BC is banning Airbnb’s, here’s why you should buy a short term rental in Alberta instead

By Robin Tuck
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New BC short term regulations coming into effect in May 2024

Last month, the British Columbia provincial government made the landmark decision to ban short term rentals across the entire province from May 2024 onwards, with a few exceptions (to be discussed below). This is a big blow to Airbnb owners across the province, particularly for those that have built their businesses around short term rental income.

At the same time, this change has the potential to be a big win for the many that are struggling with the high home prices and rents in BC.

This blog post is going to dig into these new regulations in detail, the possible effects they’ll have, and lastly, why Canmore, Alberta could be a great alternative place to buy your next short term rental.

The new “Short Term Rentals Accommodation Act” in British Columbia

On October 16, 2023, the BC government passed the Short Term Rentals Accommodation Act, which will come into effect on May 1, 2024. The legislation aims to regulate all short term rentals that are privately managed, and advertised on common rental sites, like Airbnb, VRBO, Kijiji, newspapers etc. While many jurisdictions in BC already regulate Airbnbs, this is the first attempt to create province wide regulation.

Exemptions to the new Short Term Rentals Accommodation Act in British Columbia

The law prohibits all properties from being rented out as short term accommodation (less than 90 days), with a few notable exceptions:

1. Short term rentals within the hosts principal residence are allowed

This is the biggest exemption with the new act, and it allows owners to continue to legally operate short term rentals within a host’s principal residence PLUS one secondary suite or accessory dwelling. So if you rent a room out in your house or have a separate accessory unit, your listing is probably safe.

2. Resort Communities are exempt in BC

One of the biggest questions with this new act relates to resort communities, and places where the local economy virtually entirely depends on tourism (e.g. Whistler and Golden, BC). These will largely be exempt from the Airbnb ban. Here is a list of the 14 resort communities in BC that will be exempt in future acts:

  • City of Fernie
  • Town of Golden
  • Village of Harrison Hot Springs
  • District of Invermere
  • City of Kimberley
  • Town of Osoyoos
  • Village of Radium Hot Springs
  • City of Revelstoke
  • City of Rossland
  • Sun Peaks Mountain Resort Municipality
  • District of Tofino
  • District of Ucluelet
  • Village of Valemount
  • The Resort Municipality of Whistler.

So, if you’re looking in these areas, you’re safe (unless the local authority decides to opt into the act and remove their exemption – which will always be a possibility).

Generally speaking, it’s Airbnb operators, owners and managers with properties in Vancouver, Victoria and Kelowna that are going to be the most affected.

3. Additional exceptions to the short term rental ban

Any short term rentals operating in any of the categories below are also exempt from the new act:

  • Properties on reserve lands
  • Properties on Nisga’a Lands or the Treaty Lands of a Treaty First Nation (unless the Nation chooses to opt into all or part of the legislation through a coordination agreement with the Province)
  • Hotels, motels

Legal non conforming use is not a protection from the ban

Often with bylaw changes, there is an opportunity to be grandfathered in and have your unit designated “legal non conforming”. Not in this case. Non conforming properties will still be subject to the ban as well and will still be fined (up to $3000 per day) if they continue to operate.

Other important things to know about the BC short term rental ban

The new and contentious 90 day definition of short term rental

Typically, the vast majority of municipalities define a short term rental as anything up to 30 days, however British Columbia has made the decision to define a short term rental as anything up to 90 days.

Who is affected most by the Short Term Rentals Accommodation Act in British Columbia?

The results of this ban will be that all condos and full home rentals that aren’t exempt will be removed from all short term rental platforms. Unfortunately, those who will be affected most are investors who have purchased investment properties to be used exclusively for short term rentals.

On the flip side, renters and home buyers are likely to see the most benefits from this ban (to be discussed more below).

Why has BC decided to ban short term rentals?

BC has a major housing crisis, and the theory is that short term rentals are causing rents to increase significantly, as well as removing potential long term homes of BC citizens from the market. As of 2023, the government identifies 28,000 properties listed on short term rental sites across BC, with an estimated 16,000 of those being entire homes dedicated to short term rentals.

