12 28 189

Jubilee 0 0 9 0 9

North Park 0 6 8 0 14

Oaklands 0 9 1 16 26

Rocklands 0 0 0 22 22

Vic West 212 0 69 3 284

City of Victoria 683 215 282 429 1,609

Source: City of Victoria, Official Community Plan Annual Reviews for 2015 and 2016.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

With more than a two fold increase in the number of condo permits issued between 2012 and 2016, it is

not surprising to see a simultaneous phenomenal growth of short-term rental units in the city—

reflected in a 15 fold increase in Victoria’s Airbnb listings from 62 units in 2012 to 938 in 2016. (see

Table 1). The vast majority of these listings are for newly constructed condo units in the downtown area,

James Bay, and Fairfield.

3.2.3 Vacancy rates, rents, and demand for rental housing

The 2016 CMHC Rental Market Survey indicated that the vacancy rate in the Victoria CMA declined to

0.5 percent in October 2016. While the vacancy rate in the City of Victoria saw a steady increase from

1.3% in 2010 to 2.4% in 2013, it has been on a downward trend to 1.3% in 2014, and .6% in 2015

(compared to an average of 3.5% for the national vacancy rate).

Despite the introduction of new units to the rental housing market, supply remained constant as older

housing units were removed from the market for renovation. With a limited increase in supply and an

increase in demand that resulted from 2,100 new households moving into the Capital Region in 2016,

the vacancy rate declined. The largest group of migrants into Victoria are the 16-24 age group who are

more likely to rent than to buy.

The City of Victoria reported 158 fewer housing units than the previous year as aging units were

removed from the overall housing stock for renovation, particularly in the James Bay neighbourhood.

As can be seen from Table 9 below, the City experienced close to a 6 percent increase in rents, with

James Bay seeing an average rent hike of 7.5% as older multi-storey apartment blocks are refurbished

while more five-storey condo units are being built to replace aging single-family dwellings.

Table 9 - City of Victoria Selected Private Rental Housing Statistics for 2016

Zone

Vacancy Rate

Availability Rate

% Change of Average

Room Rent Since 2015

Apartments

Cook Street Area

0.5%

0.7%

4.0% ($ 980 ave.)

Fort Street Area

0.3%

0.9%

4.8% ($ 987 ave.)

James Bay Area

0.8%

1.3%

7.5% ($1,075 ave.)

Remainder of City

0.5%

1.0%

6.7% ($ 964 ave.)

All 4 Areas of City

0.5%

1.0%

5.9% ($ 997 ave.)

Rented Condos

City of Victoria

0.7%

Not avail.

- 1.9% ($1,419 ave.)

Secondary Rentals

Victoria CMA

Not Avail.

Not avail.

1.9% ($1,289 ave.)

Source: CMHC Rental Market Report, Victoria CMA, Fall 2016

City of Victoria Housing Report 2015, p. 9.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

In contrast, rental condos in the city saw an average 1.9% decrease in rents, with a slightly higher

vacancy rate than purpose-built apartments and an average rent of $400 more than an apartment unit,

as more are built throughout the urban core. Although there are few details on changes in vacancy and

availability rates for rented homes and accessory suites, rent rate increases were much lower than for

purpose-built apartments, with an average of $1,289 or about $300 more a month than a purpose-built

apartment unit. What is evident however is that few tenants have an option to move in the face of rising

rents given both low vacancy and availability rates in all areas of the city.

Of the city’s 16,310 apartment units in 2016, 59% are one-bedroom, 26% are two-bedroom units, 14%

are bachelor units, and only one percent are three-bedroom units. While 485 apartment units were

added to the City’s rental housing stock between 2010 and 2016, almost half were one-bedroom units

with less than a 3 percent addition to the three-bedroom family units in the rental pool.

To give some idea of the housing rental supply side shortfall, one urban housing researcher

used the

“Bedroom Shortfall Indicator” to measure the minimum number of additional bedrooms a community

needs to house all renters at all income levels suitably. She indicated that that Victoria needs a 6.7%

increase [2,540] in its total number of rental bedrooms in order to house all rental households

(particularly those in the $0-$57,772+ range) suitably.

The Fall 2016 CMHC Rental Market Report indicates that the average monthly rent for a 2-bedroom

condo is $1,511 (or a pro-rated nightly rate of $50.36); for a 2-bedroom purpose-built apartment unit is

$1,188 (or a pro-rated nightly rate of $39.60). Compare these rates to the average nightly rental rate for

an Airbnb unit in the City of Victoria at $118.00. It is not difficult to see why property owners might try

to capitalize on the higher revenue generating opportunities afforded by a short-term vacation renter

rather than a local tenant.

What is even more disconcerting is the fact that on December 11, 2016, Airbnb units available (938)

exceeded the available rental units (723) for the Greater Victoria area posted on Craigslist. While 140

Airbnb units were listed as available in James Bay, there were only 49 rental units available for local

residents in the same neighbourhood.

The City of Victoria represented 38% of the Craiglist rental unit listings for the Greater Victoria area of

which 49 were listed in James Bay, 125 listed downtown and 102 listed elsewhere in the city. The

Downtown area and James Bay rental listings represented 63% of the total rental housing portfolio.

In comparison, Murray Cox of InsideAirbnb determined that of the 640 Airbnb listings in the City of

Victoria in August 2016, 123 were listed in James Bay while 134 were listed in the downtown area

(comprising 40% of the Airbnb portfolio for the city). It is interesting to note that these short-term

vacation listings exceed the rental units currently available both in James Bay and downtown.

Hannah M. McDonald, U.B.C. MSc. Planning Thesis, The Rental Housing Index: Examining the Rental Housing

Market in British Columbia, March 2015, p. 29.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

3.2.4 The impact of Airbnb units on the secondary rental housing market

The following table estimates the impact of Airbnb units on the secondary market rental units (rented

condos plus rented houses and accessory suites), as well as all rental housing in the City of Victoria in

October 2016.

Table 10 - A Comparison of Victoria’s Airbnb Units to Secondary Rental Housing

Market Units in 2016

Estimated # of units

Housing Description No. of Units Vacancy Rate Vacant Oct. 2016

Rented Condos (2016) 3,195 0.7 % 22

Estimated # Households in

Secondary Rented Houses Est. Vac. Rate

and Accessory Suites (2016) 5,978 0.7% 42

Estimated Total Number

of Secondary Mkt. Rentals 9,173 64

Estimated Total Number

Of All Market Rentals 25,570

Estimated Full-Time Entire

Airbnb Listings (representing

74.4% of all ABB units) 697

F-T Entire Airbnb Listings as

% of Secondary Mkt. Rentals 7.6%

Full-Time Entire Airbnb

Listings as % of All

Market Rentals 0.27%

While rental condos represent approximately 12% of the total rental housing market, they represent

35% of the secondary market for rental housing (which includes condos and rented houses and

accessory suites). Airbnb listings currently represent approximately 7.6% of the secondary rental market

units as few purpose-built rental units cater to tourists. However this may change as developers such as

Concert Properties (owners of the Q-Apartments, the refurbished Queen Victoria Hotel), list some units

as short-term vacation rentals. Their newly approved seniors’ apartment complex (“The Tapestry” in

James Bay) will offer “sought-after” rental units with amenities plus 42 luxury condo units, and the

option of providing short-term stay units for respite use or as guest suites.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

What is clear from this cursory analysis is that the total number of full-time entire Airbnb units is more

than ten times the number of estimated vacant secondary market suites in the City of Victoria in

October 2016. The issue remains as to whether these units would have remained empty were it not for

the financial incentives built in to short-term rentals as opposed to long-term rentals. And, the

unanswered question is whether the competition for housing that Airbnb creates is pitting tourists

against tenants as is shown below in two areas of the City—James Bay and the Downtown core.

In James Bay there currently exist an estimated 1,577 condo units (based on BC Assessment and Victoria

Real Estate Board sales data). Assuming 25% are rented, that would mean approximately 315 are in the

rental pool. With a vacancy rate of 0.7%, there are roughly two vacant units. However, there are more

than 100 entire Airbnb units currently available in James Bay to tourists. (Craigslist indicates there are

currently 49 residential vacancies in James Bay, predominantly apartments). One can only conclude,

therefore, that condo property owners who do not reside in their units find it more profitable to rent on

a short-term basis to vacationers than to provide accommodation to a long-term tenant.

