When The Rules Change
On today’s show we have an update on a story that we’ve been following for some time. The topic is short term rentals. The staff at the City of Ottawa completed their public consultations on the short term rentals and have issued their recommendations to a committee of City Council which I will be speaking at this coming week.
At the end of 2018 there were an estimated 6,278 listings. Listings include individual rooms and complete dwelling units.
It’s estimated that the number of investor owned commercial short term rentals in the market is approximately 1,236 units.
These properties have been put in the short term market and serve purely a commercial and no other purpose. This is an issue to which there are two sides and quite frankly I see both sides of the argument.
As an investor, I fully support the notion of investors making an honest dollar by providing a product for which there is real demand.
I live in a lovely home backing on park land and a lake. If my neighbour decided to move to the Caribbean and put their home into the short term rental market, I’d be pretty upset. The transient nature of the traffic next door would negatively affect the value of my property. So I fully understand the issue from the perspective of residents who bought residential property in a residential area, never expecting a hotel product to open up next door.
I own several short term vacation rentals in an another community that is heavily tourism centric. The properties that I own are zoned for tourism and for short term rentals. There’s no conflict between the intended use and the actual use.
In response to this shortage, the city is hoping that by regulating short term rentals, they will eliminate some of what they see as problems with short term rentals, and that these second homes will appear in the long term rental market to help address the shortage of properties in that segment, or sold outright in the open market to help address some of the shortage there.
The new rules provide for residents to benefit from the sharing economy while attempting to establish appropriate regulations that minimize the negative consequences of short-term rental activities that impact the availability and affordability of housing, generate community nuisances, and disrupt community cohesion.
Where the problem lies is with those investors who purchase properties for the sole purpose of entering the short term rental market and are now facing a dramatic drop in income as their properties will no longer be allowed to operate as a commercial short term rental.
The city has been incredibly slow to act on this, compared with other communities around the world. Platforms like AirBnB have been around for more than a decade. The city has the right through their zoning policy to dictate what types of businesses are allowed in a given area. But the city hasn’t used the zoning code to guide the current proposed bylaw. My comments to the city will be to amend the zoning definitions to specifically include short term rentals within the zoning. That’s the mechanism that currently governs the use of properties in the city. If all of a sudden chicken farming became really popular, we don’t need a new set of special chicken farming regulations. The use is governed by zoning, and this is no different.
I have no issue with the city charging hotel tax. That’s a level playing field.
I’m going deep on this situation because it’s a dialog that is happening in cities around the world. If you’re an investor in your local market you definitely want to understand what is happening within your city’s government and their bureaucracy so that you can influence the