What is the issue?

The issues are

  1. ensuring a level playing field for accommodators,
  2. safe accommodation facilities for visitors and tourists, and
  3. that we are meeting the housing needs of local long-term renters.

Short-term rentals, often referred to as Airbnb after the best-known short-term rental platform, are very prevalent in Nelson. Airbnb alone has about 100 listings, the majority of which are entire homes. Several other websites as well have listings of private residences in Nelson.

The City has regulations designed for ‘traditional’ tourist accommodations such as bed and breakfasts, hostels, motels, and hotels. These and other land-use regulations, stipulated in the zoning bylaw, de facto govern short-term rentals for the time being. To respond to this new trend, the City is now interested in exploring new policy options tailor-made for short-term rentals.

Despite much anecdotal evidence from across British Columbia and the world of tenants being evicted in order to convert the property to a short-term rental, it remains unclear to what extend they impact the rental housing market. Many major cities are grappling with how to study and measure the impact. The thesis research of Simon Fraser University graduate student Karen Sawatzky on the impact of Airbnb on Vancouver’s rental market has figured prominently in provincial media. The suspicion that short-term rentals are removing part of Nelson’s long-term rental stock and the possibility that the City could improve conditions for its resident renters have drawn the City into this conversation. Regulating short-term rentals fits in as part of Nelson’s ongoing affordable housing strategy.

The advent of short-term rentals has frustrated many hoteliers, who point out that short-term rentals are often illegal under current zoning and argue that their competitiveness is based on an unfairly low overhead characterized by the non-payment of sales and lodging taxes, lack of a business licence, not being subjected to commercial property tax, insufficient insurance, and non-compliance with safety and health standards. For example, accommodators with over four short-term rental units are required to levy a 2% tourism tax which goes towards marketing the Nelson Kootenay Lake region, efforts that short-term rental hosts benefit from without contributing to. Accommodators hence state that short-term rentals have an unfair advantage over legal accommodation providers.

The City is also concerned with the safety of unregulated tourist accommodations. Licensed accommodations are required to undergo a safety inspection, which illegal short-term rentals are currently bypassing. The City is concerned that both hosts and guests are unaware of the potential risks. Many home insurance providers claim that short-term rentals void all damage and liability coverage.

Short-term rentals … for whom?

There are numerous benefits of short-term rental (STR) platforms such as Airbnb and VRBO for different people. They allow community members to gain a secondary income, even if they have a spare room that is only free from time to time. Some commentators have cited the benefit of reciprocal reference writing: while anyone can write a hotel review online, accommodators have not been able to review their guests. Some STR platforms allow hosts to do just that, and some have argued that this holds guests more accountable and provides incentive to be respectful of neighbours and the home. Although no such study exists for Nelson, some studies elsewhere have shown that they provide a net benefit to the tourism economy.

There are also drawbacks to the way short-term rentals may be operating now. Airbnb cites its roots as a “home-sharing” scheme that creates connections between local residents and visitors. But there is increasing evidence that a large share of short-term rental accommodations are operating more like a hotel than “home-sharing”. The following section provides a brief portrait of some of the considerations for different groups of people in the community.

Neighbours and the community

Neighbourhoods have been concerned with protecting their integrity. Anecdotally, one 86-year old Hollywood Hills homeowner told LA Weekly that, “the whole neighborhood is now people who come and go every week or two. They’re nice enough people, but I have no real neighbors anymore.” The term “the dark block” has been coined to describe neighbourhoods, particularly in American cities, where the vast majority of residences have become short-term vacation rentals.

A tight long-term rental market like Nelson’s may displace long-term community members. Recently in Victoria, the 60% resale premium of a recently completed condo unit was widely attributed to the fact that it was sold as a “very successful AirBnB [vacation rental] that is always booked” and “great for anyone looking for an exciting new turnkey business with proven track records.”

In other cities concerns specific to multifamily buildings have arisen. One Vancouverite told the Vancouver Sun that there are multiple Airbnb listings in the 60-unit building where she lives that have all been posted by the same individual, a realtor. Her concern is that short-term guests are provided keys that give them access to all parts of the building, including the storage and bike lockers and the laundry room. The Southeast Uplift Neighborhood Coalition in Portland, Oregon, has expressed concerns about how STR brings about the mixing of residential and commercial without neighbours being warned of it.

In addition to noise complaints, on-street parking is a common complaint. Regulating short-term rentals could also involve regulating STR parking for neighbours’ benefit and fairness.

In many cities, short-term rental regulations have required hosts to notify neighbours, ensuring that neighbours feel empowered and informed about what kind of business is taking place on their block.

Tourists and visitors

As a general rule, visitors benefit from a diversity of accommodation options and competition that theoretically drives down prices. “Airbnb” is a seemingly growing trend, adding value for visitors by allowing them to ‘live like locals’ either with real locals or in residential areas. Research compiled in Amsterdam by Airbnb, for example, concludes that Airbnb guests are more likely to stay longer and more likely to return to the city than visitors who stay in other accommodation. Based on the reviews on websites like Airbnb and others, there is no shortage of satisfied travellers coming through Nelson and staying in short-term rentals.