The ultimate goal of the government is to free up more properties for long term residents. Government officials have said that they believe it’s unfair that a few property owners are making huge profits from short term rental businesses at the expense of a more vulnerable part of the population.

What are the potential consequences of banning Airbnb’s in British Columbia

There are a number of potential consequences that will arise from banning short term rentals in British Columbia; some good, some bad (depending on who you are). Let’s explore what could happen once this rule comes into effect:

1. Removing short term rentals will cause residential rents to fall

The most obvious consequence here is that rents may fall across BC. Short term rentals will be converted to long term rentals, and more rental properties on the market equals more supply. Removing several thousand properties from the STR economy overnight is likely to cause a one time shift in prices, due to supply shock.

However, this may just be a temporary/one off reduction. If the BC population keeps increasing and housing starts don’t keep up with population, it is inevitable that rents will increase again over the long term.

In September 2023, McGill University released a study that showed residential rental rates in BC had risen 19.8% from 2017 to 2019 as a result of short term rental growth (click here to download the full pdf study). It also showed that even the presence of 1 short term rental out of 100 units can cause an average rental increase of $49 in the area. This has been widely cited as evidence that we should be removing short term rentals from the market to help improve rents, however there have also been conflicting studies from other sources.

The Conference board of Canada conducted its own study and showed that of the 30% increase in rents across Canada, short term rentals account for a less than 1% effect of that (although Airbnb collaborated in this study).

With so few short term rentals in the province (relative to the total number of homes), removing a portion of them seems unlikely to have a huge, permanent impact on residential rents (in my opinion), but it will no doubt have at least some effect on rents in the short term. Ultimately, the government knows this won’t fix the problem, but at least it’s something.

2. Property prices may fall in BC

Less demand means property prices should fall

An announcement like this is naturally going to make these properties less attractive to buyers. They will take longer to sell and demand will drop off. As a result, prices are sure to fall. Of course, this is going to affect single family homes and condos that were already being used as STR’s the most.

For the most part, falling prices will have the biggest impact on properties that were sold with inflated prices on the basis of being a great short term rental investment. But this will no doubt cause a ripple across the entire market and cause a general price decrease.

Reducing income reduces value

Demand aside, earning potential is another major determinant of value. Short term rentals significantly increase a property’s income potential and this is the major reason buyers pay so much more for them. If the revenue is slashed significantly, this will also slash the value of these properties.

This could lead to many owners falling into negative equity and being forced to sell their properties at a loss. This could be disastrous for many owners and ultimately, it could be argued that the government is saving some people at the very realistic cost of harming others.

3. A glut of ex-Airbnb’s on the market in British Columbia

Inevitably, if income and desirability wanes on these short term rentals in BC, it’s likely that many of these owners and investors will put their properties on the market and attempt to sell. This is likely to drive up supply. As these properties will enter the market as long term rentals or family homes, they will absolutely affect the supply of the regular housing market. This is going to create more of a buyers’ market and will inevitably cause housing prices to fall in certain asset classes..

With huge fines for operating illegally ($3000 per day), investors will have a massive incentive to sell their investments and avoid operating their rentals illegally. In particular, investors that bought recently and are highly leveraged and paying high interest rates will be hugely incentivised to sell, lest they lose their shirts.

If you’re a buyer, aiming to invest, 2024-2026 will be an interesting time and may offer the most opportunities. The addition of all these ‘ex-airbnbs’ to the market is only going to compound the negative effects of the high interest rate environment across Canada.

4. An increase in hotel prices as accommodation is drastically reduced across BC.

Perhaps an unintended consequence of the reduction of short term rentals will be an increase in hotel costs. With reduced competition, hotels could be able to significantly increase their prices.

5. Other industries may be unintentionally affected by the ban on STR’s

Reduction of houses and accommodation may affect industries which rely on the availability of temporary accommodation. The film industry, for example, relies on being able to find temporary accommodation for their crews, and finding hotel rooms for everyone isn’t always possible. The burgeoning BC film industry may soon find itself suffering unintentionally here.

