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Victoria's AirBnB operators turning to furnished rental suites in exodus from vacation market

A formerly AirBnB-grandfathered condominium tower can be seen in the distance, at-centre, along the 900-block of Yates Street from within Zeds Beds, a downtown Victoria retailer on Fort Street that is catering to landlords preparing for a shift from AirBnB operations to full-time, furnished apartment rentals. Citified.ca

Victoria's AirBnB operators turning to furnished rental suites in exodus from vacation market
Mike Kozakowski, Citified.ca
The Provincial government’s plan to outlaw AirBnB-style short-term rentals is forcing some Victoria landlords to consider their options ahead of a May, 2024 implementation of Bill 35, known as the Short-Term Rental Accommodations Act.
 
Approximately 2,000 units of condominiums within the City of Victoria have been grandfathered since 2019 for full-time AirBnB use following the City’s removal of transient accommodation from several residential property zones.
 
In October, the Province announced that it would no longer permit full-suite short-term rentals of non-primary residences in Greater Victoria, otherwise known as AirBnBs, even if the usage is permitted or grandfathered by a municipality.
 
It is estimated that approximately a quarter of the 2,000 grandfathered condominiums in just Victoria-proper are being legally used as full-time AirBnBs by investors, or roughly 400 to 600 homes. As of May 1st, 2024 AirBnB operators will forfeit the ability to rent their suites for periods shorter than three months, unless the residence is their full-time home.
 
Because Bill 35 requires landlords to cease short-term rentals, units removed from AirBnB platforms will be subject to BC’s speculation tax if not made available as rental housing, meaning that short of moving in to the unit, property owners will have to pay a speculation tax for an empty condominium, or rent it out for six or more months, or sell the asset.
 
“The transition from short-term to long-term rentals will be relatively streamlined for landlords with already furnished AirBnB suites, so the simplest response by investors who choose to keep their units is to make them available as furnished homes for long-term rent,” says Adam Averill, owner of downtown Victoria’s Zeds Beds (see website).
 
“Since the provincial announcement, we’ve had a significant increase in customers with AirBnB units changing out essentials in preparation for long-term rentals,” Averill says. “As an example, landlords with experience in the AirBnB industry recognize how important a quality, new mattress will be for a full-time, fully-furnished listing in a market that will become more competitive in the months to come as more furnished units become available.”
 
Considering the costs associated to operating AirBnB units, half of annual earnings can go towards operating expenses like permitting, taxes and various management fees, depending on how hands-on the operator is. For out-of-town owners, costs can be even higher for more involved on-site oversight and maintenance.
 
In Victoria’s rental market, fully furnished suites can yield a monthly rental premium of 20% to 30%, turning a $1,750 one-bedroom rate into a potentially $2,275 gross rent, but that requires a landlord to invest into quality furniture and finishings.
 
“To be competitive in the AirBnB market, most landlords are aware that reputable brands and materials can be an important differentiating factor, but quality doesn’t have to mean high pricing,” Averill says. “Our BC-made mattresses are very competitively priced, made from durable materials, and they're already a popular choice among local landlords offering furnished suites.”
 
Landlords transitioning out of the short-term rental industry and into full-time or month-to-month, non-AirBnB rentals are likely to generate an income necessary to cover monthly operating and mortgage commitments, particularly if a unit was purchased prior to the run-up in interest rates. However, where Bill 35 could make a financial impact across the board is in re-sale values.
 
In that regard, the change will have immediate implications on prices that up until now were bolstered by protected privileges. Landlords who intend to maintain their investments as long-term rentals could, theoretically, ride out the value drop over the near-term, and realize gains over the medium or longer terms as the market finds equilibrium.
 
Victoria realtor Marko Juras says he’s already seen a jump in re-sales on the Multiple Listings Service since the Province’s announcement, although at ambitious prices.
 
“Units for sale in AirBnB-permitted buildings have jumped in recent days, and prices are at levels we’d expect to see with an AirBnB zoning, so it’s likely price concessions are coming in the months ahead if owners are serious about selling their investments ahead of the May short-term rental ban,” Juras says, but cautions the impact on the housing market remains unknown. “It is too early to say how many former AirBnB listings will become full-time rentals, month-to-month temporary rentals, full-time homes, or secondary homes irrespective of the speculation tax.”
 
As for landlords who have no intention of selling their asset, long-term, furnished rentals are a reasonable alternative to financial benefits of a short-term usage, albeit without the carrying, management and permitting costs that can eat into earnings.
 
Fully furnished suites are also more practical for month-to-month rentals, which continue to be sought by seasonal workers, individuals requiring long-term treatments at Victoria area hospitals, snowbirds from across Canada, military members posted to Victoria for term-specific deployments, and professionals engaged in temporary assignments on southern Vancouver Island. C
 

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