The abhorrent math behind BC’s new short term rental rules
BC Government made major policy changes based on erroneous assumptions with huge consequences for local small businesses and BC families
BC Government made major policy changes based on erroneous assumptions with huge consequences for local small businesses and BC families
In January 2023, the City of Victoria (CoV) passed a motion to “encourage housing and affordability”1, the beginning of a campaign to lobby the BC government to revoke the operational rights of 634 legally non-conforming (LNC) Short-Term Rentals (STRs) within the core tourism area of Downtown Victoria i. In July, CoV staff shared their analysis with Council ii, alleging these LNC units removed rental units from housing stock and caused a substantial rise in long-term rental prices. The analysis solidified the City’s advocacy to revoke the rights of LNC units to operate as transient accommodations. However, the analysis was based on biased information and significant arithmetic errors.
Citing Victoria’s interest in removing these dedicated STR units2, the BC Government included section 36 in the Short-Term Rentals Accommodations Act (STRAA)iii with a stated objective of enlarging the rental supply and lowering rental costs. This effectively removed the ‘non-conforming use’ rights for non-principal residence STRs in two dozen buildings in Victoria BCiv.
You will find clear evidence below and in the attached documents that the premise for outlawing legal short-term rentals was based on the report by the CoV staffv, but contained significantly flawed calculus. That report became the crux of a compelling narrative the City and Province used to remove previously inalienable property rights from a subset of small business owners.
The story highlights an inept departure from common sense, where miscalculation led to a policy, overlooking injurious outcomes while failing to address the underlying issue.
Lawmakers relied on flawed calculus and biased information to expropriate rights without consultation or compensation
The Wachsmuth reportvi is an advocacy paper written by an associate professor at McGill but commissioned by the BC Hotel Association. The paper unequivocally claims that STRs increase rents for long-term renters in BC. The BC Government repeatedly referenced the advocacy paper as “research from McGill University” to legitimize the impacts of STRs on the housing marketvii, viii, ix, while ignoring other research that contradicted those findingsx. The University of McGill has since distanced itself from the report by Mr. Wachsmuthxi, while the BC Hotel Association continues to celebrate the work3,xii.
The CoV used the Wachsmuth report to infer the impacts of the 634 dedicated STRs on Victoria’s long-term rental market. That CoV report, presented to Council in July 2023, cemented the narrative that LNC STRs in Victoria caused massive increases in other people’s rents4.
A recent reviewxiii of the CoV report details significant interpretive and arithmetic errors and miscalculations, undermining the premise of the CoV and BC Government Argument for section 36. This is novel information for this story and debunks the premise that led to a series of unfortunate decisions (see endnote xiii).
What are non-conforming uses?
In BC, under the Local Government Act, “non-conforming use” refers to the use of land or buildings that do not comply with current zoning regulations but were established legally before these regulations were enacted. Such uses are ‘grandfathered’, meaning they can continue despite not meeting new zoning requirements. Changes to or intensification of these non-conforming uses are generally not allowed. However, these rights persist with the land, even if the property is sold or transferred. This framework aims to balance the development in line with current zoning bylaws while respecting established land-use patterns.
Section 36, which revokes non-conforming uses for a subset of small businesses (LNC STRs), is a bold and unprecedented overreach that signifies an erosion of property rights in BC.
What are the non-principal residence ‘legal non-conforming’ STRs in Victoria?
Victoria’s two dozen LNC buildings were purpose-built and purpose-bought units uniquely zoned to serve as accommodations, with many having never contributed to rental stock. In July 2023, there were 634 of these units operating as STRs. Here is a brief video backgrounder on Victoria’s non-conforming use STRs:
Additional angles for consideration
LNC STRs are unaffordable housing and unsuitable for middle-income families. Moving the most expensive $/sq.ft. micro condos from tourism accommodation and into housing stock does not support the CoV housing strategyxiv
Removing LNC STRs will cost an estimated $84.5 million in lost tourism revenues annually in Victoriaxv
Section 36 exacerbates an already constrained accommodation supply in Victoria, which will lead to increased room rates and higher hotel profits, making travel only affordable to the wealthy
Victoria’s LNC STRs tax to the MRDT Online Accommodation Platform (OAP) has been the biggest contribution to Victoria’s Housing Reserve Fund, CoV’s prominent affordable housing programxvi. In 2022, it contributed $1,016,671 to the Housing Reserve Fund.
