Victoria councillors have axed a planned increase to fees the city says are used to disincentivize property owners from listing their long-term housing on the short-term market.
Council voted in the summer to raise the business licence fee from $1,500 to $2,500 for non-principal short-term rental (STR) operators – who don’t live in the home they’re listing on sites like Airbnb. That higher rate would come into effect after a final vote next month.
At the time, the move was the city’s only avenue to dissuade 1,600 legal non-conforming units from operating as STRs and councillors unanimously supported it. Legal non-conforming (LNC) units are mainly condos in buildings that had grandfathered-in exemptions from Victoria’s STR bylaw – allowing them to enter the short-term market at any time unless the province amended its legislation.
That happened when the B.C. brought in its suite of short-term rental restrictions this fall, which included a May 1, 2024 end date for the legal non-conforming protections.
Councillors Stephen Hammond and Marg Gardiner moved a motion on Dec. 7 to reduce the fee to $500, citing how the non-principal operators would only be allowed to run for the first third of 2024. Councillors rejected that rate – saying it’d be akin to an unfair pro-rated fee the city doesn’t do for other kinds of businesses – but eventually landed on going back to the $1,500 rate.
Several councillors alluded to operators who lobbied in recent weeks to keep the annual fee at $1,500, with multiple acknowledging they were giving those STR owners a break.
“That’s already a win for them, this is $1,000 savings for them, to give them a $2,000 savings I think will send the wrong message to the public,” said Coun. Jeremy Caradonna, who moved to go back to the $1,500 rate.
City staff in the summer said housing availability and affordability are impacted each time a unit enters the short-term market, and said the operation of STRs adds an average of $1,15o annually to a Victoria renting household’s costs. The non-principal fee, which staff said looks to discourage STRs, was originally proposed to be $2,500 in 2018 before the councillors of the day reduced it.
Mayor Marianne Alto would not, as some of her council colleagues did, characterize the fee move as a “break” for STR operators. The additional $1,000 would’ve been a minor adjustment that would have an “insignificant” impact on the provision of housing over the next four months, she said in an interview.
But she can also imagine how a decision that appears to benefit STR operators would be seen as unfair now the province has said it’s no longer a “viable business.” The bottom line is the non-principal owners will have to sell or list their unit as a long-term rental, the mayor said, adding that the latter is the best use in her view.
Asked then if the higher fee could’ve helped get units back in the long-term market even sooner, Alto said “whether the impact of a four-month lack of increase is going to be significant enough to make people run right to the very last minute, I can’t say that, I don’t think it does.”
“This is finding that compromise between understanding some of the challenges that some of these people have but also understanding that the time for owning and operating an STR in British Columbia is over – I think that’s a good thing,” Alto said, noting the city supported the new rules and has been aggressively advancing policies that accelerate new housing.
A landlord of 20 years himself, Mark Holland said he can sympathize with operators wanting simplicity and called the short-term rental business model legitimate, in theory. But it can’t be separated from the reality in Canada where every single long-term housing unit needs to be used for that purpose, not as small hotels in residential areas, the community planning expert said.
“It’s now a chronic situation,” risking fundamentals of life like housing, safety and families being warm and dry, Holland said, adding that “does in fact take intervention in the market by governments.”
The Vancouver Island University professor said sites like Airbnb have strayed far from their original intent of having people book just one part of a home or crash in one room. Downtown Victoria alone had 679 active Airbnb listings on Friday (Dec. 15) and all but 14 are renting the entire home or apartment, according to the tracking site Inside Airbnb.
Victoria business licence fees also go toward paying the staff that enforce STR rules, but staff in the summer said the city is likely spending more on investigating compliance than what it takes in from fees. At most, only 66 per cent of STR operators got a business license in 2022, according to the city – meaning hundreds skirted the requirements.
Licence fees rarely cover the costs cities spend on managing that activity and its issues, Holland said. Communities also have to walk a fine line in setting rates that disincentivize unwanted actions, but aren’t so high that they drive people underground to where they’re avoiding the rules altogether, he added.
But from a pure policy perspective, the community planner said having a larger fee would discourage short-term rentals over the coming months.
“I’m going to guess that it’s probably more of the politics of it because they do have a lot of residents who are not happy about the situation,” Holland said. “It’s not a thoughtful policy undertaking.”
Several councillors noted STR operators and other groups specifically asked them to go back to the $1,500 rate. One of those groups, the Property Rights Association of B.C., said in a presentation to council last month the increased fees would be bad for tourism and cited data from Destination Greater Victoria.
But that tourism agency said it was pleased with the province’s STR legislation.
“With five new hotels in the pipeline downtown and others in the works, the accommodation sector can manage the volume of visitors coming to the region without short-term rentals,” Destination Greater Victoria CEO Paul Nursey said in a statement to this paper in October.
“We understand there’s a housing crisis and we want to be part of the solution. Commercial transient accommodation is for travellers. Housing is for homes.”
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