BC vs. the "sharing economy"
For the last several years, the so-called “Sharing Economy” has attempted to undertake a fundamental transformation of two major economic sectors of our collective lives: housing and transportation. I am a software developer in the business of technology, and new companies like Uber and Airbnb have been come to be seen as an inevitable future that connects human beings in a glorious utopia. However, I write today to argue that the socio-economic consequences of the sharing economy, particularly in the housing sector, have been largely ignored, misunderstood, or swept under the rug for far too long. I would like to take this opportunity to describe some of the dramatic affects that I have witnessed in greater BC since Airbnb has taken off.
BC is incredible
First off, I live in British Columbia. It’s honestly one of the most spectacular places that I can ever imagine. It hosts miles of deserted beaches, cathedral old growth forests, dramatic ocean vistas, lush green vegetation, endless alpine mountain ranges punctuated by glacial valleys, classy Victorian neighborhoods, and on and on… BC has it all.
Because of BC’s grandeur, it is a serious international travel destination. In the summer, Victoria and Vancouver both host cruise ships that dump tens of thousands of tourists on to our streets every day. Victoria has so many tourist from Seattle, that Seattle threatened (or at least felt entitled to threaten) to boycott Victoria until they built a sewage treatment plant (a whole other story). When I go skiing in the winter of BC interior, I rarely ride the lift with anyone who is actually from town… the skiers hail from Australia, New Zealand, New Jersey, Germany and dozens of other places that are not BC. My partner grew up near the border in Castlegar, and her family still tells stories about working as border agents and the endless stream of German tourist whose purpose for coming to Canada was to “Rent an RV and tour de national paaarks.”
The point is, BC is awesome and everyone wants to come and visit and experience how incredible it is. That, in and of itself is not a problem… unless capitalism is involved.
Problem: the globalization of housing supply
BC tourism hosting the world was mostly harmless to locals back in the “good old days” when tourism was relegated to its own sector of the economy. There are only so many hotel rooms in any given town, and if demand was higher than the supply (capitalism at work!) the price of a hotel room would go up and the negative feedback cycle in the market would naturally work itself out. If demand outstripped supply, the price of hotels would go up and less visitors would come, but generally the local people who have to live and work in a given city would remain unaffected.
The so called “sharing economy” completely breaks the supply and demand in destination cities. Websites like Airbnb and (and there are others, but these days Airbnb generally constitutes the vast majority of short-term rental bookings in a given community) turn the entire housing supply into potential hotels and essentially globalize the housing supply. I.e. anyone in the world who is willing to pay the highest price and travel to BC will be entitled to purchase the housing. This isn’t necessarily a single person or entity, but could be an entire demographic. Basically, BC can be out-competed for their own homes because there now exists an international “marketplace” to do so.
This, BTW, absolutely happens. When I posed the simple question: “Are you pro or anti Airbnb?” on my Facebook wall, I immediately received a story from a Victoria friend who was being kicked out of her home, by her landlord who had already converted all of his units to an Airbnb rentals. It was totally illegal, but since enforcement is only complaint-based, brazen landlords can (and do) ignore the Good Faith Requirement and win out 90% of of the time.
Whereas the globalization of our food supply had negative effects (i.e. mass starvation) on countries that were forced to export their food resources rather than feed their people, I would argue that we are already seeing the effects of a globalized housing supply in BC. Rather than housing people that work and live in the local communities, we are seeing our limited housing resources being turned into de facto hotels and hosting short-term visitors that contribute little to the local community.
If mass starvation was the result of globalized food supply, the analogue result of a globalized housing supply would be mass homelessness. BC is already seeing an increase in the “hidden homeless”, a pronounced decrease in the rental vacancy rate, and a rapid increase in both the cost of renting and the cost of buying a home.
Renting in BC sucks
In BC’s coastal market (Vancouver and Victoria) housing has become dramatically more expensive–both to rent and to buy–during the years that Airbnb has been operating. But, the coast is actually one of the good cases in BC where the laws of supply and demand are responding. In the interior of BC, there never was much supply to begin with and the vacation rental are sucking up any housing supply that once existed like a vacuum cleaner.
If you live in a town in BC’s interior that happens to have a lake, you may find that as a renter you can only secure a 9 month lease from September to May. Landlords are now so inundated with opportunities for short-term summer rentals, that they’re willing to operate as a summer hotel (without a business license, mind you) and then rent their place out for 9 months on the side. This is devastating for the housing security of local residents, who may spend an inordinate amount of time moving 2-3 times per year because they are unable to find a long term lease. This affects people of all socio-economic statuses. I have literally met a homeless engineer in Salmon Arm who was living at a local campground, because there was no where else to live. Today I checked the “housing wanted” ads on I Love Nelson and found 3 ads this week for long-term tenants whose housing had been sold out from under them.
The effects of this are even more insidious if you consider how it affects the balance of power between landlord and tenants. When there is a < 1% vacancy rate, landlords have a lot more leverage and begin acting in sketchy ways and with dubious ethics. I had a friend who moved to Salmon Arm and before starting her job she only had one single option for housing. The owners of the rental had illegally built a residence within the flood plane of a local river, and then illegally converted the house to a multi-family dwelling (for which it was not zoned). My friend lived there for three months before the landlord sold the house out from under her. The landlord then illegally served my friend a 2 month notice to vacate and lied on the form saying that the new owners intended to live there (even though they actually intended to rent it for more money). In the end, my friend had to quit her job and leave the community because she couldn’t find another place to live. The great irony was that the home sale fell through (after being flooded by the spring freshet) and the landlord proceeded to take advantage of his power and rent it out for even more money.
Every home is a potential hotel
The problem with the Sharing Economy of housing is that it doesn’t just affect those who use Airbnb. This fundamentally changes the economics of housing in all categories. Every house purchase is a potential hotel property (and it’s no surprise that during the period of Airbnb’s reign, the average home price in Vancouver/Victoria has increased dramatically). Every home now has to compete with per-night hotel prices which could be $100-$400 / night. I’ve known people in Victoria who literally abandon their house for the summer because they can sell it out to tourists every single night at hotel prices. No wonder the price of a rental house in Victoria can easily exceed $3000 per month.
The City of Vancouver has over 5000 short term rentals which is more than 5% of their rental market. Losing that much of the rental market puts a huge strain on the supply of housing and a corresponding surge in pricing.
Hope
Victoria and Whistler are considering measures to tax short-term rentals as businesses. And I strongly encourage them to do so as aggressively as they are able. I don’t think that it’s an overstatement to say that the long-term viability of the community’s health will depend on substantive action.
BC Green’s Housing Policy has signs of hope, but ultimately I haven’t seen any evidence that it addresses the lack of rental supply.
Conclusions
Airbnb (and other vacation rental “marketplaces”) have been intentionally innovating around the law for years. During those years, housing prices, both rental prices and purchase prices, have increased dramatically. It’s well past time for us to treat short term vacation rentals and Airbnb as what they are: a multi-billion dollar hotel company that operates within our communities without contributing, and draining our limited housing resources. It’s well past time that relegate short term vacation rentals back to the tourism and business sectors of our economy, localize housing supply and reclaim BC housing for BC residents.
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