6. Properties become more affordable for buyers in BC

Of course, the intention of this new legislation is intended for renters and first time home buyers; the goal being to reduce rents and house prices that have jumped out of control in recent years. The introduction of the empty home and foreign owner taxes in BC have clearly not had the desired effect of reducing prices and rents, so this is yet another drastic move to support local residents who have grown despondent about the impossibly high costs of living and property costs. So, while the first few points are absolutely terrible for property investors, this is fantastic news for renters and first time home owners who are trying to enter the real estate market.

7. Properties with legal suites and legal accessory dwellings could actually increase in value

Just as a reduction in demand for ex-STR properties will cause prices to fall, a reduction in supply of legal airbnb’s will undoubtedly increase the price of those remaining legal properties.

If you happen to have a property with a legal suite in your primary residence or an accessory dwelling, then this rule change will only affect you positively. With most alternatives being wiped off the market, being an owner of one of the few remaining legal Airbnb’s will only drive up the value of your property. It could also allow your nightly rate to increase significantly.

8. We may see a jump in foreclosures in BC

Falling property values, high interest rates and increased supply will force a lot of owners into negative equity or a situation where they can no longer afford their monthly expenses. It seems very likely that there will soon be quite an increase in foreclosures in BC.

9. Developers struggle and buyers walk away from their deposits

There are still plenty of new developments in BC that have pre-sold units to investors under the assumption that those houses or condos can be used for short term rentals. Of course, with the law now changing, there will be many investors on the hook for a property that no longer is financially viable.

As a result, we might see a number of investors walk away from their deposits, rather than closing. This could also have a knock on effect on developers, who may find themselves struggling if too many buyers renege on their contracts. Again, the protective aim of this law might inadvertently harm some of today’s buyers irreparably as well.

So if the vast majority of BC doesn’t make sense as a safe short term rental investment, where else can investors look to park their money?

Why Canmore, Alberta is a great place to buy short term rentals right now

Investors in BC can look to Alberta as the next closest location for investment that still allows short term rentals. Regulations across Canada tend to be targeting major cities for short term rental restrictions, while tourist communities tend to remain exempt. Tourist towns rely much more heavily on short term accommodation, and removing these properties would be incredibly damaging to these towns.

Canmore is one place in Alberta that still offers fantastic rental revenue and is still safe from too much red tape.

Canadians discovered the mountains during Covid

While Canmore and Banff were traditionally more appealing to international tourists, during Covid there was a huge surge of domestic travel to the mountains. Canadians couldn’t travel abroad, so a lot of them finally made time to travel to the Canadian Rockies.

Fast forward a couple of years and international travel is back, but this time we have a whole country of Canadians that are now equally interested in visiting. The Bow Valley’s post covid numbers are higher than ever, and it’s because we have more demand than ever. Nightly rates are continuing to climb each year, and property prices are gradually increasing to match the demand.

Fortunately for Canadians, there is currently a ban on investment in towns with more than 10,000 people (Canmore is on that list), so there is a rare opportunity to buy now at current prices while the demand is being kept at bay.

Canada’s mountain property has an extremely limited supply

When you own a short term rental in a city, there are literally thousands of units that can compete with yours. When you buy in a small recreational town, there are very few alternatives when visitors try to book your home.

On average, Canmore has around 4 million visitors per year (around 3x Whistler’s visitor numbers), and there are only one or two thousand short term rental units. This is an extremely limited supply that push up prices. Forecasts predict that visitors will only increase in the next decade, meaning prices will probably only move in one direction.

Unlike cities, there is only one place like Canmore, with amazing mountain views, the connectivity to Calgary and the almost limitless adventures in the surrounding outdoors. Sure, BC has Whistler, Fernie and Golden, but there is a reason they don’t get as many visitors!

Canmore still has undeveloped lots that are zoned for short term accommodation single family homes

While short term rental single family dwellings are being phased out in many towns and cities, there are new development lots in Canmore that are zoned for ultra-luxury single family homes that allow short term rentals as well as long term; you can build a legal suite OR just rent out the entire home. There are relatively few of these properties available in Canmore (let alone in Canada), so owning one of these is a rare opportunity.

