Transcript
Speaker: I'm Jane Williams, this is the Red Eye Podcast. You can hear our live broadcast on Saturday mornings from 10 till noon at 100 .5 FM in the Lower Mainland. Today I talk with economist Mark Lee about what the pandemic has revealed about Vancouver's housing market.
Speaker: Tourism and business travel have evaporated due to the COVID -19 pandemic with disastrous effects on workers in the hospitality and transportation industries. At the same time, the crisis has had a welcome effect on the sky -high rental market in Vancouver. Asking rents for vacated units fell by 9 % in April, while new apartment listings were up 12 % in March.
Speaker: It's likely that some of these units that have come onto the market were previously being used as full -time Airbnb suites. Mark Lee says we have the opportunity to use the current situation to push for serious regulation of short -term rentals. Mark Lee is a senior economist at the BC Office of the Canadian Centre for Policy Alternatives, and he joins me by phone today. Hello, Mark. Hi, good morning.
Speaker: Now, the vacancy rate before the pandemic was around 1%. Do we know how much of the recent change can be attributed to rental apartments no longer being diverted into short -term rentals? The data are always looking backwards in time, so it'll be a little while before we can say how much the vacancy rate has changed.
Speaker: But there's a lot of anecdotal evidence out there, you know, people on Craigslist and
Speaker: There's a site called Rentals .ca, which tracks the rents for newly vacated apartments. That's something that's different than the typical rental data you get from CMHC, where it's the entire rental universe, including people who've been in their apartments for a really long time. From these sources, it seems like there has been a lot of new units put on the market as long -term rentals.
Speaker: And I guess the question is, how much of that is attributable to Airbnb? Some of it could be due to foreign students, for example, or other factors. But we've looked at Airbnb before, and in Vancouver, like many other cities around the world,
Speaker: it's become a problem. And I say that as someone who has used Airbnb over the years, you know, I totally get the appeal of it. It's really fun to stay in like not in a hotel and in a normal neighborhood and
Speaker: gets to engage a city at that level. But once the size of Airbnb's operations gets too big, particularly in popular international destination cities like Vancouver, then it inevitably competes with the long -term rental market and people who need to work for a living and pay rent as part of that to be able to stay in the city. So we've seen this steady upward pressure
Speaker: on rents over the last decade or so. Airbnb is a fairly new phenomenon, really like maybe the past five or six years where it's really taken off. And it stands to reason that there are
Speaker: several thousand units that were being listed as Airbnb's that may still be being listed as Airbnb's that really ought to be part of the long -term rental universe because we have a housing crisis in this city and we need to put priorities. The party should not be well -heeled foreign travelers, although there aren't any right now, but the party should be making sure that people who work in the city can afford to live here.
Speaker: Now you identify short -term rentals as a kind of marriage of financialization and globalization. So let's just take that apart a little. What do you mean by financialization here?
Speaker: Well, financialization is the treatment of housing primarily as an investment rather than a place to live. So for a lot of people who've bought homes in the city, it's always an investment in some respect. But I think that the difference is when people are buying second homes that then they can put in the rental market.
Speaker: or when you get larger entities, bigger institutional investors or REITs or real estate investment trusts, they're called or going in and buying rental units with the express purpose of investing a little bit of money and then trying to jack up rents to the market. And the globalization part is really that it opens up new opportunities for travelers who can rent
Speaker: an ordinary dwelling in a normal neighborhood rather than a downtown hotel room. And the upshot of the two combined is that you get these gentrification pressures where the housing stock that was formerly available to long -term renters is removed
Speaker: and then market rates go up and i think the challenge is that for a landlord owning a particular property they can earn so much more by renting it as an airbnb or short -term rental than in the long -term rental market the city of vancouver for example estimated that
Speaker: Landlords can generate two to three hundred percent more annual income per year by renting the unit as a short term rental rather than renting it long term. So there's a powerful incentive to get rid of existing tenants and then put the unit on the short term rental market. It's a similar dynamic as you see for the rent eviction problem that we've had in Vancouver for many years. And what kind of units are getting diverted into the short term rental market as far as we can tell?
Speaker: Well, I mean, it's all different kinds of Airbnb rentals. Sometimes it's just a room in somebody's home, and no one really seems to have a problem with that. But the difficulty is when you get units that are essentially entire homes with their own separate entrance, and that they're being used as short -term rentals more or less full -time.
Speaker: So I think that's a distinct issue that is directly competing with the long -term rental market. And if you kind of concentrated on the, you know, there's a study out of McGill that calls it the triple threats, short -term rentals that are being used full -time, that are entire homes.
Speaker: and that there are multiple listings. So essentially the hosts of those homes administer two or more, you know, entire homes. And so in Vancouver, that ended up being, you know, a couple years ago, 1 ,790 units.
Speaker: And it's a pretty substantial amount of revenue, $46 million of revenue going to that. So those are a lot of units that could be available to Vancouver renters. And obviously this is good for the landlords in terms of getting more money in their pockets, but it's a problem for everyone else. Now, having said that, the city of Vancouver in 2018 negotiated a memorandum of understanding with Airbnb
Speaker: And they brought in some regulations. So, you know, essentially restricting Airbnb operations to private rooms, as I said before, or situations where, you know, you own your home, but you go away for two weeks or a month on vacation. And in that time, you can rent out your place. So, you know, on the surface of that, you know, I don't think that's too much of a concern. But I think what we're seeing in Vancouver is that the regulations are kind of vague.