The map of the region below shows Victoria’s 12 neighbourhoods; two principal areas – Downtown and

James Bay, represented 40% of all Airbnb listings at the end of August, 2016 (according to data provided

by Murray Cox of InsideAirbnb.com) and 63% of all long-term rental listings (December 2016).

CITY OF VICTORIA

AirBnB Listings: 640

19% in James Bay;

21% in Downtown

Long-Term Rental

Listings: 276

18% in James Bay

45% in Downtown

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

3.2.5 Household incomes of renters and owners

The Capital Regional Housing Gap Analysis & Data Book, prepared by the Community Social Planning

Council of Greater Victoria in August 2015, paints a stark picture of the significant mismatch between

the income of the region’s population and the cost of available housing.

When only 13.7 percent of the region’s homes are affordable for 50 percent of its households, this is a

sufficient reason to suggest that there is a major disconnect between the ability of families to pay for a

roof over their heads. In other words, there are only 22,000 housing units priced at 30 percent of the

gross income of 79,000 households. Clearly there is an oversupply of housing for upper income groups,

who although they represent less than 25 percent of households, more than 64 percent of the housing

in the CRD is built to meet the needs of this income group.

Figure 3 - Percentage of Different Income Groups in the Capital Regional District Compared

With Affordable Housing Supply for Each Group

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

As of 2010, the average income of a private household in Victoria was $59,648 compared to $76,131 for

the Capital Region; the average income of a one-person private household was $37,763 (who comprised

37% of Victoria households in 2010), while the average income of two-or-more person households was

$78, 583.

According to Statistics Canada’s 2011 National Household Survey, in Greater Victoria, the average

monthly shelter cost for an owned dwelling was $1,265 compared to the average monthly shelter costs

for rented dwellings at $986. However in terms of the proportion of households that spent 30 percent

or more of household income on shelter costs, this represented only 22.6 percent for owner households

compared to 46.6 percent for tenant households.

A family paying more than 30 percent of before-tax income for housing is referred to as a “cost

burdened” household—a commonly accepted definition for unaffordable rent. The housing affordability

issues faced by lower income households means that after paying the rent, there is far less money left

over to purchase food, medications, and other necessities. Approximately 6,250 renter households

spend more than 50% of their income on rent in Victoria; 56% of whom live in one-bedroom

apartments.

What do these figures mean in relation to housing costs elsewhere in the world? Canadians spend more

of their income on housing than almost anyone in the world, according to a 2014 BlackRock Inc. survey.

Ranked third globally, they spend approximately 43 percent of each dollar of household income on

housing-related costs (mortgage, rent, and utilities) compared to the Netherlands at 51 percent, Sweden

at 45 percent, U.S. at 42 percent, Germany at 35 percent and China at 15 percent.

3.2.6 Residential building costs and home prices

The average cost of a home in British Columbia is $100,000 more than the national average

. The

upcoming new building code changes to ensure more energy efficient housing could add an additional

$40,000 to the price, which when financed over time may amount to $67,000. These changes, in

addition to an inadequate supply of housing, high land costs, zoning restrictions, permit fees and

processes are all seen to contribute to capital region’s housing affordability issue, according to the

Victoria Residential Builders Association.

According to the Victoria Real Estate Board Multiple Listing Service, the average price of a single-family

home in the City of Victoria in 2015 was $651,810, a six percent increase over 2014 prices. This is about

11 times the average annual household income in the City of Victoria. The average price of a

condominium was $353,409 in 2015, a one percent increase over 2014 prices, and about six times the

average annual household income in the city. The average price of a townhouse was $488,861 in 2015, a

three percent increase over 2014 prices.

The Rental Housing Index: Examining the Rental Housing Market in British Columbia. Hannah M. McDonald, MSc.

Planning Thesis, UBC, March 2015, p. 44

MarketWired.com, October 30, 2014 http://www.marketwired.com/press-release/blackrock-survey-canadians-

prioritize-long-term-financial-goals-but-their-short-term-1962637.htm

Les Leyne, “Province taken to task for housing costs”, Times Colonist, October 13, 2016.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

The current housing market is in a strong upward cycle benefiting from a low interest rate, a low

Canadian dollar, and a low housing inventory in areas close to the urban core and amenities. The

Multiple Listing Service Home Price Index benchmark for a single family home in Victoria in November

increased 23.9 percent over the same time last year to $753,800 compared to the average price increase

of six percent for homes across the country. According to the Victoria Real Estate Board, in 2016, the

city’s housing market experienced record-breaking numbers—10,722 properties sold, exceeding the

previous record of 9,241 sales in 1991.

Figures released by B.C. Assessment last week indicate that the City of Victoria saw the second highest

jump in assessment values in the Capital Regional District. Oak Bay, with the highest property

assessments, recorded a 31 percent jump, followed by the City of Victoria with a 24 percent increase in

property values for a typical single-family home going from $547,200 to $679,000, and a typical strata

residential increase in the range of five to 25 percent.

An important factor for change in the local housing market is growing presence of the foreign buyer.

Compared to previous months, October 2016 showed an increase in foreign buyers in the Capital

Region. They represented 6.3 percent of property transfer taxes, and may well be a factor influencing

the shortage of housing supply in the region.

In terms of debt levels per capita, City of Victoria residents

rank number seven in a list of 25 Canadian

cities with the following government debts per capita: $812 (Municipal), $14,454 (Provincial), and

$33,261 (Federal). In addition, British Columbians carry an average consumer (non-mortgage) debt of

$38,682, the highest of any province in the country, while according to Statistics Canada’s 2011 National

Household Survey, only 55.9 percent of owner households in Greater Victoria are currently paying a

mortgage.

3.2.7 Housing market changes and the impact of gentrification in James Bay

The shoreline of James Bay was once home to Coast Salish villages and their sacred burial grounds now

host today’s Laurel Point Inn and condominiums.

Transformation of this ancient landscape also came in the form of early colonial settlements in the

middle of the nineteenth century. The first properties were built by the wealthy elite in the southern

and eastern portions of the neighbourhood.

Many decades later cottages were built on the west side to accommodate workers who found jobs in

the fishing, grain-handling, ship-building, and industrial hub. In the 1960s, when painful economic times

saw rising poverty rates among families living in the neighbourhood, relief came in the form of Federal-

Government-supported housing programs which saw the demolition of the older wood-frame cottages

Kendra Wong, “Industrial rental rates on the rise, says expert”, Victoria News, January 13, 2017.

Kendra Wong, “Property assessments jump 24 per cent in Victoria”, Victoria News, January 13, 2017

CBC News, Canada’s Debt Map – How much governments have borrowed where you live, May 3,

2016. http://www.cbc.ca/news/politics/national-debt-map-canada-1.3557745

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

and their replacement by several high-rise rental towers. This influx of newcomers spurned the

development of our retail centres and hotels in the 1970s.

The next wave of multi-storey residential condo development occurred at the turn of the new

millennium with reclamation of the former industrial land on the western periphery. Once again, the

demolition of older single-family homes and low-rise apartment buildings throughout James Bay give

rise to higher-density condo developments as newcomers from Alberta, the Prairies, Ontario and the

Lower-Mainland take up residence here.

The multi-million dollar multi-storey residential and commercial redevelopment of the former

Legislative Precinct property along Superior and the Douglas corner by Concert/Jawl Property

developers promises a significant shift in the character of the neighbourhood.

Throughout these shifts in land use and migration of individuals and families to the neighbourhood,

there is both development and displacement. James Bay represents a mixed use neighbourhood with

diverse income groups and choice of housing that includes subsidized rental units and family-oriented

townhouses, market rental units for moderate to middle-income households, and luxury properties

(both single-family dwellings and condo units).

As land values increase, older structures are demolished and replaced by higher-density, higher-value

multi-storey properties, while existing high-rise apartment towers are refurbished to generate higher

rents. Indigenous people and lower-income individuals and families are obliged to move. Now many

seniors who are long-time renters in the neighbourhood are now obliged to move. But those who are

displaced are finding it increasingly difficult to find an affordable place to live in a city that is no longer

capable of meeting their needs.