That said, the current unregulated state of short-term rental (STR) may not be entirely in visitors’ favour. For one, illegal and unlicensed STR properties are bypassing safety and health inspections, which all licensed hotels and bed and breakfasts undergo before receiving a licence to operate. Secondly, an STR is not necessarily adequately insured. While Airbnb specifically offers some liability and damage insurance, other web listing platforms do not.

Tourism industry

Tourism and hotel operators in Nelson have been asking for fair standards and a level playing field. Many have told City Hall that they are not intimidated by the competition, but expect their competition to be held to the same standards, regulations, and taxation that they are.

Airbnb/STR hosts

Short-term rental (STR) affords homeowners and authorized renters great flexibility. They are able to earn a secondary income, as well as company, by capitalizing on a spare guest room that they perhaps need 10 weekends a year, and hence cannot rent long-term.

STR hosts may not be familiar with local rules and may unwillingly be contributing to public safety or health risks. Municipal regulation helps ensure a fair and level playing field with other hosts in the area – consider the benefits of professional standards for regulated professions (e.g. planners, lawyers, massage therapists). For instance, licensing ensures that all rental properties meet basic safety standards, providing assurance to hosts that other hosts and competitors in the area are complying with the same standards that they are.

There have been a few widely reported cases of significant property damage to STR rentals, in particular one in Calgary. On the other hand, some traditional landlords have decisively become STR hosts for multiple reasons. One Toronto couple wrote an op-ed in the Toronto Star explaining their rationale. After numerous negative experiences with tenants, they “vowed never to rent again” and chose to rent to tourists on Airbnb instead.

According to some recent media reports (see CBC News), renting out a property short-term without notifying your insurance company may void your residential insurance. Not all insurance providers seem willing to insure residential short-term rentals.The comprehensiveness of Airbnb’s coverage has been questioned by some insurance brokers quoted in the media. One broker strongly urges hosts to ensure that any guest has their own property or tenant’s insurance. There are a number of instances that may not be covered by Airbnb’s insurance. Furthermore, other commonly used platforms do not offer insurance. Municipal regulations and standards for short-term rental may ultimately ease insurers’ concerns, promoting better, more affordable and certain operating conditions for hosts.

According to an article by the Real Estate Board of Greater Vancouver, there are a number of legislative acts that hosts must consider: the Hotel Keepers Act and the Hotel Guest Registration Act, the Income Tax Act, the Provincial Sales Tax Act, and, if the rental is within a strata/condominium building, the Strata Property Act, as well as any rules enacted by their Strata Council. If rental income exceeds $30,000 per year, GST must be paid.

Landlords

In addition to the likelihood of property insurance being rendered void and the resulting liability issues, any fines for illegal activity on the rented premises, such as illegal tourist accommodations, could ultimately be levied against the property owner, even if the landlord was not aware of the premises being rented out short-term by the tenant. Most leases prohibit subletting, such as short-term rentals, without the landlord’s prior permission. At the time of writing, the province’s largest organization representing landlords, LandlordBC, recommends to its members to not permit tenants to sublet short-term.

Tofino requires the property owner to sign off on any new short-term rental permit.

Renters

37% of Nelsonites are renters and despite an increase in overall dwelling counts between the years 2006 and 2011, the ratio of renters to owners remained constant. The rental market is tight, with low vacancy rates and more demand than supply. Nelson’s 2015 rental vacancy rate was 1.6%; in October 2014, Nelson’s vacancy rate was the lowest in the province at 0.06%. A healthy vacancy rate is considered to be 3%. Rental rates are also increasing.

The City of Nelson has received some reports of long-term tenants being evicted and the property becoming listed online as a short-term rental. In many cases, this scenario may be an illegal eviction. The Residential Tenancy Act stipulates that a landlord may end a tenancy with two months’ notice (even if the rental is on a month-to-month basis) if

  • the landlord plans in good faith to use the property, or
  • the landlord plans to do major construction that requires the unit to be empty.

Apart from the home being sold to a third-party, the only remaining track for eviction is the “good faith” requirement to use a property, meaning that the landlord will:

  • move into the unit, or have a close family member live in it, or
  • sell the property and the new owner, or a close family member of the new owner, plans to live in the rental unit.

If the rental unit isn’t used for the reasons given in the notice within a “reasonable period of time” (according to the Tenant Resource and Advisory Centre, this means at least six months following the eviction), the tenant may apply for dispute resolution and request compensation equal to two months’ rent. More information is available online from the Province of British Columbia. The City of Nelson does not provide legal advice for individual cases. If you think you have been wrongfully evicted, you may wish to contact the Residential Tenancy Branch at 1-800-665-8779. You can also contact the Tenant Resource & Advisory Centre at 1-800-665-1185.