The City of Kelowna's been pretty woke lately. With their commitment to take a determined and holistic approach to homelessness, and now with their endorsement of a Healthy Housing Strategy that understands our woefully underserved housing needs (be they affordability or vacancy) all across the spectrum1, you'd think their newly adopted principles guiding their approach to increase long term rentals by regulating short-term holiday ones would be a welcome sign.
Two weeks ago, Community Planning Supervisor, Laura Bentley submitted the Short Term Rental Accomodation Regulatory Direction to council, laying out the city staff's vision to introduce regulations limiting short term rentals (hereafter STR) to one's principal residence (just like those old school Airbnb days, when a real local would rent out a room, or their place while they're away) – which is something when you consider that 70% of the rentals in Kelowna are short term. Council endorsed the principles of the report on July 16th. However, this report to council did not discuss commercially zoned buildings: aka all apartments downtown.
So of course, I have some questions: in the pursuit of balancing all civic interests, is the city potentially tearing a big hole in their comprehensive plan to combat our housing ills by allowing developers and property investors carte blanche over what types of units get built? Does the very nature of municipal politics – no political parties, less ideologically driven, and definitely much more of a management system between conflicting interests – preclude a sustained visionary approach to a complex problem2? And real talk, do all the interests have equal weight? Are they even of this city? Do we even know who all the players are (clearly there are newly emerging types of residents, landlords and tourists)?
In short, I guess I'm asking, when the city considers blanket tourism3 and real estate developers' bottom line as part of the housing issue, can Kelowna have a comprehensive housing strategy at all? Are they giving with one hand and taking away with the other?
The report did give credence to results from a "statistically insignificant" survey of Kelowna residents that were substantially pro residential STR, leaving me to wonder if they are setting themselves up to be solvers of only part of the problem. Is their supposed "crack down" on STRs just a way to distract from the fact that they are leaving a wide swath of prime downtown housing real estate open and available for short term rentals? Real estate that this council rode into office on, by proclaiming to make thriving and vibrant year round?
Bentley was in conversation with CBC Daybreak's Chris Walker (begins at 1:10:55) last Friday, and after initially skirting the issue of commercially zoned areas being exempt from these STR regulations, preferring to talk residential zoning, she eventually admitted that presently all commercially zoned areas do allow as many secondary STRs as the market will bear. Those condos on Ellis St., St. Paul, Bernard? All commercial zones, and based on anecdotal evidence, most all of them Airbnb secondary investment suites. So unless their strata decides to restrict it, downtown apartments are open for Airbnb business.
Bentley spoke a lot during this interview of "tourist commercial areas" without really distinguishing between the resort condo areas (the Dolphins, Playa del Sol etc.) and actual downtown apartments in Kelowna, and I found this conflation between resorts and the newer urban densified living confusing. At least, that is, until she mentioned that this commercial zoning allows "flexibility for developers", somehow turning a blind or dismissive eye to the fact that this flexibility has led to, yes, plenty of sales, but next to no long term rentals (or residents) in downtown condos. She clearly must not live downtown with its swath of short-term rental condos along the Ellis/St. Paul corridor if she thinks that "we haven't seen, I think, many short term rentals in our downtown specifically."
Walker extended this issue by saying that most of the proposed downtown building hasn't even been built yet, but given the changing nature of building and housing downtown, why "exclude such a large chunk of housing supply?" Bentley replied with what sounded to me like the talking points: "we'll continue to review and monitor these rules going forward" ... "where we land on this will take shape after stakeholder consultation." Vague.
Balance of Power
To be fair, public consultation can change a lot, we just need to be sure this will not be simply rubber stamping, where rather than including the public in the process to find the outcome, public inclusion is solely used to validate a predetermined outcome. Personally I don't think this is the case, but I do worry that many of the "stakeholders" will have more inclusion and power than others in this process. And the fact that, after the report was publicized to the city and council, it took questions from a journalist rather than our eight councillors and mayor as to whether or not downtown real estate zoned commercial and used for apartments, would be exempt or not, is a bit telling of where the power balance lies.
Or perhaps we can tell by the condo marketers where the power balance lies, so brazenly confident they are in their claims that their zoning and project is exempt: "Concerned about the new rental regulations coming to Kelowna? Don't be. The City of Kelowna has designated Brooklyn with a zoning classification... which permits nightly and weekly rentals". Why are they so confident?
