Canada's Housing Crisis: Short-Term vs Long-Term Rentals
Calgary’s condo market is constantly evolving. For the past 15+ years, one of the key drivers of condo development has been investors looking to profit from short-term rentals (Airbnb and VRBO) rather than traditional long-term rentals. But that is about to change.
Condos like this one next to Memorial Park are ideal for tourists.
I was surprised to discover there are 4,321 short-term rentals (under a month) in Calgary as of June 2023 and growing. That is the equivalent of twenty 200-room hotels, each about twenty storeys high. Think the new 27-storey Dorian Hotel in downtown Calgary.
With the advancement of technology more and more people have entered the ‘’short-term rental” business.
No longer does the Airbnb owner have to meet with guests face to face to give them the key and make sure the person occupying the condo is the person who rented it. T
oday the absentee owner just texts the building code and door code and never actually meets the guests.
This technology has made owning several Airbnb’s a viable business model for many who have other jobs as there is no need to be available to meet people at all times of the day.
Most of Calgary’s short-term condo rentals are in the City Centre next to the major tourist attractions at Stampede Park and downtown.
I was also surprised to learn Calgary’s Airbnb’s have on average a 71% occupancy rate, which is considered a healthy hotel occupancy rate.
Obviously short-term have become an important part of Calgary’s tourism ecosystem.
Airbnb 101
Airbnb was created by Joe Gebbia, Nathan Blecharczyk and Brian Cherky in 2008, when they decided to use some unused space in their San Francisco loft to allow people attending an Industrial Design Conference after hearing the city was short of lodging in the saturated San Francisco hotel market. Given they were living next to Silicon Valley it didn’t take long to set up a website and marketing campaign to allow others with unused space in their homes to reach out to those looking for cheaper accommodations. Today Airbnb has over four million hosts and 5.6 million active listings and 150 million users in 100,000 different cities. Roughly 60% of Airbnb’s users are millennials. It is considered to be the largest hotel chain in the world.
We were early adopters of Airbnb as we like the home-away-from home aspect. We like having a full kitchen, separate bedroom and larger living area. When we visit a city we like being part tourist and part local. It is fun to grocery shop with the locals, mix and mingle at the gym and chat in the elevator like you would do if you lived in a condo.
We have stayed in Airbnb’s in London, Berlin, Florence and Dublin, as well as numerous cities across North America. More and more we are not the only tourists in the condo building as there are people with luggage coming and going from the condo building all the time. Sometimes we wonder if there are any real residents.
Airbnb offer a chance to mix and mingle with locals.
Changes are coming
In June 2023, the City of Calgary passed an amendment to the “Business License Bylaw” relating to how short-term rental businesses, must operate as of January 1, 2024.
Applicants for a business licence for “short-term rentals” will have to provide proof of the condominium board’s consent for their entire condo or even a bedroom to be used as a short-term rental. This requirement will make it harder to receive a business licence for short-term rentals as getting condo board consent for short term rentals is becoming more difficult, especially in amenity rich condos.
Many condo boards are reluctant to want short term guests using their gyms, lounges, communal kitchens and parkades as they often don’t abide by the rules. They are less likely to be concerned about letting strangers into the building which is a huge security issue. As a result, more and more condo boards are changing bylaws to forbid short-term rentals.
The federal government is also going to make operating short-term rentals less profitable by not allowing expenses to be deducted from revenue for tax purposes. This will be a game changer.
Housing Affordability
Investors buying condos for short-term rentals have been instrumental in helping to finance many new residential developments in Calgary.
Many popular European and North American tourist cities are already restricting or eliminating short term rentals as they increase the cost of housing for locals as 1,000s of older condos and rental apartments (as well as new,) have been converted into Airbnbs reducing the supply of long term housing.
British Columbia will have new legislation in 2024 that will restrict short-term rentals to primary residences, require them to have a posted business licence posted and for Airbnb and VRBO to share data on listings in communities over 10,000 people.
In Calgary’s case having Airbnb owners willing to invested upfront has been helpful to the financing of many new condos in our City Centre over the past 20 years and critical to a renaissance in urban living.
However, many City planners and politicians are looking at the 4,300+ short term rentals and wondering if they were all converted into long-term rentals how that might help address Calgary’s current demand for more long term rental housing and even home ownership as many of the “short-term” rental owners will sell their condos.
At the same time the city wants to encourage more tourism with mega projects like BMO Centre Expansion, new arena, Glenbow and Arts Commons redevelopment. Calgary’s hotel developers would be hard pressed to replace the 4,300+ rooms quickly. And they can’t provide the same tourist experience as the “short-term” rentals can.
Last Word
The City of Calgary will have to tread carefully as they look for ways to balance the need for more long-term rental housing and the need for diverse accommodations for tourists.