All the talk about needing to deflate the cost of housing is finally getting serious.
This week, B.C.’s NDP government tabled the Short-Term Rental Accommodations Act that, if passed, will ban most short-term rentals that aren’t within an operator’s principal residence. Effective May 1, the new restriction would apply in municipalities with a population of 10,000 people or more and in smaller communities within 15 kilometres of a larger city.
The change would force thousands of AirBnB-style properties to convert to lower-yielding long-term rentals while negative carrying costs prompt more listings for sale. See, ‘I just hope my investment doesn’t come crashing down on me:’ B.C. Airbnb owner responds to proposed crackdown:
It will effectively wipe out the business model for real estate investors and property management companies with dozens of short-term rental listings. Under the new rules, they will have to convert those units to long-term rentals or face hefty fines.
Increasing the supply of properties for primary residence should help deflate housing costs via lower rents and home prices. While painful for investors, policy changes are necessary to bring shelter costs back in line with long-term affordability norms. Provinces like Ontario are likely to follow suit.
A decade-plus of near-zero interest rates and speculator-friendly incentives encouraged capital misallocation and a massive housing bubble. Normalized interest rates are now leading the take-back phase.