Or perhaps we can see where it lies when councillors such as Gail Givens are already concerned that the Airbnb "hotel tax" levied on new licensees – the MRDT (Municipal Regional and District Tax) – will go towards Tourism Kelowna (who made 2.8 million from the tax last year and is spending major on an outsize tourism centre), and not affordable housing. Or that Mayor Colin Basran was quick to note that OMREB (Okanagan Mainline Real Estate Board) definitely be a stakeholder, but not long term renters as a group – but to be fair he likely had not heard of the very recently formed Renters United Kelowna group.
Developers: The Sunny Side of the Street is Dark
When selling condo pre-sales quickly is the name of the game, a little marketing speak about rare short term rental possibilities may be the very incentive that onboards more than a few insecure investors (is this the new predatory loans?). And if they play fast and loose with reality, leaving new owners holding the bag once regulation potentially kicks in, over at Kelowna's Waterscapes they also did it with the law.
A few years ago, some folks dispirited with their experience living in a "tourist commercial" development that allowed STRs, looked to find a more residential environment in a new building that the developer touted as "Excellence in Creating Multi-Family Developments (Skye at Waterscapes)" while extolling the virtues of urban living in Kelowna and a vibrant cultural life year-round – exactly what these residents were looking for. They did not want "to live in a development where short-term rentals were permitted because of constantly changing neighbours; noisy parties in the units and common areas; and the lack of regard by such guests for other residents, the premises and surrounding area." (see case).
Or in legal terms, they sought what the developer claimed in its Disclosure Statement's permitted uses (a legal requirement for developers' marketing) were "residential purposes only". However, what was not stated in there was the possibility for STRs (a secondary use in RM6 zoning). When they learned of this, they took the developer to court to get out of their sales contracts. The BC Supreme Court found "that the failure of Waterscapes to disclose the permitted secondary use for short term rentals was a violation of REDMA (Real Estate Development Marketing Act) entitling the plaintiffs to the relief they sought. The Court ordered that the plaintiffs have their deposits and any additional funds paid under their contracts returned." (Pushor Mitchell Blog)
So, are we going to trust that Mission Group is adhering to the spirit of consumer protection legislation like REDMA that regulates the pre-sale of condo units and sets obligations for what developers must disclose at the outset (as well as updates about the strata site) when they state that "as a unique advantage, Brooklyn homeowners will be able to use their condos as short-term rentals — a rare find in the city of Kelowna. Buyers and investors will be allowed to rent out their homes for periods of less than 30 days, creating a convenient avenue to offset their investment costs" (Livabl.com), when Bentley has stated that the STR regulations ain't a done deal?
First Hand Experience
Interestingly, of the 12 Waterscapes plaintiffs, several came from Discovery Bay (or as it's known colloquially, Disco Bay, due to the loud shitty music being played through the evening and night among other things). They were upset with the scene there. A scene that I can attest, as a current resident, has really snowballed. When most year-round owners bought here, the number of STR units was nowhere near where it is now. Presently 177 out of 236 units are STR units, not a single unit pays the licensing fee, and the wear and tear is far beyond the strata council's original estimation – and I won't even get into nasty stories about what ends up in the pool late at night, suffice it to say I haven't been swimming in it.
I'd say not only the nature of housing downtown is changing: building up not out, becoming more urbane and dense etc, but so is that of these "tourist commercial" zones (RM6 zoned developments in tourist heavy areas that allow STRs as a secondary use). Many owners here at Discovery Bay bought in when, if you rented out a holiday stay, there was a single property management company running the show, but now the complexion has changed dramatically to much more casual owners renting out on Airbnb with little oversight, and packing loud groups, sometimes in the double digits, into their suites.
Also if you are a long term resident in a building with STRs, be warned – a huge chunk of your strata fees will likely go towards the absentee landlord-owners' wishes. Presently we pay a security firm almost $100,000/yr to operate year-round. Understandably security will be a cost with vacationers having a good time here, and that's no biggie, but the year-round service really adds up, and seems to serve only for the remote operators to have their places secured (god forbid they rent them year-round for the security – they used to do this for students, but this is not really happening much anymore as housing near UBCO increases).