63%, or 119 out of 188 pages from a recent Freedom of Information request to the City of Victoria came back redacted (empty), citing solicitor/client privileges
Section 36 represents an about-face for the NDP, who previously characterized STRs as part of the ‘sharing economy’7. The BC Government did not consult any STR accommodation providers during the development of STRAA, but repeatedly consulted the hotel industry, made up of international conglomerates such as the Hilton, Best Western, and Hyatt hotels
Under Mayor Lisa Helps, the COV passed a 2018 bylaw limiting STRs to principal residences8. That same year, the CoV lost a case at the Supreme Courtxvii involving that bylaw. The Court upheld the non-conforming use rights of a new condo building for owners to operate as non-principal residence STRs. The case detailed these LNC units as purpose-bought for transient accommodations. By 2023 Lisa Helps was working in the office of the Premier as Eby’s Housing Solution Advisor.
In short, the BC Government is willing to exchange the bankruptcy of many families to increase the supply of unaffordable housing.
1 The City of Victoria’s advocacy to the Province of BC for the
inclusion of section 36 in the STRAA began with the Committee of the Whole
minutes, January 5, 2023, motion carried to “direct staff to report to
Council…with recommendations for advocating…to the provincial government
to introduce an amendment to the Local Government Act that would phase out
the grandfathering of year-round short-term rentals in existing units and
buildings.”2 With regard to the Local Government Act provisions that allow
non-principal resident STRs, the Hon. Min. Ravi Kahlon stated on October 26,
2023 that “Victoria did ask us to remove that provision.” Hansard Debate.
Afternoon Sitting, Issue no.349. BC Legislature, Victoria, B.C. Hon. Min.
Ravi Kahlon. October 26, 2023. Hansard Debate. Afternoon Sitting, Issue
no.349. BC Legislature, Victoria, B.C.4 On October 2, 2023, City Councilor Jeremy Caradonna posted on
the Vancouver Island Housing Market Facebook group “It is not legal to take
a unit off the housing market permanently as an STR. However, there is one
major (and unfortunate) exception to this rule, and that is a group of over
1,000 units that got grandparented into the old zoning rules in 2018. The
City does not want these STRs to exist, as they take ~1,000 units off the
housing market and quantifiably lead to everyone else’s rent being 15%+
higher….We have told the Province very clearly that we want them either to
regulate these legacy STRs out of existence or give us the ability to do
so.”;5 Property Rights Association of BC. November 9, 2023. Orion
Rodgers, West Coast Association for Property Rights: Impact of bill 35 on
city of Victoria – s.36 “legal non-conforming” removal clause and its direct
effect on licensed property.
i Post-Meeting Minutes – COTW_Jan05_2023 – English.pdf
ii Addendum Presentation Short Term Rentals in the City of Victoria.pdf
iii ShortTermRentalAccommodationsAct3rd.pdf
iv ChekNews2022 FOI.pdf
v City of Victoria Report July 2023.pdf
vi McGill BC Report2022.pdf
vii Legislation introduced to rein in short-term rentals,
deliver more homes for people – BC Gov News.pdfviii ShortTermRental_Technical_Briefing.pdf
ix Hansard Debate Oct 26 record.pdf
x Conference Board
airbnb-activity-and-rental-markets-in-canada_october2023.pdfxi McGill Letter Nov2023.jpg
xii BCHA-Advocacy-Report-Final_compressed.pdf
xiii Appendix 1 CoVerrors 021024.pdf
xiv Appendix 2 Affordability 01092024.pdf
xv Appendix 3 Lost Tourism Revenue 01092024.pdf
xvi Addendum_Presentation_B Harris.pdf
xvii Newton v. City of Victoria
18-036_20STR_20Regulation_20Bylaw.pdf