Over 80 percent of the Capital Region’s housing supply is categorized as above-moderate to high income

units, while moderate to high-income households represent less than 36 per cent of the population. In

August, 2016 there were 43 properties for sale in James Bay ranging from a low of $79,000 to five

properties priced at more than one million dollars. In addition, there were 123 short-stay listings of

private dwellings available in James Bay at more than $170 a night.

And, as James Bay becomes gentrified, community organizations that had traditionally provided

activities and services to residents now find that 30 to 40 per cent of their clientele are drawn from

elsewhere in Victoria. Meanwhile, the nearby hotels are now offering recreational amenities and

customized programs that appeal to the more affluent members of the community.

James Bay is no longer an inclusive diverse neighbourhood. The gap is ever widening between the

“haves” and the “have nots”. Since the beginning of new millennium, James Bay has transformed itself

into an exclusive enclave of privileged property owners who keen to promote and protect their

interests. Concierge services in condo complexes and self-catered vacation suites now cater to their

needs in recreation, dining etc. Not surprisingly, the upscale newcomers and retirees are also looking for

opportunities to shape the future of their community through their own urban design preferences, or

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

exercise their influence in planning and managing of parks and recreation or choice of suitable public

art.

As the City and the neighbourhood undertakes the development and planning of its future urban

landscape, perhaps this is a time to reflect upon what we as citizens want and need, as much as what

role citizens can play in a place that many long-time residents still call their home.

Victoria is now the recipient of affluent newcomers: Vancouverites cashing out on homes and buying

condos here, Prairie (particularly Alberta retirees) seeking a comfortable climate and cozy condos, well-

paid civil servants and high-tech millennials who like to bike or walk to work, and a small but growing

cohort of overseas investors seeking a safe place to park their funds while their children pursue an

education here. But what does the housing market look like in James Bay?

There are 1,716 detached and semi-detached houses, duplexes, and townhouses in James Bay, and an

estimated 1,577 condo units. According to The Mark Imhoff Group, there have been 214 residential

units sold in James Bay since the beginning of the year: 56.6% were condo units, 24.2% single-family

units, and 19.2% townhouses. The average selling price for a home in this neighbourhood is now

$612,583. This may not be a surprise to many who have witnessed the residential demolition trend in

the City (400 between 2006 and 2015). In 2015, 15 demolition permits were issued in James Bay,

representing 26 percent of the houses demolished by the city.

But this snapshot does not represent the whole picture. Eleven homes (representing 20 percent of the

single family dwellings) sold for more than a million dollars. And 10 condo units, primarily in the seaside

Shoal Point area changed hands for more than a million dollars. These units represent 8% of the strata

title properties); two sold for more than two million dollars, and one for a whopping $5.5 million.

Meanwhile, James Bay tenants are facing an average 7.5 percent increase in rents – the highest in the

city. In many cases, a 30 to 40 percent hike in shelter costs is not uncommon for newly “refurbished”

rental suites in high-rise towers. A glance at Craigslist in early December 2016 showed that in a rental

housing market with a vacancy rate of near zero, there were fewer than 50 units available at an average

rent of $1,726 per month.

The real estate market is competitive place for homeowners, renters, and now tourists. However, the

homeowner has an advantage the renter does not, to offer a spare room or an entire unit to a tourist

who offers higher income opportunities than a permanent tenant. The popular online accommodation

website Airbnb now offers 938 short-term stay residential accommodations in Victoria in December

2016, (78% of which are for entire suites). This suggests that in the “sharing economy”, temporary

residential rentals are now thriving businesses especially for multiple unit commercial property owners.

There are currently 158 residential units

available for rent in James Bay, of which 69 percent are

dedicated to short-term vacation rentals, while 38 percent are available to local residents for long-term

131 residential units as of December 11, 2016 comprised of 49 Craigslist rental units in James Bay, plus 109 full-

time equivalent Airbnb units (140 units x 75% entire homes)

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

accommodation. Surely when more rental units are available to tourists than to residents, one can only

conclude that a roof over one’s head is now becoming a luxury not a basic necessity.

Kyle Kerr, Director of the Victoria Real Estate Board, has noticed that “the short-term vacation rental

market has definitely increased in the last two to three years in Victoria, but there are only about 15 to

20 buildings in Greater Victoria that have the legal Transient Zoning which allows these types of rentals.”

He added that “the condos found in buildings that legally allow STVRs generally sell for more money

than normal condos in the long term.”

As BC cities grapple with how to regulate online vacation rental broker platforms, economic impact

studies are being commissioned by Airbnb

to suggest that money going into the hands of hosts has a

positive ripple effect throughout the economy in terms of tourist expenditures on food, entertainment,

and shopping. Such arguments ignore the long-term economic benefit of rental households who live and

work in the city; their taxes contribute to infrastructure improvements and their purchases sustain many

needed small businesses and services in the community that do not rely on tourists.

It remains to be seen whether quaint seaside Victoria at the southern tip of Vancouver Island will

become another Venice, Italy

– a popular destination for tourists accommodated in short-term

vacation rental units – a place devoid of long-term residents who are the foundation of any healthy,

sustainable community.

“Suite deal? Airbnb study touts economic benefits of short-term rentals in Vancouver”, Business in Vancouver,

November 9, 2016. https://www.biv.com/article/2016/11/suite-deal-airbnb-study-touts-economic-benefits-sh/

Benjamin Mack, “Tourism overwhelms vanishing Venice”, November 9, 2012. http://www.dw.com/en/tourism-

overwhelms-vanishing-venice/a-16364608

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

Chapter 4. Implications of the Expanding Short-Term Rental Sector on Victoria’s

Tourist Accommodation Market

A Grant Thornton Report prepared for Tourism Victoria in June, 2011 indicated that there were 197

accommodation properties (8,905 rooms) in the Greater Victoria area, generating $163 million in room

revenue in 2010, based on an average 63 percent occupancy and an average Daily Room Rate in the

survey sample of $121.50. By 2015, the annual occupancy rate had increased to 73 percent while the

average Daily Rate had increased to $151.70, and revenue per available room had increased to $110.70.

According to the October 2016 Victoria Tourism Bulletin, prepared by Chemistry Consulting Group, the

average occupancy rate for October 2016 was 70.6% compared to 65.4% the previous year while the

year to date occupancy reach 77% with an average Daily Room Rate of $164.49 with a Revenue per

available Room rate of $126.77 up more than $16 from the previous year. By 2019, Victoria is expected

to have the fifth highest per-room value in Canada.

It would appear that the Mayor’s Economic Development Task Force’s target of achieving a 72% hotel

room occupancy rate by 2016 on a sustained basis has already been met. A hotel occupancy rate above

70 percent means a profitable return on investment to hoteliers, and thereby it becomes the threshold

above which additional capital may flow into this sector for expansion.

While potential build-out of the hotel industry may be possible, it remains an expensive option in

comparison to the flexible and marginal cost of adding additional short-term rental units on alternative

accommodation platforms such as Airbnb, VRBO, HomeAway etc. This is where the growth of short-term

rentals may hinder the expansion plans of the profitable hotel industry.

The Canadian Tourism Human Resource Council estimated there were 23,646 jobs in 2010 in Greater

Victoria’s tourism industry—approximately 20 percent were employed in the accommodation sector

(earning an average annual salary of $26,782), while the majority of jobs were in the food and beverage

industries. It should be noted that 46% of Greater Victoria’s population in 2010 had an income under

$30,000 compared to 51% for B.C. and 50% for Canada.

In November, 2016, the general manager of the Inn at Laurel Point (in James Bay Victoria, BC), estimated

that there were about a thousand Airbnb listings in the City that compete with the local hotel industry,

but do not pay similar fees and taxes.

