A commentary by a former owner of multiple legal Victoria Airbnbs.
I understand and applaud regulation that cracks down on illegal Airbnb. However, the proposal to eliminate the legal nonconforming so called “loophole” that disallows the legal use of property is a step too far.
First, it never was a “loophole,” nor is it one now. Victoria had zoning that permitted short-term rental of units in certain parts of downtown. It was legal.
Second, in the early 2000s the City of Victoria, in order to incentivize the renovation of many derelict and unused buildings, permitted those buildings to be constructed with so called single room “micro suites,” many of which are not larger than a typical hotel room.
Some of the buildings were, in fact, former hotels, such as the Oriental, on Yates Street.
Thirdly, the City of Victoria, recognizing that these small units were less attractive, also provided a 10-year property tax holiday as an incentive to the buyers of these “micro suites”.
However, then like now, it was difficult to make the numbers work. Few people want to live full-time in one room of about 300 square feet or less, with no parking and no amenities.
Achievable rents didn’t cover the investment carrying costs and renting elsewhere remained more desirable. Some out-of-province people bought them as vacation homes and we already know what the government did to quash that.
Eventually, developers building new buildings within that zone marketed them as short-term rental possibilities and this is when the growth of short-term rentals really took off.
This is when the city cracked down and eliminated the zoning permitting short-term rentals.
However, the city, per standard practice when downzoning, in fairness to those already legally operating in the former transient zone, allowed those units to continue operating as “legally non conforming” and charging owners the highest business licence fees in Victoria. They were legal before and continued to be legal.
Simply put, these old buildings were renovated, zoned, incentivized, built and licensed with hotel-size suites. It is therefore disingenuous for the city to now be upset that they are being used as short-term rentals when everything was in place for that to be their best use.
Yet, now government wants to force those micro-suites back onto the rental and resale market. This ignores the fact that there has been a steady resale turnover of these units but given their size and other limitations, few, if any, are bought as long-term housing.
Even if prices drop 20 per cent, the typical monthly cost of these micro units with a 75 per cent mortgage plus strata fees and taxes will be more than $2,500.
Add to that, that these sales will be subject to GST. Rents covering all those costs simply aren’t achievable for a single room. Investors won’t buy them. Likewise, they have limited attraction for long-term tenancy whether as owners or tenants.
So while parts of this crackdown make sense, going after the owners of legally non-conforming micro suites (a situation created by the city) is reckless over-reach that will result in severe financial hardship, freeing up suites that may well be unsellable and unrentable in this market.
But then again, the governments have an answer for that, given that if they remain vacant, they can further punish these owners with the B.C. Speculation Tax and the Federal Underused Housing Tax.
Owners of all types of property should be able to trust government when property is bought and used for permitted use.
Demonizing owners that put property to a legal, permitted and licensed use is irresponsible and ignores that government itself created this mess.
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