Recent direction from Canmore council could see the Town phase out the polarizing tourist home classification and possibly add a tax to incentivize such homes return to the market.
The plan, if council approved when it returns later this year or early 2025, could gradually phase out the homes in the mountain community.
But with any decision likely to have long-term implications, there’s a call to ensure there's broad public engagement and look at options before attaining a seal of council approval.
Nathan Rotman, the regional policy director for Airbnb in Canada and northeastern United States, said it’s important for the municipality to weigh all impacts a change may have.
“Canmore’s obviously a really important destination in Canada for all the right reasons. It’s a beautiful spot and lots of people want to stay there,” he said.
“If I lived in Canmore and I travel somewhere for the winter, a person should be able to short-term rent out their apartment when they’re not using it when they’re travelling. Individuals who have also invested because they go to Canmore on the weekends to ski or hike, but they want to make up some of that investment the rest of the year, they should be allowed to rent short-term when they’re not using it.”
He said a destination place such as Canmore will often put in a registry system, so the municipality knows who’s operating the short-term rental to ensure it’s following municipal bylaws such as noise and safety protocols.
He gave the example of Whistler – which requires short-term rentals to have a business licence and restricts its use to specific areas, including not in residential neighbourhoods – but also for any municipality to consider potential negative economic impacts.
“We absolutely work with any city who wants to do this, but most cities will put in place a basic registry first to show who’s operating, how are they operating, how often they’re operating and get a sense of that before start putting in place any restrictions or other things to deal with other challenges,” he said.
Rotman, a former national director for the NDP and chief of staff to Rachel Notley when she was premier, said Airbnb remains committed to working with municipalities looking to regulate short-term rentals or fine tune existing bylaws.
“We’ll work with communities all over the world who have different rules to tailor to their specific needs. The Catskills in New York or the Rocky Mountains in Alberta are different regions with specific needs and we’ll work with them as they look to put in specific rules.”
The Bow Valley Builders and Developers Association (BOWDA), who represent and advocate for developers in the region, noted the plans are at the early stages and couldn’t comment until more details are released on potential bylaws and regulations.
“On the face, the proposed changes will have a wide-ranging effect on the community and it is important that the Town of Canmore is not too hasty in moving forward without attempting to determine the unintended consequences of the proposed changes,” said Brian Talbot, chair of BOWDA.
In Canmore, tourist homes make up 714 units – including 77 declared for personal use this year – of the community’s housing stock. Though small, it still slightly outnumbers the available apartment rentals which are 587 as of 2022.
Tourist homes grew from 515 to 685 between 2013-22, but there are still more planned in council approved area structure plans such as Silvertip and Three Sisters Village, which calls for 900-1,300.
Though tourist homes are in council’s crosshairs, it doesn’t mean existing approvals for tourist homes are planned to be stopped. The Town’s planning department approved development permits for a tourist home with an accessory dwelling unit on 2nd Avenue earlier this month as well as an apartment building at 1606 Spring Creek Gate with 29 units and 31 tourist homes since they aligned with the land use bylaw.
TOURIST HOMES 'SMALLER PIECE OF THE PUZZLE'
But Mayor Sean Krausert said the possible removal of tourist homes isn’t the only solution for helping the housing shortage, but it is one of many options.
“This is one smaller piece of the puzzle,” he said. “Tourist homes are increasingly becoming more profitable and popular to build and we need to stop that before it completely erodes residential neighbourhoods where it’s allowed.
“Because we already limit tourist homes to certain areas, we were actually ahead of the curve. We’re not in the same desperate situation as communities that didn’t have that limit in place because they’re seeing a proliferation of tourist homes throughout their communities.”
He cautioned tourist homeowners any change would be to limit new tourist homes being constructed, ultimately grandfathering in the existing ones.
Krausert added the bulk of the concern he’d heard came from tourist home owners, but that legal operating ones would still remain.
However, Town staff will return with an option to tax such properties higher and possibly end the exception of tourist homeowners being able to annually declare it’s for personal or business use.
“What we’re looking to do is limit its growth, so after a certain amount of time we won’t approve any more new tourist homes. The current legal tourist homes will be allowed to continue to operate,” he said. “As we’re moving to limit new ones being approved, we’re also going to be ramping up enforcement of illegal ones.”