Tom Caton, CEO of Airdna

, a third-party consulting firm that analyzes Airbnb occupancy rates, revenue

and seasonal demand, disputed the claims that the home-sharing platform is not to blame for rental

housing shortages experienced in Victoria, Vancouver, or elsewhere around the world. He indicated that

his firm’s data showed that Victoria had only 422 active listings for entire Airbnb units in November

Victoria Tourism Bulletin, (prepared by Chemistry Consulting Group), September 2016, p. 1

Deborah Wilson, “ Airbnb impact on rents, hotels in Victoria minimal, analyst says”, CBC, December 8, 2016.

http://www.cbc.ca/news/canada/british-columbia/airbnb-victoria-vancouver-rental-vacancy-hotels-1.3886623

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

2016, not far from the estimate of 300 Airbnb units taken out of the city’s long-term rental housing pool

by urban planning consultant, Jay Wollenberg.

According to Airdna, the 422 active Airbnb listings are equivalent to 191 hotel rooms at 100 percent

occupancy for one month, and possibly 100 apartment units not available to residents of Victoria.

However considering the fact that there were only 723 vacant rental units in Greater Victoria (according

to Craigslist for December 11, 2016), and 276 vacant units in the City of Victoria, this could represent a

loss of 36% of rental housing units in the City alone.

While Airdna may be trying to minimize the impact that short-term vacation rentals have on the city, it

would appear that tenants are feeling the negative impact as are hoteliers. And, in this traditionally low-

season for hotel occupancy, it would appear that the number of entire unit Airbnb active listings has

climbed to 574, representing 77.7 percent of all Airbnb listings for December 24, 2016 according to the

Airdna website.

Some may say there is little to be concerned about especially when Victoria’s 58 hotels seem to be

flourishing with more than three million overnight visitors annually to the provincial capital. Today,

tourists outnumber locals by 37 to 1. And with close to 30 hotels located in the City’s Inner Harbour, this

area is also home to the largest concentration of long-term renters in the city.

A recent report from Boston University,

studied the case of Airbnb, a prominent platform for short-

term accommodation. The research team assessed its entry into the state of Texas, in particular, Austin

where Airbnb supply is the highest, in order to quantify its impact on the Texas hotel industry over the

subsequent decade. Their study indicates that, “in Texas, each additional 10% increase in the size of the

Airbnb market resulted in a 0.39% decrease in hotel room revenue. …These effects are primarily driven

by Austin, where Airbnb inventory has grown extremely rapidly over the past few years, resulting in an

estimated revenue impact of 8-10% for the most vulnerable hotels in Austin”.

This report estimated that Airbnb’s “entry into the Texas market has had a quantifiable negative impact

on local hotel room revenue. Short-term vacation rental units appear to provide a viable, alternative for

certain traditional types of overnight accommodation, particularly families or large group gatherings

that seek lower priced rooms (particularly those in the budget to mid-range tiers).

In the Victoria tourism accommodation market, Airbnb listings compete directly with the hotel industry,

most notably in the mid-tier market (2,400 units) represent 55 percent of all hotel rooms and the upper

tier (1,489 units) 34 percent of all hotel rooms, and budget tier (502 units), comprise 11 percent of all

Jay Wollenberg, Coriolis Consulting Corp. Short Term Vacation Rentals Policy Report to City of Victoria, 5 October

2016 -https://victoria.civicweb.net/FileStorage/00E137E00A9F4567B7F94C2CDAEBCE34-

attach%201%20short%20term%20vacation.PDF

The Rise of the Sharing Economy: Estimating the Impact of Airbnb on the Hotel Industry, Georgios Zervas (Boston

University), John W. Byers (Boston University), David Proserpio (University of Southern California), Revised Nov.

18, 2016, pp 1-3.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

the rooms. This assessment is based on hotel accommodation data provided by Chemistryconsulting.ca

(Victoria Lodging Results – October 2016) and findings reported by Ethan Wolff-Man:

“Survey data from DG-Research.com shows the biggest target is on the backs of midscale

hotels. Around 43% of Airbnb guests would have chosen midscale hotels, compared to just 4%

that would have chosen an upscale hotel, and economy hotels, which were replaced by

Airbnb’s 18% of the time. Similarly, Airbnb cannibalizes extended stay options more, perhaps

owing to the fact that a full lodging with a kitchen has a leg up on a hotel room’s mini

fridge.”

4.1 A snapshot of short-term vacation rentals, long-term rentals, and tourist accommodation in

James Bay

One area of inquiry that is often overlooked is the impact of short-term vacation rentals on permanent

rental housing and hotel accommodation uses that all exist in same neighbourhood.

With a population of almost 12,000 (and a density per sq. km. three times the city average), and 59% of

its households living in rental accommodation, James Bay is also home to over half of downtown

Victoria’s commercial tourist accommodation industry (see Table 11 on the following page).

This neighbourhood hosts 17 hotels and motels (1,666 rooms of which more than 60% fall into the

budget to mid-range room price category), plus 15 licensed bed and breakfasts (79 rooms), and more

than 180 Airbnb units in December 2016 according to Airdna.com. This is equivalent to an estimated 380

rooms, in other words another Grand Pacific Hotel in the neighbourhood. Murray Cox of

InsideAirbnb.com

revealed that in late summer 2016, more than 75 percent of the Airbnb listings in

the neigbourhood were for entire units.

These short-term rentals, appealing to leisure and business travelers, now compete with traditional

hotel accommodation suppliers, extended stay properties (like the Royal Scot Hotel and Embassy Inn),

as well as licensed bed and breakfasts, especially in James Bay. On the other hand, hotels such as the 46-

year-old, 12-storey Harbour Towers

are following the trend of previous hotel owners, (like the Queen

Victoria and Dominion), who converted their properties to residential use. Harbour Towers has applied

to rezone and redevelop their 189-room building into a 219-unit residential property. All this is taking

place at a time when hotels are enjoying an average 76% occupancy rate. It appears that residential

units are now more profitable than hotel rooms, even in a tight tourist accommodation market.

Ethan Wolff-Mann, “The big reason why Airbnb terrifies the hotel industry”, Yahoo Finance, January 5, 2017

http://finance.yahoo.com/news/airbnb-dwarfs-hotels-in-room-availability-162135372.html

Murray Cox, InsideAirbnb.com (listings for James Bay, 1 August 2016)

http://insideairbnb.com/victoria/?neighbourhood=James%20Bay&filterEntireHomes=false&filterHighlyAvailable=f

alse&filterRecentReviews=false&filterMultiListings=false

Andrew Duffy, “Tourists face tight market for Victoria hotel rooms”, Times Colonist, January 8, 2017.

http://www.timescolonist.com/business/tourists-face-tight-market-for-victoria-hotel-rooms-1.6612263

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

Table 11 - Tourism Accommodation Market in James Bay Victoria

17 MOTELS, HOTELS & TIMESHARES PRIVATE SHORT-TERM VACATION RENTALS

(1,666 Rooms) (187 Airbnb Listings)

Admiral Inn (H) 32

Best Western Inner Harbour (H) 74

Coast Victoria Harbourside (H) 132

Days Inn (H) 71

Embassy Inn (H) 70

Gatsby Mansion (H) 9

Harbour Towers (H) 196

Helm’s Inn (H) 40

Huntingdon Manor (H) 110

Hotel Grand Pacific (H) 308

Inn at Laurel Point (H) 196

James Bay Inn (H) 40

Oswego Hotel (H) 80

Rosewood Inn (H) 17

Royal Scot (H) 176

Surf Motel (M) 14

Worldmark (Timeshare) 92

15 LICENSES BED & BREAKFASTS

(79 Rooms)

Albion Manor 9

Ashcroft House B&B 5

Carriage House B&B 4

Fisher House B&B 4

Fisherman’s Wharf B&B 2

Gingerbread Cottage 2

Haterleigh Heritage Inn 6

Heathergate House 7

John Lewis House B&B 2

Marketa’s B&B 12

Menzies Manor 7

Robert Porter House B&B 6

Victoria Harbour Walk Suite 1

Oceanic House 9

Victoria Vacation House 3

Source: Primary Research – Web-based Listings for Properties in James Bay

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

Table 12 - 2016 Tourism Accommodation Market Revenue

in James Bay, Victoria

Ave. Nightly

Category of Accommodation (Total) No. of Rooms Room Revenue

Motel, Hotel & Timeshare properties (17) 1,666

$ 135

Licensed Bed & Breakfast properties (15) 79

$ 140

Private Short-Term Vacation Rentals (180)

(Airbnb Listings, Dec. 2016, entire units =140) 140 Listings

$ 159

Total Transient Accommodation

Property Owners (172) 1,885

Sources:

Includes Hotels, Motels, Timeshares, Licensed Bed & Breakfasts, and Private Short-Term Vacation Rental

Properties.

