Growing pains: short-term rentals are a concern around the world

Growing pains

This is the first in a series of in-depth stories on how tourism is evolving around the world and how some destinations are dealing with concerns about overtourism, unprecedented growth in short-term rentals, skyrocketing house prices. and, finally, how these factors can affect communities.

The proliferation of short-term rentals is not a phenomenon confined to Niagara-on-the-Lake, but is a global issue that sparks debate and action in places as diverse as Venice, Barcelona and the country of cabins. Ontario.

“Venice, in order to survive, must retain an urban residential identity which is not only linked to mass tourism, which wears it out, consumes and gradually empties its vital soul. We must aim for quality tourism, attentive and respectful of the fragility of a city, as well as accompanied by a dimension of balanced and sustainable economy.

Thus bookends the Decalogo, or “Ten Commandments”, a document published jointly by the Italian cities of Venice and Florence. The decalogo was released by cities earlier this year as a call to the Italian federal government to help cities tackle the explosive growth of the short-term rental industry over the past decade.

Large cities like Barcelona, ​​Paris, Venice, New York and Toronto, as well as small Ontario municipalities like Seguin, Oro-Medonte, Fort Erie and Lincoln are facing the rise of the short-term rental industry and this that the Venetian authorities called the emptying of their “vital souls”.

Municipalities like Seguin, Oro-Medonte and even Wasaga have implemented a total ban on short-term rentals operating on residential properties, insisting that they be considered commercial enterprises and acquire the proper zoning.

More municipalities, such as Prince Edward County, have implemented a municipal tax on lodging, which Niagara-on-the-Lake passed at the end of August.

Unlike NOTL, many municipalities levy tax on all types of short-stay accommodation, while the plan adopted by NOTL’s council gives a pass to any rental operator who has fewer than five rooms. This means that only 12 of the city’s 255 legal and licensed short-term rentals will be required to collect the tax.

A 2019 analysis by the freelance Institute for Economic Policy in the United States argues that the cost of expanding short-term rentals and Airbnbs outweighs the benefits to local jurisdictions and long-term residents.

One of the Institute’s findings is that short-term rentals, by gobbling up possible properties for tenants or long-term owners, increase the cost of housing for potential long-term residents.

The study cites research by economists Keren Horn and Mark Merante in Boston, which determined that for 12 new Airbnb units in a census tract, rental costs rose 0.4%. Another study found that a 10% increase in Airbnb listings led to a 0.76% increase in house prices.

A quick account on Airbnb this fall found around 150 advertised rentals just in Old Town, north of the community center. According to research from Horn and Merrante, these 150 Airbnbs could represent a 5% increase in long-term rental costs for future NOTL residents due to the lack of available accommodation.

Another 2017 study, “The Effect of Home-Sharing on House Prices and Rents,” by economists Kyle Barron, Edward Kung and David Prosperio, found an annual increase of $ 1,800 in house prices caused by rentals. in the short term, accounting for one-seventh of real price growth per year.

Analysis by the Economic Policy Institute challenges the idea that rising house prices are worth it because of falling short-term rental supply prices in an area – which could attract more tourists.

This was a point raised by members of NOTL’s tourism industry when council approved the municipal tax on lodging.

Short-term rental housing made up about 1% of a family’s annual budget in 2016, while housing averaged 15.8%, according to the study.

“Housing costs occupy much more of the average household budget and rising house prices mean that long-term housing has increased more as a share of the family budget than short-term travel accommodation,” writes Josh Bivens, director. research institute.

“It seems like a bad compromise. This rising cost of housing has become a major economic stress for many American households. Anything that threatens to exacerbate that stress must be carefully considered.”

Added to this are the results of a survey of 800 Airbnb users. The survey found that only 2% of travelers would not have made their trip if they had to use more traditional forms of accommodation, according to the institute.

These rising housing costs in historic centers, such as NOTL, could scare away potential long-term homeowners – like young families – essential to the long-term health of a municipality.

This is a problem that Venice knows all too well.

“The economic exploitation of real estate for tourism purposes helps to drive the inhabitants away from the ancient city and is a phenomenon that must be contained absolutely,” said Simone Venturini, city councilor of Venice and deputy mayor for tourism.