Speaker: And they lend themselves to evasion. So it seems that in spite of all the regulations, there's still a lot of Airbnb activity happening outside of that world. And we essentially need stronger regulations and better enforcement. And then the other part of it is that the regulations only play in the city of Vancouver, whereas obviously we live in a region.
Speaker: So, in some cases, it seems like short -term rental units have listed themselves as being in Burnaby, ostensibly outside of the regulations, but they actually do exist in the city of Vancouver. So, in your estimation, then, the regulations that have been brought in so far haven't done a tremendous amount to fix the problem?
Speaker: Well, I mean, the city has put out its first report. The regulations only kicked in in September 2018. The city reported on progress in November 2019, so we had a year under our belt. And I feel like they were kind of slowly ramping up the enforcement of the regulations in the early part.
Speaker: of that period. It seems that there have been an increase in the number of long -term rental licenses, and there has been some estimates of a smaller number of short -term rental units that have been returned to the long -term rental market. But it doesn't appear to be capturing the full amount of the threat. And that McGill study I referenced earlier, looking at Vancouver, found that in certain neighborhoods of the city,
Speaker: you know, they basically are taking up two to three percent of the rental housing stock. So if we go back to that number, we cited at the beginning of a one percent or less vacancy rate and a healthy rental market is generally considered to be three to four percent vacancy rate. And then you have two to three percent of units that are Airbnb is not necessarily citywide, but in the key neighborhoods. You know, that's sort of the difference between a balanced rental market
Speaker: and an unbalanced rental market. So the opportunity we have now because of the COVID shutdown is that we can lock in some of these gains and keep those units as much as possible available in the long -term rental market. And how do you think we can lock in those gains? Well, I think we need to tighten up the regulations in the city of Vancouver. We need to have
Speaker: better data sharing with Airbnb so that the people who are enforcing the regulations can get a more finely tuned picture of where the problems are. We need to actually be going out and enforcing those regulations. And then we need some kind of push to be able to extend those region -wide so that we don't have border jurisdictions encroaching on that or
Speaker: units that are stated that they're in Burnaby when they're actually in Vancouver. Is there evidence of substantive non -compliance with regulations? Well, I mean, this is the challenge, right? A lot of this is operating below the radar and part of the task of government seeking to
Speaker: deal with the situation is to shine some light on what's happening. So you have websites like AirDNA and Inside Airbnb. Those use computer tools like scraping of data in order to get a profile of how many listings there are and then trying to assess, you know, are those actually entire homes or apartments as opposed to a shared room or a private room.
Speaker: That still ends up being a fairly substantial share on the city. So for example, inside Airbnb, found just under 5 ,000 Airbnb listings in April 2020. So already with the COVID -19 pandemic and shutdown underway,
Speaker: 70 % of those units, so just under 3 ,500, were entire homes or apartments. So that's equivalent to 2 .3 % of the renter households in the city of Vancouver. So that's a pretty substantial amount that's still existing that should not exist according to the regulations. There's a mathematician named Jens von Bergmann who has also been looking at this, among other things, and, you know,
Speaker: He did a kind of mathematical approach trying to figure out how much evasion was happening. And he was the one to uncover some of these properties that were being listed in a neighboring municipality like Burnaby or other attempts to try to skirt the regulations.
Speaker: Looking at the bigger problem of affordable housing in Vancouver, is there a role that the provincial government could be playing in alleviating the problem right now?
Speaker: Well, the bigger problem in terms of the rental market in Vancouver needs a bigger solution than just Airbnb regulation. That is certainly a part of the problem and should be part of the solution. But really what we need is government to be going out and building
Speaker: a lot of non -market rental housing, new rental buildings. I did an estimate last fall that we'd be looking at about 10 ,000 new units per year of non -market rental housing.
Speaker: You know over the next generation to be able to deal with some of the backlog and also account for the fact that population Is likely to continue to grow so we need to build and we need to build you know multi -unit buildings that are dedicated rental not
Speaker: not doing what we're currently doing, which is allowing sort of rampant building of condos, some of which end up as being safe deposit boxes for, could be local or foreign wealth holders. Some of those end up in the rental market, but at higher rents and with very weak tenure provisions in terms of people potentially getting kicked out. So we need dedicated purpose -built rental. And we're starting to see some movement on that from the city of Vancouver. They're trying to shift incentives in various ways.
Speaker: They have targets for rental housing that have not been met, so they really need to turn up the temperature, but get shovels in the ground. I'd like to see the city, the region, provincial government, federal government, all governments essentially get in on this because nothing's more important in the city than housing. Well, thanks very much for talking to me today, Mark. You're very welcome. Take care.
Speaker: I've been speaking with Mark Lee. He's a senior economist at the BC Office of the Canadian Centre for Policy Alternatives. The Red Eye podcast is produced at the studios of Vancouver Co -op Radio. You can support us by supporting Co -op Radio. Go to coopradio .org and click on the donate button. Independent media relies on the support of people like you.