Hotel room capacity primary research: 17 James Bay hotel proprietors represent 56% of 30 hotel properties in the

Downtown & Inner Harbour and 52.2% of total room capacity of all City of Victoria Inner Harbour hotel s (total

3,186 rooms) and Average Nightly Room Revenue from Inner Harbour Hotels - $135 for 2016, DVBA Tourism

Victoria Lodgings Statistics 2016.

Licensed Bed & Breakfast primary research by the author (room capacity not available).

Data based on December 29, 2016 Airbnb listings. Airbnb listings represent 80% of all transient accommodation

property owners in James Bay and almost 10% of the lodging supply. Value of Airbnb market in James Bay

estimated to be $2.7 million annually based on derived Airdna and Inside Airbnb data, compared to more than $16

million dollars in revenue for Airbnb units in Victoria in 2016.

AirBnB website listings for James Bay, Victoria on December 29, 2016.

Estimated visitor accommodation capacity (based on double occupancy rooms) is 3,770.

The current year to date Downtown/Inner Harbour hotel room rate is $172.00, while the Luxury Hotel

Room Rate to date is $211, a mid-tier room rate is $146, and a budget-tier room is priced at $98.

The nightly room rate at this time of year for hotels in James Bay hotels ranges from a low of $79 at the

James Bay Inn to more than $189 at the Hotel Grand Pacific. This is a premium rate when compared to

licensed Bed and Breakfasts which charge a minimum of $125 for the smallest units, while the average

nightly rate for entire Airbnb units in the neighbourhood is $159. This is in sharp contrast to the average

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

pro-rated nightly long-term rental rate ranging from $36.00 to $50.00 charged by landlords to

permanent tenants living in 3,416 private apartment units in James Bay.

These results have direct implications for hotels, travelers, and policy makers. Paul Nursey, CEO of

Tourism Victoria, at the Union of BC Municipalities annual meeting in September 2016, that a rise in

speculators buying vaction rentals is accelerating an “absolute crisis” of scarce housing. He added that

the Airbnb multiple listing rental units were operating like “shadow hotels” without paying taxes or

being regulated like the existing commercial tourism accommodation operators.

For hotel managers, the competition from peer-to-peer short-term accommodation platforms is not

something to be ignored. As the Boston University study points out the Airbnb platform has near zero

marginal cost, i.e. rooms can be added to or removed from the database, with negligible overhead costs.

This allows Airbnb “hosts” to expand or contract the supply of rooms in a short time frame to meet

changing seasonal demand, or to handle special event accommodation needs. In contrast, increasing the

permanent hotel room supply involves sizeable capital investment on the part of hotel owners, causing

significant marginal cost increases for hotel chains.

What Airbnb can do which hotels cannot, due to zoning regulations, is to leverage the existing housing

inventory by potentially expanding its supply wherever houses or condo units already exist.

Furthermore, Airbnb is preparing to offer a wider range of products and services than hotels including: a

wide range of self-catered full amenity units and concierge services, flights, excursions and personalized

activities at the destination, transportation, liability insurance for owners, and an easy booking and

payment platform.

What travelers enjoy are the benefits of “collaborative consumerism” which usually means lower prices

due to increased competition for accommodation, and leveraging purchasing power to secure

personalized services for tourists.

While municipal governments have traditionally relied in part on tax receipts from well-regulated

industries such as hotels, bars and restaurants, as well as taxis and tour buses, the new short-term

accommodation and personalized tourist services industry is based on disruptive digital technology and

privacy protection. This “sharing economy” segment, like others in the field of ‘peer-to-peer’ personal

transportation, remain for the most part outside the ability of local authorities to regulate or enforce tax

collection and remittances.

As the housing market becomes commoditized as an investment income asset class, i.e. profitable short-

term rental enterprises, working individuals unable to purchase an affordable home are obliged to seek

a dwindling supply of permanent rental accommodation at soaring prices. Cities that are popular tourist

destinations are being transformed into a booming ghost hotel industry that values tourists and their

higher discretionary expenditures more than long-term tenants who live and work in the community.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

4.2 What’s missing from this picture?

The overlooked quality of life costs associated with an exploding short-term vacation rental market are

rarely included in the rosy “home-sharing” picture, particularly in urban tourist destinations. These

include: increased traffic volume, congestion as well as safety and security concerns; increased property

damage, motor vehicle accidents with pedestrians and cyclists, and anti-social behavior – noise from

partying, or substance abuse related criminal activity associated a non-resident population.

The City of Victoria points to its history 20 years ago, in finding a flexible solution to address the

insufficient hotel inventory required to accommodate the influx of tourists and athletes to the 1994

Commonwealth Games. Bed-&-Breakfast vacation rentals in the Capital Region were the answer, and it

took more than five years to bring them into compliance in terms of oversight, regulations, and taxation.

The critical difference is that today, it is one “collaborative consumer” international corporation using its

economic leverage and new technology to flout oversight under the guise of “privacy protection” of its

hosts, or its unwillingness to accept the regulatory and taxation authority of states, provinces, or cities.

In sharp contrast to coping with an exceptional circumstance of housing people for a special event, by

permitting B&Bs as a permanent, but small, segment of the hospitality industry, today this growing

informal, unregulated and unlicensed home-based rental business is negatively impacting the traditional

hotel industry market but also the long-term rental housing market needed by workers, students, and

seniors living on fixed incomes.

To suggest that the “sharing economy” has benefits for everyone is not the case. Renting or leasing of

“underutilized assets” – such as empty rooms or entire suites helps home-owners in order to

supplement their income or help pay down their mortgage and living expenses, assists travellers to find

cheaper accommodation, but government sees no net benefit in terms of taxes collected to defray its

services. And, renters cannot participate in the “sharing” economy benefits as provincial legislation

often precludes the rental of “surplus space” in their apartments without the permission of their

landlord.

With the growing concentration of services, amenities and attractions in the urban core areas of tourist

destination cities, there is increased competition among owners of property to secure the highest return

on their investments – in this case the short-term vacationer at the expense of the long-term tenant. As

more and more accessory housing units, condos, and character homes are converted to commercial

“accommodation” uses, modest-income workers, students, and seniors are displaced to the margins of

the city far from convenient transportation, services, and employment or educational opportunities.

The Airbnb peer-to-peer business model is transforming the accommodation and travel excursion

industry but also reshaping the city, its role in society, and whose interests will be ultimately be served.

The issue facing popular tourist destination cities is how to avoid catering exclusively to leisure travellers

that will result in displacing local residents who have traditionally formed the backbone of the economy

and social fabric of their communities.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

As peer-to-peer online lodging platforms proliferate and disrupt the traditional commercial

accommodation market, hotels may well use the Airbnb platform as a sales channel offering micro-

boutique holiday units under a new brand of centrally-managed, fully-serviced, dispersed units

throughout a city. What is to prevent the majority of downtown condo units from being purchased by

corporate commercial property interests or hospitality industry investors and converting them into

short-term vacation rentals and flipping them when conditions change? Or, what steps, if any, will be

taken by local government to curb evictions on the part residential real estate owners who wish to

convert some or all of their existing apartment units into short-term rental vacation units at the expense

of long-term tenants?

If a City with a chronic housing shortage that maintains no inventory of housing for its inhabitants, no

monitoring and licensing of short-term rentals, and no record of the nature and volume of residential

evictions, is upholding a duty of care that applies to all its citizens, then why do we have a housing crisis?

That the growing level of impoverishment and homeless in our cities is seen as an individual moral

failing invites more than a few questions. Are victims of evictions and homelessness to blame for the

accommodation crisis in cities like Victoria? Are those who are trying to cope with a precarious housing

situation responsible for the deregulation of private housing sector, rezoning of prime real estate, or the

transformation of cities into investment hubs for finance capital? If a system and its decision-makers

that allow landlords, property developers and financiers to routinely dispossess and displace the youth,

the poor, the elderly, or those with physical and mental disabilities in order to enrich themselves but

cannot be held accountable, then who can?