A joint study between the Conference Board of Canada and Airbnb analyzed 330 neighbourhoods in 19 Canadian cities between 2016-22 to see if the short-term rental service impacted rental rates.
The study, which was released last October and received funding and five years of data from Airbnb, found short-term rentals had limited impact on rental costs.
“Policies implemented by cities and provinces to regulate short-term rentals have significantly reduced Airbnb activity, though we find no evidence that these policies have resulted in lower rents,” the study stated. “Restrictions limiting short-term rentals to a host’s principal place of residence are associated with a nearly 50 per cent reduction in the number of Airbnbs.”
The cities selected were larger centres ranging from Toronto and Vancouver to mid-sized cities such as Windsor and London.
The study found it was likely to be surprising to some people that Airbnbs had little to no impact on rents, but added the results assumed rents in the analyzed neighbourhoods would have evolved in the same way without Airbnbs and it using market data from Canada Mortgage and Housing Corporation.
“We make no claim that were Airbnb activity to increase further, it would not cause rents to increase,” the study stated. “Indeed, our main explanation for why we find no meaningful impact of Airbnb on rental prices is that Airbnb’s share of housing stock is too small to have a material impact on prices. If Airbnb’s share of housing stock were to increase, we would expect this result to change.”
Rotman noted the study found in cities where regulation existed and didn’t, Airbnb listings had minimal impact on the housing market.
He said in Vancouver rents continued to increase monthly – with the exception of 2020 during the COVID-19 pandemic – and vacancy rates remained low.
“They found there’s an immaterial impact of short-term rentals on the overall housing market. Even in cities where they’ve been regulated, there hasn’t been a proportional reduction in rent that actually matched removal in Toronto and Vancouver, in particular.”
“When you restrict hosting, even in cities where there’s been thousands and thousands of short-term rentals removed from the market, we have not seen those properties return to the long-term housing market at a one-to-one rate.”
VISITOR SPENDING KEY FOR LOCAL ECONOMY
Statistics from Tourism Canmore Kananaskis (TCK) outlined 2022 visitor spending contributed $763 million to the region, but when excluding accommodation it was $322.75 million and the total spending for 685 tourist homes was $26.5 million.
Rachel Ludwig, who was part of the task force and CEO of TCK, said she’s looking forward to the recommendations being implemented to help with the ongoing labour shortage felt by businesses.
“The lack of non-market housing is affecting Canmore’s ability to attract and retain workers in Canmore, which negatively impacts our businesses and overall visitor spend,” she said. “We have seen restaurants close some days this past summer or stores shorten their opening hours because of lack of staff caused by the housing shortage.”
She added with tourist homes unique to Canmore, the recommendation to tax them at a higher commercial rate “is levelling the playing field with other commercial uses while protecting visitor accommodation that bring approximately $30 million in revenue annually to our restaurants, downtown shops and activity providers.”
The Canmore retail gap analysis and light industrial and commercial land review study had visitor retail spending in 2022 at $256 million, while seasonal resident households were $25 million.
According to data provided by Airbnb, 65 per cent of listings in Canmore are in areas with no hotels. In a survey of Airbnb Canadian hosts, 53 per cent said they use the income to cover the growing costs of living, 47 per cent use the income to help stay in their home and 41 per cent use it to make ends meet.
A University of Calgary 2023 report noted the majority of short-term rental properties aren’t listed year-round, but rather by people travelling or who spend winters in warmer climates.
The study, which partnered with the City of Calgary to look specifically at the city, found about 74 per cent of the city’s homes listed on Airbnb and Vrbo aren’t permanent. However, it did find roughly 1,500 listings – about 28 per cent – could be returned to the housing market.
WHAT OTHER AREAS ARE ABLE TO DO
In British Columbia, the speculation and vacancy tax allows 59 authorized municipalities to collect money who own property in the province but don’t pay the majority of their taxes in Canada.
It was first introduced in 2018 and combined with recent legislation to restrict short-term rentals is designed to add more housing supply to communities and reduce the number of vacant homes.
The City of Vancouver’s empty homes tax annual report for 2022 stated of the 1,755 vacant homes in 2020 it was reduced to 1,156 in 2022. Principal residences went from 132,205 in 2020 to 135,238 in 2022, while tenanted homes were 56,660 in 2020 and 58,819.
Data from the report stated between the tax levy and fines the City collected $32.5 million in 2022, while 12,806 audits were completed and 871 complaints were made about property owners.