Venice has published calls for social housing in its historic center to attract young families. The city has also started giving grants to young residents to move into the city center and open a local store, “thus ensuring services that go beyond the tourism industry,” said Venturini in an email to The Lake Report.

Closer to home, in Oro-Medonte, just north of Barrie, councilors voted last year to ban short-term rentals on residential properties.

“There are some areas where you can’t have business operations and we consider short-term rental to be a business activity,” Oro-Medonte Mayor Harry Hughes said in an interview.

The rule applies to the entire Oro-Medonte short-term rental industry, as even guesthouses must be dezoned from a residential property in order to function.

Hughes said the main source of consternation for the city was the unhedged rentals, where no one lives most of the year, and which are rented out to people who have no sense of affection for the community in which they will stay.

“The term that is used is ‘ghost hotels’,” said Hughes.

Unlike a traditional hotel, overseen by management and staff, ghost hotels are real passing properties where people with no attachment to the municipality come to party for a weekend and then take off, he said.

Another problem with such rentals is that people use all the amenities of a home, which means they can bring their own groceries and cook, reducing potential expense for local amenities, Hughes said.

“They don’t get involved, they don’t go anywhere else in the municipality to buy things, they don’t pay any rent, they don’t do anything. They are right there.

Hughes said the backlash over the municipality’s decision was mostly limited to online complaints.

“We’ve had more than one situation where people on social media are trying to use this as an alternative to discredit (which we are doing),” he said.

Hughes said a unique combination of factors has helped the municipality reduce the problem in recent times.

One of them was the surge in real estate values ​​due to COVID.

Since the rental by-law is now in effect, anyone who purchases a residential property in the municipality cannot operate a short-term rental. Thanks to the rise in property values, people who had purchased properties for the sole purpose of operating them as commercial enterprises saw that they could earn even more by reselling the properties to genuine long-term residents. , said Hughes.

But that resale wouldn’t have happened without the ban on short-term rentals on residential properties.

The Township of Seguin, south of Parry Sound, has also long banned short-term rentals on residential properties because it classifies them as commercial activities. The bylaw has been in place for decades, but the city never had rental issues until recently.

Short-term rental housing “is commercial. There’s no question about it, ”said Mayor Ann MacDiarmid.

MacDiarmid took issue with arguments that the current state of rentals is no different than it was two decades ago and that municipalities are overreacting.

“Supporters will say putting (a property) on Airbnb is the same as it was 20 years ago, when you put a piece of paper on the general store bulletin board,” she said.

“This piece of paper was not international in scope.”

MacDiarmid said short-term rentals on residential properties were unfair to businesses such as hotels and resorts.

“It’s not fair to the people who are zoned commercial, who pay commercial taxes and have the septic tank and everything in place to be a commercial enterprise,” she said.

“Everything we do to regulate has to be on a cost recovery basis because we don’t want non-tenant taxpayers paying for the regulation of the rental industry. “

MacDiarmid said the sky-high prices charged by some short-term rentals while avoiding business taxes are hurting the municipality.

“There are cabins on Rousseau and Joseph Lake that rent between $ 20,000 and $ 30,000 per week. A few $ 100 fines mean nothing to them, ”she said.

“There is somewhere in the middle that there is money for the township to regulate them.”

And this could be in several ways, for example by charging rents to commercial taxes, by using a municipal tax on lodging or by implementing a licensing regime. NOTL has already improved the municipal accommodation tax and has a licensing system.

But the licenses do nothing to combat some of the other issues that come with short-term rentals, such as the potential digging of neighborhoods and communities, a topic that will be explored in the next series.

Regarding rising house prices, MacDiarmid said Seguin saw a negative outcome but different from the increase in short-term rentals than other places.

On some of the smaller lakes in the area, more than 50% of the properties are used as short-term rentals, which has resulted in a drop in the value of neighboring properties.

“Nobody wants (these properties). A lot of real estate agents won’t even touch them, ”she said.

“I can tell you that the people on some of these little lakes are really hurting. “

Next: The argument over community digging and concerns about economic fallout.

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