Who matters the most to local governments – actual residents who live and work in the community? Or,

speculative property investors and tourists who contribute little to maintaining the urban

infrastructure? If short-term vacation renters and owners are not taxed, who will pay for education and

health care facilities, police and emergency services, parks and recreation, not to mention the roadways

and utility systems? Does urban growth at any cost mean sacrificing the long-term needs of permanent

residents seeking rental accommodation to satisfy the short-term gains from short-term rentals that

benefit only home-owners?

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

Chapter 5. Conclusions and Housing Policy Implications

In this chapter, I will focus on the preliminary conclusions of this assessment— the impact of short-term

vacation rentals on the housing needs of Victorians, particularly on rental housing stock for tenants who

represent the majority of households in the capital city.

While the Mayor and Council of the City of Victoria have long recognized the primary concern of the

majority of residents, the need for affordable housing, they are also trying to balance this with the need

to accommodate an anticipated population increase of 20,000 over the next three decades. By

expanding the tax base, principally through residential property redevelopment and infill densification

of the built-environment in the core area and surrounding neighbourhoods, the City hopes to meet its

modest housing growth targets.

What is evident, particularly over the past five years, has been:

 Sharp increase in the construction higher-priced fragmented ownership properties.

 Conversion and refurbishment of older multi-storey apartments to strata title units and

construction of new high-rise private condo units.

 Little replacement rental housing stock that meets the financial constraints of modest income

tenant households in the city – workers, students, and seniors;

 Low vacancy rates, displacement of existing tenants when new owners redevelop the multi-

storey multi-family properties, and substantially increased rents charged.

 Promotion of the “sharing” economy which relies on the notion of renting or leasing out the use

of an underutilized asset – a car, a house, tools. However it is not a change of use or an

additional use; it is simply monetizing the substitution of a temporary secondary user for the

permanent primary user and owner of the asset.

 Phenomenal growth of high-profit margin short-term vacation rental units focused in the urban

core which is also the location of the hotel industry and the traditional rental housing market

infrastructure.

Regrettably, in spite of its Official Community Plan adopted in 2012, the City has not invested in any

serious long-term housing and development planning, but adopted a streamlined “spot zoning” and

fast-tracked development permit approach that caters to the needs of large-scale developers. In the

absence of a housing inventory or baseline data regarding the capacity of city neighbourhoods to

accommodate large-scale redevelopment, prompt decisions are made with little consideration of the

possible consequences.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

A process that involves the gentrification of older neighbourhoods is bound to result in dramatic shifts in

the urban landscape, with socio-economic benefits and losses distributed unevenly throughout the

terrain. Home-owners benefit while hoteliers see the new unregulated and untaxed alternative

accommodation industry encroaching into their traditional tourist market. And tenants face evictions

from their rented houses or suites as property owners seek to maximize their profit through the

“sharing economy”, i.e. lucrative short-term vacation rentals serving the tourist market. Employers are

now facing a critical shortage of rental housing which is needed for those who cannot afford to purchase

a home which is well beyond the reach of many working people.

There are significant changes in the quality of life experienced by residents. Many feel the repercussions

of a sharp increase in income gaps, a housing tenure trend that now favors owners as opposed to

tenants. With the increased value of real estate in a popular tourist destination such as Victoria,

property owners are now treating their homes as investment vehicles. Certain elements in the business

community are placing a higher value on seasonal influx of tourists staying in short-term vacation rental

units and spending more than the local long-term residents who sustain the economy year round.

By reducing parking requirements, removing the restriction on the minimum housing unit size

requirement, and increasing the allowable height of residential property complexes, the City is

facilitating the growth of upscale multi-storey condo developments resulting in increased density of

housing in the core area and the picturesque Inner Harbour neighbourhoods.

By amending its bylaws to encourage the addition of garden and accessory suites in “character” home

neighourhoods as well as new rental condos in the core area and in nearby gentrified upscale

neighbourhoods—the City has created fertile ground for investors to capitalize on the growth of the

alternative accommodation market.

When the value of a tourist exceeds the value of a local resident, what may result is an exclusive,

segregated enclave that serves the needs of visitors while demanding that locals pick up the tab for the

costs—increased traffic volume and road maintenance, congestion and accidents, increased

environmental impacts in reduced air quality from diesel bus emissions and garbage collection, as well

as enhanced safety and security systems.

One only has to wonder whether Victoria’s climate and affluent island lifestyle for retirees, refurbished

downtown live/work lofts for millennials, and its popular tourist amenities, including the home-sharing

economy, has resulted in more than a few unintended consequences.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

5.1 The social effects of increased tourism and the home-sharing economy on Victoria

Recent figures released by Statistics Canada indicate that Victoria currently ranks 4

in a list of 33 cities

with the highest impaired-driving rates

(both drugs and alcohol) in the country. Victoria’s 990 impaired

driving incidents in 2015 represent a 12% increase over last year. The capital city of British Columbia

now has the unenviable reputation of being the country’s leading impaired driving capital in terms of

growth of this social behavior. It remains to be seen whether this factor will reflect negatively on the

city’s pristine image of a healthy and livable place for both residents and tourists alike.

When 59 percent of consumers will not trust “sharing” economy businesses until they are properly

regulated, according to a Price Waterhouse Coopers 2015 report, what steps will the City take to protect

consumers in the area of short-term vacation rentals?

Is it not up to the members of the “sharing” economy such as Airbnb to demonstrate how they are

consistently and effectively contributing to the “greater good” of the economy and what they doing to

ensure the well-being of the communities in which they do business? Right now Airbnb and other

lodging platforms are benefiting gratis from the Destination Marketing Support which the hotel industry

must underwrite in tourist destinations such as Victoria. Are they “taking” more than “giving” to the

cities that serve their patrons?

If the “collaborative consumer” economy is here to stay, what is the high-stakes end game for cities

where the “home-sharing” phenomenon is threatening to engulf the life of its citizens? Is Victoria being

transformed into a post-colonial heritage in indigenous culture theme park for tourists to play in while

locals are pushed out beyond its boundaries? What really matters to the citizens of this capital city, and

who really counts in the decision-making process of Mayor and Council?

Will Victoria choose to hold the status quo and do nothing to regulate home-sharing enterprises since it

might be seen to be restricting property owner rights, curbing real estate development and investment,

or stifling “innovative” sharing economy entrepreneurial activities?

Will it partner with online lodging platforms like Airbnb and place few restrictions and regulations on the

growth of short-term rental units, stating that bylaw enforcement will be too difficult, time-consuming

and costly?

Statistics Canada, Impaired driving in Canada, 2015, Samuel Perreault, Dec. 14, 2016.

http://www.statcan.gc.ca/pub/85-002-x/2016001/article/14679-eng.htm,

Alcohol or drug-impaired driving incidents, by Census Metropolitan Area, 2015 http://www.statcan.gc.ca/pub/85-

002-x/2016001/article/14679/tbl/tbl1-2-eng.htm. This study also identifies the role of demographics and income:

higher use of substances by the 20-35 age group, increased impaired driving rates among higher income quartiles,

as well as higher repeat rates of impaired driving offences among 60 plus age group – all of which are present in

two of BC’s highest impaired driving incident cities: Victoria and Kelowna.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

Or, will it choose to prohibit these new business enterprises in order to protect the city’s commercial

tourism accommodation operators, and majority tenant households facing low-vacancy rates, loss of

affordable rental housing stock, or displacement by short-term vacation renters?

5.2 Grappling with the consequences of short-term vacation rentals

The presentation, “Policy Implications for Short-term Vacation Rentals”, by a number of tourism

representatives and city officials at the annual general meeting of the Union of B.C. Municipalities in

September, offers a glimpse of options for consideration.

The thrust of these presentations tended to stress the need to make short-term rentals work for all

residents – to be fair to home-owners but also neighbours. Furthermore, that local government should

be realistic about what and how they regulate but also how much to charge for compliance services and

how to fund enforcement. And lastly, local authorities need to effectively address the key housing

challenges such as availability of housing stock and affordability as well as how to curb profiteers and

speculators while trying to strike a balance between the needs of tourists and long-term residents.