The City of Toronto also has a vacant home tax, which its council approved in 2021. A report to its City council last September stated the City collected $54 million and had 2,336 properties declared vacant in February 2022 with it dropping to 2,161 as of August 2023.
The federal government announced in November plans to remove income tax deductions from non-compliant short-term rental properties and $50 million over three years to support municipal enforcement of short-term rentals. However, no legislation has been passed.
The federal government launched legislation to ban foreign ownership in 2022 and announced Sunday (Feb. 4) they’ll extend the law an additional two years to keep in place until 2027.
It means foreign businesses, non-Canadian citizens and permanent residents aren’t able to buy housing in Canada. It also includes vacant land zoned for residential use.
“By extending the foreign buyer ban, we will ensure houses are used as homes for Canadian families to live in and do not become a speculative financial asset class,” Finance Minister Chrystia Freeland said in a press release.
The Calgary Real Estate Board forecast and yearly outlook report for the region released earlier this month listed Canmore as the highest benchmark price in southern Alberta at $914,050. The next highest was Chestermere at $651,900. The benchmark price for Canmore was an increase from $845,183 in 2022.
It also had a decline in new listings from 669 in 2023 compared to 722 in 2022, but inventory increased by 128 last year after 115 in 2022.
Though the potential of tourist homes could see the class phased out, Three Sisters Mountain Village Properties Limited (TSMVPL) ASPs would be immune.
The Three Sisters Village ASP, which was council-approved in October after the Court of Appeal supported the Land and Property Rights Tribunal’s decisions, has between 900-1,300 tourist homes to be built.
Ben Brunnen, the founder and principal of Verum Consulting who the Town hired to assist with the work and a staff report from January emphasized it would be “subject to discussions with the developer.”
CREATING A SUB-CLASS TAX
Brunnen noted the Municipal Government Act doesn’t allow for municipalities to create a vacant property tax, but they do have authority to create subclasses for residential properties.
He said “it’s likely within this authority for the Town to create a primary residence subclass,” but that he “would not be surprised to see someone try to challenge this legally.”
Therese Rogers, the Town’s general manager of corporate services, added Town staff has had initial legal review of it and while it’s likely to be challenged, anything brought for council consideration will be legally vetted and within municipal authority.
“That’s part of the work we’re doing and will be doing as administration will be working with legal counsel to make sure what we’re bringing forward is within our authorities and you all as councillors are aware of what we can and can’t do and how we structure programs to make sure we’re compliant,” she said.
Scott Johnson, the press secretary for the Ministry of Municipal Affairs, said the Municipal Government Act “provides municipalities with broad autonomy to determine the property taxation model that is the most appropriate for their unique local circumstances.”
He added the MGA allows a council to pass a bylaw that would establish a sub-class and “it is up to the municipalities to explain and justify to residents any differences in tax rates for residential sub-classes.”
The MGA requires municipal council’s to pass a property tax bylaw each year, but the ratio between non-residential and residential rates can’t go past 5:1. It also allows a different tax rate for each assessment class or sub-class.
In a Thursday (Feb. 1) appearance at the House of Commons finance committee, Bank of Canada governor Tiff Macklem urged governments across the country to work with one another to increase the supply of housing since monetary policy can’t alone solve inflation. He pointed to having faster permitting times create more certainty in the homebuilding process.
He said high interest rates can discourage new residential construction since costs are increased for developers and demand for pre-construction signs are low.
A September report from the Canada Mortgage and Housing Corporation (CMHC) said to ease costs more housing is needed. It estimated in Alberta there were 1.81 million housing units, but it would need to increase to 2.17 million by 2030. However, only 2.09 million units were projected to be hit by 2030, leaving a shortage of 80,000 units.
CHMC’s rental market report – released Jan. 31 – found rental units had increased, but not kept up with demand with national rental vacancy slipping to 1.5 per cent. It found Alberta had the highest growth in population between 2022 and 2023, leading to a higher demand for housing and lessening of supply.
Rotman noted with housing crisis being faced across the world, one approach isn’t going to fix all the issues and needs to be looked at as a wholesome approach.
“It’s such a complex issue. We have a growing population and we’re not building nearly enough,” he said. “You add in interest rates and a number of other factors that are hampering construction and it’s obviously going to have an impact.”