More real estate investors in Calgary are turning to short-term rentals even as demand increases for long-term rentals
A growing number of real estate investors in Calgary are turning to short-term rentals despite the increased demand for long-term rentals.
The number of short-term rental listings for entire units available on Airbnb and Vrbo was 8% higher between January and July this year than in 2019, according to AirDNA, a US-based analytics provider. for short term rental. industry.
With a monthly average of 2,472 registrations, whole units accounted for about 80% of all registrations during this period, compared to 60% before the COVID-19 pandemic, according to company data.
At the same time, increased pressure from higher interest rates and inflation on potential buyers has created a tight rental market in Calgary, said Ray Wong, vice president of data operations at Altus Group.
Interest rates “drive away people who want to buy and can’t, causing more stress and driving up rents in the traditional rental market,” Wong said.
In the first quarter of 2022, Altus Group reported a rental vacancy rate of 2.31% in Calgary, below 5.1% in 2021 and 6.6% in 2020, as rental rates have steadily increased.
In July, the average rent for a one-bedroom unit in Calgary was 27 per cent higher than a year earlier, the second highest increase on Rentals.ca’s national rent rankings.
As Calgary’s economy recovers, this situation is expected to continue. “Calgary is benefiting from the resurgence in oil prices,” Wong said. “It’s causing a push for some of the rentals in the city center.”
Yet investors seem to be turning to short-term rentals rather than taking on long-term tenants. Wong notes that short-term rentals offer the prospect of higher revenue than long-term rentals due to higher turnover.
Duncan Haldane, co-owner of Your Key, a Calgary-based short-term rental management company, said short-term rentals offer landlords a higher rate of return, among other benefits, than long-term rentals.
“It’s a way to create more value from their property,” he said. “When you consider a short-term rental, the economy is better than if you compare it to a long-term rental.”
AirDNA data shows that whole units listed on Airbnb and Vrbo fetched an average of $2,000 a month in the first seven months of the year, despite being occupied for half the time they were available , an increase of 40% compared to 2019.
The average rent for units on the RentFaster rental listing website was around $1,700 during the same period.
In July, Airbnb listing Calgary is one of the most popular markets for long-term stays in Canada, alongside Toronto, Vancouver, Montreal and Victoria.
While July is the busiest month in the Calgary short-term rental market, data from AirDNA shows that longer-term stays are changing seasonal patterns. In the first seven months of this year, the monthly number of nights booked in entire units was about 10% higher than in 2019.
Short-term rental services have also been criticized for disrupting local housing markets by reducing supply and driving up rents.
Researchers at McGill University published a study in 2019 which revealed that Airbnb had pulled 31,000 homes from the Canadian rental market. Airbnb denied that its service had a negative effect on the traditional rental market and said it was working with local governments to follow regulations designed to control short-term rentals.
While the municipal governments of Vancouver, Victoria, Ottawa and Toronto require all properties listed are the owner’s primary residence, thus prohibiting the availability of entire units on the short-term rental market and affecting renters, Calgary is relatively permissive.
In 2020, the City of Calgary implemented a business license requirement for short-term rentals to ensure landlords adhere to regulations such as guest count limits and record keeping.
Lindsay Tedds, associate professor of economics at the University of Calgary’s School of Public Policy, said policies and regulations adopted by local governments should also consider the role platforms play in driving demand and short-term housing supply.
Dr Tedds said cities should adopt a ‘co-regulatory’ model, working with short-term rental companies to ensure landlords follow local rules – rather than what she describes as an approach to ‘Thor’s Hammer’ that could stifle the market. .
“The big problem is [that] the platform is not just player agnostic,” Dr. Tedds said.
“He wants more and more ‘listers’, and more and more short-term tenants. And so he always makes sure that, from their point of view, there are enough rentals of sufficient type in certain areas, and then they want to bring certain tenants there.
Still, Dr. Tedds dismisses the idea that short-term housing in Calgary is undermining the traditional market, because according to his team’s research, between 2017 and 2021, the average number of short-term rentals available in Calgary has remained stable at approximately 2,500 units. a month, including both whole units and shared accommodations.
“We don’t see this as a hollowing out of the rental market,” she explains. “The tightness of the rental market cannot be underwritten by Airbnb, it’s been a function of poor housing policy for 20, 30 years.”
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