A summary of their observations and recommendations follows:

 A Short-Term Rental Definition (also known as ‘home-sharing’ or a vacation rental property) refers

to the commercial accommodation of guests in a private residence – a room, condo, secondary

suite, or a house – on a temporary basis, usually less than 30 days. Unlike a bed & breakfast the

property owner is often not on site and does not operate as a taxed, licensed or regulated business.

 Short-Term Rentals (STR) increase the pressure on local services; increase safety and security risks,

do not contribute to the tax base, and place additional demands on affordable housing and affect

ability of employers to recruit seasonal or service industry workers.

 Regulation of Short-Term Rentals needs to be warranted, reasonable, balanced and enforceable.

 Short-Term Rental operators should be registered or licensed within each community, and local

governments should identify STR operators to compel them to comply with local regulations or

prosecute offenders. It is fair to treat STRs as a business and commercial use not as a “landlord”.

 Taxes and Booking Data Disclosure: Provincial Sales Tax (PST), Hotel Tax (8%) and Municipal &

Regional District Tax – MRDT (3%) should be collected at source by the booking platform and

remitted to the province and the lodging/booking platform should also collect and disclose STR data

required by the municipality and/or Province to properly monitor and oversee transactions and

adherence to local bylaws and legislation. If Airbnb is already collecting taxes in 200 jurisdictions

around the world and generating $110 million in tax revenue for local government, this should be a

requirement of its social license to operate in this country and province.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

 Short-Term Rentals Registration/Licensing: Studies show 10% of STR operators obtain permit or

license ($200-$400 annually) to ensure they comply with zoning and building code regulations, and

pay their taxes without compliance monitoring while 90% will pay for a permit if there are

appropriate penalties for non-compliance (some suggest $200-$500 fines per day while others are

considerably higher).

 Short-Term Rentals in Relation to Zoning Matters: Allow STRs (guest rooms, guest home or suites) to

be located in transient accommodation zones or in residential/mixed use zones.

 Possible Short-Term Rental Regulations: may restrict the number of licenses/permits issued per

property, per block, per neighbourhood or per city; consolidates STRs with Bed-and-Breakfasts

(B&Bs); specifies ownership and primary residency requirement; mandatory annual inspections;

reduction in parking requirements, or must provide sufficient off-street parking as part of

accommodation offering; must provide 24/7 local contact person; specifies maximum number of

sleeping units (maximum occupants/guests – 6), specifies a license/permit process that also includes

provision to revoke approval; assessing whether each regulation is enforceable; use of third party

compliance monitoring service (e.g. HostCompliance.com) in absence of qualified staff, database

management build-out and maintenance.

 Short-Term Rentals Communications and Civic Engagement Strategy: develop direct contact with

short-term rental companies and property owners, property management firms responsible for

housekeeping and concierge services for STR owners, real estate industry professionals responsible

for sales of homes and condos regarding STR business ventures as income generation options;

strata title boards dealing with STR units either by individual owners or corporate investors who

operate a number of privately owned units; architects and developers regarding mixed use of condo

unit complex with shared/common spaces and amenities (work/live environments, transient

accommodation, business office use) to ensure appropriate access, security, parking, and

privacy/good neighbor agreements); community engagement through Town hall meetings,

conversation cafes with residents and business owners and community organizations.

 Short-Term Rentals – Legal Liability Issues regarding online accommodation/booking companies,

legal recourse and options regarding what is an unlawful property; STR complaints process to

resolve issues – public disturbance, noise, parking, garbage, etc.; STR non-compliance options: fines

and bylaw prosecution.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

5.3 Balancing the conflicting interests of home-owners, renters, and hoteliers

The Mayor and Council of the City of Victoria met in June, 2016 to explore the impact of short-term

rentals on the limited supply of the housing stock—particularly rental accommodation for working

families, modest income individuals, and seniors on fixed income. They did so at a time when, evictions

and demolitions of older properties continue unabated causing the displacement of hundreds of

tenants. As politicians deliberated, tourists were accommodated in a growing number of alternative

hotel suites in popular tourist neigbhourhoods like James Bay and Fairfield. Meanwhile hotel operators

were finding it difficult to retain service staff in a city where housing costs and rents are soaring in a low-

vacancy environment.

Citing “conflict of interest”, neither the Mayor nor the Council Liaison for James Bay (employed in the

tourism accommodation sector) entertained any public discussion regarding the matter of short-term

rentals and their impact on housing in the City. Meanwhile, the Executive of the James Bay

Neighbourhood Association, many of whom live in nearby well-appointed condominium complexes,

citing busy agendas for meetings in December 2016 and January 2017, declined two requests by a JBNA

member to discuss the issue of short-term vacation rentals in this high rental household community—a

community experiencing an unprecedented level of evictions, and a popular Airbnb neighbourhood.

What might be helpful to politicians, citizens, urban professionals might be the development of short-

term policy objectives that address the issue of effective housing strategies in affluent residential

communities that are experiencing a shortage of affordable housing, especially for long-term tenants

who comprise the majority of the city’s households.

Such a policy discussion among home-owners, renters, and members of the business community would

invite a number of options that could include the following:

 A ‘housing first’ approach to the problem of dealing with both short-term rentals (Airbnb) and

vacant units (e.g. View Street rental property with multiple floors of empty, unrented

apartments). Establish a priority for providing living accommodation for individuals as opposed

to using housing as a “leisure” commodity from which to speculate on and profit from.

 Ensure that traditional residential neighbourhoods are not transformed into preferential tourist

areas designed to meet the needs of affluent short-stay vacationers to the detriment of long-

term residents, especially those who do not live in secure housing, i.e. tenants.

 Ensure that council does not favor one side of the housing equation, homeowners, to the

detriment of long-term renters; respecting the right of home-owners to use their property

(condo, garden suite, home) as a short-term vacation rental to supplement income and take

advantage of property tax deferrals and other home-owner benefits, while neglecting any

meaningful way to safeguard and protect rental housing stock and assist tenants who also need

to pay for a roof over their heads.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

 Insist on lodging platform accountability and cooperation in terms of booking data for

compliance and taxation purposes, consider prohibiting commercial hosts with multiple units

that do not live on the premises and for all intents and purposes operate as unlicensed and

untaxed business enterprises and, require accommodation platforms to verify registration or

licensing of STRs prior to posting new listings, and removing non-registered host property

information.

 Ensure that the city does not forego hotel, or transient occupation tax revenue that could be

invested in much needed community services for permanent residents.

 Ensure that short-term rentals and home-sharing operators are taxed in the same way as

traditional lodging providers to facilitate a level playing field and maintain local service jobs.

 Ensure that homes are not turned into micro-hotels (for rent by the hour, day, week, or month)

or become “party houses” that cater to large groups that may often be associated with anti-

social behavior, or incur excessive public or private property damage.

 Minimize public safety risks as well as negative consequences of short-term rental use:

increased traffic/congestion, noise, parking problems, increased trash removal or city services.

 Maximize the availability of affordable housing options by ensuring that no purpose-built long

term rental properties are converted to short-term rentals while tenants are displaced in a

limited supply housing market with soaring rents and less than a one percent vacancy rate.

 Establish a housing office with responsibilities for monitoring the number of evictions in the city,

regulating conversion of units or building of new suites explicitly for the short-term vacation

market; completing a housing inventory for the entire city; hiring a third-party to monitor the

STR operators in the city and funding it through a partnership with Tourism Victoria and

traditional tourism accommodation operators; charging a user fee on all condo properties and

garden suite properties in Victoria, particularly if all strata title properties must now be available

as rental units.

A recent VicWest strata council’s decision

to approve use of the 177-unit 21-storey Promontory and

condo tower at Bayview Place for short-term rentals (even though it contravenes the city’s land use

bylaw limiting STRs to transient accommodation zones) is disturbing. It would appear the City chooses to

These refer to a number of recommendations made by Karen Sawatzky in her M.Sc. thesis, “Short-Term

Consequences: Investigating the Extent, Nature and Rental Housing Implications of Airbnb Listings in Vancouver”,

Urban Studies, Simon Fraser University, September, 2016.