With such limited supply, your nightly rate for a unique luxury property in Canmore will easily beat your returns on virtually any kind of city short term rental investment.

Silver Tip Golf course recently released 21 tourist home lots in their Mountain Tranquility development (zoned for short term rental – lots starting around $1m), where you can build your own lucrative home in the mountains. Stunning mountain lots like these are now virtually impossible to come by in Canada, and once they’re gone, they’re gone! The development also plans to build a new mountain gondola up Mount Lady Macdonald, as well as a mountain village, so this will be an incredible development to be a part of.

Make sure you read my blog post on understanding Canmore Zoning rules if you’d like to get to know the short term rental market. Be sure to reach out if you’d like more information on Mountain Tranquility Place as well.

Foreign investors can still buy undeveloped lots in Canmore

You may have heard of the prohibition on foreign investment in real estate in Canada until January 2025, but international buyers are still allowed to buy undeveloped Canadian land to develop in the future. Prices in tourist destinations will almost certainly increase once foreign investment returns to Canada in 2025, so buying one of the Silver Tip lots now and holding until the ban is lifted is a still huge opportunity for profit.

Give me a call at +14034012066 or email me at info@robintuck.com if you’d like more information!

Will Canmore ban short term rentals too and why is it safer than BC?

The short answer is no, but like in BC, short term rentals are a hot topic in Canmore (as they are across Canada). While other places are trying to completely restrict short term rentals, Canmore recognises their importance to the economy. There is currently no talk of outright bans, and instead there are some less restrictive changes proposed that will protect owners.

Canmore is looking at phasing out the tourist home zoning on future developments but keeping current STR’s

Canmore has two types of STR’s; those that allow short term rental only (known as visitor accommodation or hotel condos) and those that allow short term rentals AND long term rentals (known as tourist homes).

Hotel condo type (visitor accommodation) properties that were custom built for vacationers are absolutely protected here, and there are plenty of very profitable units in Canmore that are available to purchase (these are typically harder to finance and require 30-35% down, but it helps to know the right banks! Ask if you need me to connect you).

The properties that some people are worried might be removed are those that allow both short AND long term residents (similar to what has just been banned in BC). While other jurisdictions are completely removing owner ability to operate their properties as short term rentals, Canmore is working on a more sensible solution that basically says, “if you don’t use it, you lose it”.

As it stands, there is a proposal that the the tourist home zoning will be phased out, but owners with properties with this permitted use may become legal non-conforming (still not confirmed). Anyone that doesn’t use their tourist home property as a short term rental for 6 months, loses the ability to use it as a STR, but anyone that continues to operate their unit as a STR will be grandfathered in. A great solution that protects buyers and sellers and creates an opportunity for some of these condos to work their way back into the long term housing market.

Canmore also will not be allowing any more Tourist home developments that aren’t already approved in the land use bylaw. So this means that Tourist home properties will become a limited supply and ultimately more sought after!

Ultimately, Canmore is taking a very reasonable approach to short term rentals that protects owners and offers a route to creating more accommodation for locals that need long term housing. Potential buyers can feel reassured that any investment they make will be safe.

An influx of BC investors might cause further price increases and opportunities in Canmore

With BC investors looking for safer alternatives to Vancouver and Kelowna, Canmore is an obvious place to buy into. Alberta might still be considered relatively cheap compared to Vancouver, so investors will soon be eyeing up opportunities in our Bow Valley with glee. Demand, and prices, will almost certainly go up once this ban goes into effect, so investing in Alberta early is critical to ride that price wave.

Final thoughts

The British Columbia ban on short term rental accommodation will hopefully be a positive thing for local residents in need of housing in BC’s major cities, but the cost will be high for some investors/owners.

The likely outcome is that investors will soon move out of BC and look to fresh pastures for high returns. Alberta might be the obvious choice, and with only two mountain towns to choose from (Banff and Canmore), Canmore is poised to explode with investment (unfortunately Banff is a no-go for anyone without the ‘need to reside‘). The short term rentals in Canmore for sale are some of the best units in Canada with the best facilities; with consistently high returns on investment, high cash flowing properties, and ever increasing tourist numbers, it’s an opportunity not to be missed!

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