Market Update

New Regulations Transform Short-Term Rentals in B.C.: What You Need to Know

B.C.’s new legislation on short-term rentals will triple the fines for hosts who break the rules, and bring in a number of new requirements for operators in an attempt to return units to the long-term market.

Premier David Eby and Housing Minister Ravi Kahlon announced the Short-Term Accommodations Act on October 16, 2023.

“There is no question, in British Columbia short-term rentals have gotten out of control,” Eby said at a news conference after the legislation was tabled, adding that the bill seeks to crack down on profit-driven operators.

“Thousands of homes that used to be available to buy or rent are now off the market, and people who are looking for a decent place to live are struggling more than ever,” he continued. In a long-term rental market characterized by sky-high prices and extremely low vacancy rates, the province estimates there are currently 28,000 short-term rentals operating in communities across B.C. A significant percentage of these, the province says, are run by for-profit operators and not people renting out their own homes or vacation properties. Up to half are not compliant with existing municipal bylaws, according to the province.

“We’re taking strong action to crack down on the abuses in the short-term rental market,” Eby told reporters.

The first part of the new legislation will see a significant increase in fines for illegal operators. The penalty will jump from $1,000 per infraction, per day, to $3,000. In addition, regional districts – which currently do not have the authority to license or regulate businesses – will be allowed to license and regulate short-term rentals.

By May of 2024, the province will bring in a principal residence requirement for short-term rentals, meaning people can only rent out the home in which they live for the majority of the year. Renting out one secondary suite within a principal residence will also be allowed.

“Short-term rentals in non-principal residences across the province are taking away homes for people in B.C.,” a presentation from the province says.

“Entire homes are being used as short-term rentals when they could be put on the long-term rental market or sold.”

The principal residence rule will apply to communities with more than 10,000 residents but resort municipalities like Whistler, Tofino, and Osoyoos will be exempt. Cities with a vacancy rate of more than three per cent, which is considered healthy, can apply for an exemption from this requirement.

Another change that will come into effect in May of 2024 is a requirement for municipal business licence numbers to be displayed on rental listings on platforms like Airbnb and VRBO. Listings without this information, the province says, will have to be removed.

By the summer of 2024, short-term rental platforms will be required to share data with the province, including information about hosts.

“The province can then share that information with local governments to support a more integrated approach to regulation and enforcing provincial rules,” the presentation from the province says, adding that no private information will be released publicly.

By the end of 2024, a provincial registry will be up and running. Short-term rental operators will be required to register, and non-compliant listings will be removed from platforms. This registration requirement will be complemented by a provincial compliance and enforcement team.

“As the number of short-term rental listings continues to rise in B.C., people are paying the price. Rents are through the roof, and people can’t find an affordable place to live,” Kahlon said.

“That’s why we’re taking action here today. This is a big piece of legislation.”

A recent study showed that short-term rentals in B.C. were driving up prices on the long-term market by as much as 20 per cent in communities across the province and recommended a province-wide approach to regulation.

The legislation, Eby and Kahlon explained, is a floor and not a ceiling. Municipalities and regional districts can bring in steeper penalties or additional rules as they see fit. Jurisdictions that are exempt can also opt-in if they choose to.

The aim of the legislation, according to the province, is not to punish or deter people who use short-term rentals on holiday or those who use the platforms to make some extra cash.

“Those of you that are renting dozens of short-term rentals to make a huge profit while taking away homes for people – you should probably be thinking about a new profit scheme in the very near future,” Kahlon said.

“If you’re an investor and you’re buying three, four, or five homes and using short-term rentals to make wealth, the message here is that that is no longer allowed,” Eby said.

“We are saying we need these homes for people.”

Airbnb, in a statement, said the legislation will not alleviate the housing crisis but instead will take money out of people’s pockets, inflate the cost of accommodations for visitors and decrease tourism revenue.

“We hope the B.C. government will pursue more sensible regulation and listen to the many residents – hosts, travelers, and businesses – that will be impacted by the proposed rules,” a spokesperson wrote in an email.

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October 25, 2023: Bank of Canada Maintains Policy Rate, Continues Quantitative Tightening

The Bank of Canada has announced its decision to maintain the policy rate at 5%, with the Bank Rate at 5¼% and the deposit rate at 5%.

Additionally, the Bank will continue its policy of quantitative tightening.

Source: The Bank of Canada

The global economy is experiencing a slowdown, with projected moderate growth due to previous increases in policy rates and recent spikes in global bond yields affecting demand. The Bank’s global GDP growth forecasts for this year, 2024, and 2025 are 2.9%, 2.3%, and 2.6%, respectively. Although the overall global growth outlook remains similar to the July Monetary Policy Report (MPR), there have been shifts in regional economic performance, notably with a stronger US economy and weaker economic activity in China. Growth in the euro area has also decelerated, and inflationary pressures have been easing across economies, albeit with underlying inflation persisting.

Within Canada, there are mounting indications that past interest rate hikes are tempering economic activity and reducing price pressures. Consumer spending has been restrained, with decreased demand for housing, durable goods, and various services. Business investment is negatively impacted by weaker demand and increased borrowing costs. The substantial population growth in Canada has eased labor market pressures in some sectors but contributed to elevated housing demand and consumption. The labor market, while experiencing recent job growth below labor force expansion, maintains its tightness, with persistent wage pressures. In sum, various indicators suggest that the Canadian economy is approaching equilibrium between supply and demand.

After averaging 1% over the past year, economic growth is expected to remain weak in the near term before improving in late 2024 and through 2025. The initial slowdown is attributed to the broader consequences of prior interest rate hikes and weakened foreign demand. Subsequent growth will be driven by household spending, increased exports, and heightened business investment due to improved foreign demand. Government spending is set to be a significant contributor to growth in the forecast period. Overall, the Bank anticipates the Canadian economy will grow by 1.2% this year, 0.9% in 2024, and 2.5% in 2025.

Recent months have seen volatility in CPI inflation—registering at 2.8% in June, 4.0% in August, and 3.8% in September. Elevated interest rates have been moderating inflation in many credit-financed goods and extending to services. Food inflation is receding from exceptionally high levels, although rent and other housing-related costs continue to exhibit high inflation. Near-term inflation expectations and corporate pricing behaviors are gradually normalizing, with wage growth remaining in the range of 4% to 5%. The Bank’s favored measures of core inflation indicate limited downward momentum.

In the Bank’s October outlook, CPI inflation is expected to average around 3½% until the middle of the next year, gradually easing to 2% in 2025. The timeline for inflation returning to target remains consistent with the July projection. However, the near-term trajectory is slightly higher due to energy prices and the continued persistence of core inflation.

Recognizing the signals that monetary policy is curbing spending and reducing price pressures, the Governing Council has decided to maintain the policy rate at 5% and continue the normalization of the Bank’s balance sheet. The Council, however, expresses concerns over the sluggish progress towards price stability and heightened inflationary risks. It is prepared to further raise the policy rate if necessary. The Council aims to observe a downward trend in core inflation and remains focused on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviors. The Bank is resolute in its commitment to reestablish price stability for Canadians.

Information Note

The next scheduled announcement for the overnight rate target is on December 6, 2023.

The Bank will release its next comprehensive economic and inflation outlook, including risk assessments, in the MPR on January 24, 2024.

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