Mike Kozakowski, “Condo owners nix plan to curb Airbnb rentals in newly built tower”, Citified.ca, March 29,

2016. http://victoria.citified.ca/news/condo-owners-nix-plan-to-curb-airbnb-rentals-in-newly-built-tower/

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

ignore enforcement of its own bylaws by favoring property owners who argue that any rental

restrictions would depress the re-sale value of their homes. Apparently ‘turnkey’ vacation rental suites

are now fetching a 60 percent premium over pre-sale prices in new downtown condos, this is hardly the

story that Airbnb provides to justify their alternative lodging enterprise…offering middle-income owners

a way to supplement their income, pay off their mortgage and prevent foreclosure.

What happened to the principal that ‘housing is first and foremost for homes not operating a business’

as the Mayor of Vancouver, reiterated in October 2016 when Council considered staff recommendations

made in their report, “Regulating Short-Term Rentals in Vancouver”?

5.4 Recommendations and Reflections

In the absence of housing data in general, and the impact of short-term rentals on housing in particular,

the City of Victoria would be wise to consider the following actions:

 Obtain the services of a third-party home-sharing research service such as Host Compliance LLC

(who prepared a comprehensive report on this matter for the City of Vancouver in July, 2016 to

determine if there needs to be a restriction on any short-term rental of entire housing units (as

Berlin, Germany) has done. It may also consider the option of imposing a City tax that applies to

all short-term rentals such as licensed hotels, guest houses, bed-and-breakfasts, and other

forms of short-term visitor accommodation.

 Identify and monitor for enforcement purposes property owners in the transient

accommodation zones (currently designed to regulate use of land for commercial hotels and

motels and now being used by condo developers to market the units as vacation and short-term

rental revenue properties) located downtown and in residential neighbourhoods like James Bay,

as well as spot zoning to permit the operation of licensed Bed-and-Breakfasts and secondary

suites in homes and garden cottages operating as unlicensed short-term rentals. The aim of this

action is to identify all condo suites as well as secondary suites in houses that are being rented

short-term and how many of these suites are available and being used for long-term rentals.

The City may wish to consider the experience of Austin, Texas (a tourist destination city that has

adopted a permissive Short-Term Rentals in Principal Residences and Investment Properties

Policy. It limits non-owner-occupied STR permits to 3 percent of total housing units in residential

areas and 25 percent in commercial areas and places a moratorium on such permits in

single/double family residential zones. Other jurisdictions place limits on the total number of

guests accommodation per STR property unit, or an annual number of nights that STR may be

permitted to operate.

 Identify through the development permit process how many owners are repurposing their

residential properties for visitor accommodation, be it commercial apartment owners or private

home-owners, and restrict short-term rentals (less than 30 days) to properties which are the

principal residence of owners.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

 Establish a Short-Term Rentals Complaint Service that is part of the Bylaw Enforcement

Department to address the potential for conflict among different user groups in residential

buildings and neighbourhoods where short-term rentals are prevalent. These complaints should

identify and record multiple STR listings, illegal suites, noise issues, safety concerns related to

non-resident access to private areas; damage to common property (including wear and tear on

buildings, improper use of building amenities), and increased pressure on shared public

resources: on-street parking, utilities, recycling/garbage collection, as well as police and

emergency service calls.

Renting out a spare room from time to time or making it available to paying tourists while the owner is

on vacation is one thing, but it is quite another to permit turning a housing complex into a revolving-

door hotel operated by absentee landlords and corporate entities who do not live in such a property as

their principal residence. When these well-appointed mixed-use vertical residential/commercial

communities and secondary suites in character homes in neighbourhoods close to downtown tourist

attractions, become the most favored form of urban growth in a popular vacation spot, local residents

many of whom rent and work in the city are turfed in favor of tourists. Apparently, one of the most

visible consequences of the new “sharing” economy means ensuring an exclusive paradise reserved for

those of privilege who can afford the perks and premiums offered by the owners and shareholders in

the “gig” economy.

The issue of housing equity and potential displacement by the tourism industry, is posing a real threat

not only to the well-known and high-profile visitor destination of Venice, but also to our sister city

across the pond in Vancouver. While the “sharing” economy promises a “win-win” situation where “your

profit is my profit”, others may see it simply as nothing more than a zero-sum game, “your profit is my

loss”, especially when the new rules of the game are that he who rules gets to call the shots. And when

you’re a $50 billion enterprise operating in practically every country of the world without having to

comply with local regulations and tax authorities, and hide your profits in tax havens, the sky is the limit!

“We think we are smart enough to enjoy the full benefits of the modern deal, without paying the

price.”

The truth is that few of us recognize the substance of the contract, the invisible strings

attached, or the real costs and consequences of playing with daggers, dragons, or dazzling demagogues

in digital disguise. When the power of science and technology may increase opportunities for growth,

they may inevitably increase the danger.

When the affluent become complacent, tragedy occurs, the poorest and most vulnerable suffer, and the

unthinkable occurs. This time it involves not only a threat to the well-being of our cities but more

importantly, to the ecological meltdown of our planet. If the economy actually keeps growing forever, it

remains to be seen whether the newly crowned King of the World Empire can make a deal that

countries, cities and citizens can live with, but more significantly, whether all of humanity is willing to

pay the heavy price of living in an environment with few restrictions on individual and corporate

Yuval Noah Harari, Home Deus – A Brief History of Tomorrow, (Toronto: Penguin Random House, 2015), 201.

Home Truths: Implications of Short-Term Vacation Rentals on Victoria’s Housing Market

freedom and any concern for the notion of the common good is considered an impediment to wealth-

making and accumulation.

To navigate in a world of turbulent technological and economic storms, one needs a map and a rudder

rather than just an anchor of certainty that does little to guide one’s precarious vessel into a safe

harbor. The City of Victoria would do well to develop a map to navigate unpredictable waters and a

viable strategy to ensure its citizens adapt to change effectively and reach their desired destination.

While it is said that citizens enjoy the freedom to choose a home in which to live, does that mean they

also have the right to be free of the problems associated with short-term vacation rentals? More

importantly, are City leaders prepared to pay the price of post-modernity and at the same time as honor

their commitment in words and deeds—to ensure that all Victorians are “Forever Free”—at liberty to

live in a place that is also free from poverty, disease, and social injustice?

Every paradise has its price. It remains to be seen whether today’s City leaders and citizens, and those

three decades hence, are prepared to assume the undisclosed costs, (that may well exceed their

capacity to pay), that come attached to this Nirvana by the sea.

To those who are counting on new technologies, devices and tools such as digital algorithms to tell them

the price of everything and make critical choices for them, be careful what you wish for. In this Brave

New World, it is likely that notions such as individual “free choice” and human values will no longer have

any relevance. The present deregulated and decoupled economy, with its new models of shared access

to goods and services is just another way of concentrating wealth in fewer and fewer hands.

An economy based on quantum computers, networked artificial intelligence machines together with

robots and 3-D printers among other things will have profound impacts on everyone. Some leading

thinkers such as Yuval Harari suggest that the new “best practices”, state-of-the-art processes and

cutting-edge technologies in the hands of a few monopolies and other special interests will render most

citizens redundant, i.e. surplus labour - no longer useful or valued members of society.

Is this what Mayor Helps has in mind when she speaks in glowing terms about her enthusiasm for

“moving Victoria into the 21

century as a world leading city?”

Will renters be recognized in the

Mayor’s Year of Inclusion, Diversity, and Reconciliation in 2017? More importantly, will housing finally

become a right of all Canadians on July 1 this year, when the country celebrates its 150

founding

anniversary since Confederation?

Ashifa Kassam, “Top Canada CEOs have already earned more than an average worker’s 2017 salary”, The

Guardian, January 3, 2017. In 1995, Canada’s top 50 CEOs earned 85 times more than the average Canadian

income; by 2015 this same cohort made 290 times the average Canadian income of $49,510. When adjusted for

inflation, the average income of the top 100 CEOs in Canada had grown by 99% since 1998, compared to an

average Canadian income increase of 9% over the same time period

Yuval Harari, Homo Deus, 326, 395.

Lisa Helps, “A look back at 2016 with Victoria Mayor Lisa helps”, Victoria News Interview, December 30, 2016.