Airbnb and the Wild, Wild West
Back on the residential front, certainly there are some homeowners that will see the city's crack down as draconian, the "muh freedoms" peeps who think they have the right to have a leg up on tax-paying, rule-abiding, licence holding, job-creating, community-supporting businesses. And their arguments, while extreme (and in fact anti-capitalistic), will help Mayor Basran's image as being tough on STRs. And maybe this residential regulation initiative is in fact a progressive move by council rather than solely a distraction. I mean in today's right wing libertarian political culture, where many think that owning property entitles them to enter and exploit the hospitality market unchecked: "It’s not my job as a homeowner to provide for the rental pool... why push it back [regulate/disallow] to a single family owner trying to make the most out of their house?" (thanks for that Kelowna Now), it would seem the city has a case.
Airbnb too of course promotes this profiteering, wild west mindset as well. Around the time that the STR survey went out, they invited local Airbnb renters to meet and discuss the future of home sharing in the city. While I'm not sure what went down at this pep rally for mini-me start-ups, claims like Airbnb Canada's Public Policy Manager, Alex Dagg's, "I wouldn't describe [short-term] rentals as illegal. It's about cities keeping up with technological advances", are misleading (we have laws that state it's illegal to short term rent for under 30 days) and perhaps cynical. They know they can create a strong anti-regulation vibe with these meetings so that when it comes time for discussions like we are having right now, the "don't tread on me" crowd will be anointed with the shiny coat of tech-savvy disruptor status – so much cooler than "MAGA chud".
Airbnb hosts in Kelowna bond over community, hospitality, a love for home sharing (+ a couple of drinks)! Tourism at a local level keeps small businesses thriving & neighbours smiling! Thanks for hosting @treebrewing #AirbnbCanada #homesharing #BC #Okanagan #Kelowna #supportlocal pic.twitter.com/7NWkXl7Df3— Airbnb Citizen (@AirbnbCitizen) November 21, 2017
Dagg also said that Airbnb helps "families who are struggling to make extra money to survive in a difficult market." A difficult market that most economists have found is the result of low interests rates, rampant speculation and the financialization of shelter. When the Brooklyn suggests you can offset a mortgage by Airbnbing your unit, you wonder if they are instead an active force creating a difficult market – buy something you can't necessarily afford and then rent it out, that's safe, and man look at those sweet views and that rooftop balcony.
Councillor Luke Stack said as much when he stated during the July 16th council meeting that the wild west has been going on for too long here, bringing up the advantages enjoyed by those on ALR land for instance, who feel attacked when asked to comply with actual agriculture primary purposes, as a parallel to the attitude of owner-hoteliers expecting to enjoy their market advantage of not paying their social dues as other hospitality businesses do.
In Nelson, a city whose newly introduced STR model Kelowna is closely following, a consultant they enlisted in the early stages, found that “some operators are outright profiteering, exploiting the sharing economy without fulfilling their responsibilities to the community... the consequence is severe distortion in the market for long-term rental housing for low and middle-income locals. This is already changing our community.” (Nelson Star)
So while certain actors may be at play promoting this cowboy mindset, it no doubt exists and may not be a straw man designed to make city council look like they're tough on short term rentals. However, as the Brooklyn development illustrates, present residential zones are clearly not enough.
New housing downtown is the direction council is going in, and we still need to ensure that what Bentley said about "considering new zoning for commercial and residential" to control STRs is more than just a talking or stalling point. Right now it seems to me like zoning it all commercial just works for developers to use as a way to get condo investors to buy, and have them act as individual property managers (regardless of what future regulation would be) - sorta like contracting out management or crowdsourcing capital rather than say finding full time employees – like a real hotel, or real residents looking for a home to invest in over the long term, or a properly regulated balance of the two.
Avoiding a Deadbeat Downtown
So if we want the downtown to live up to council's promise of a lively core, with increased densification, increased amenities and the like, we can't support a downtown where great real estate sits empty in the off season and those with the best intentions are forced to turn tail: in two conversations this month, the issue of sustainable downtown viability came up in a big way – one, a young business person running a immensely successful creative business (a huge Instagram influencer as well that I'm sure matters to some) is contemplating closing for the winter, and the other a friend who works from home in a brand new downtown condo (Sole II on St. Paul) who can no longer abide the noise and disrespectful short term neighbours (all but six of them are short term rental units) is now herself selling it. Making downtown viable has many spinoffs for existing and future businesses. Conversely, building towers in our city that do not pay real dividends to our community are a drain.
As we have seen, Kelowna is going through some huge planning and demographic changes. As old pre sharing-economy models, and tourism-at-any-cost mindsets are being replaced by more sustainable thinking, we need to take this issue of STRs extremely seriously – how the city shapes regulation here can determine the character of our city for decades to come.
We need to have full disclosure on who the "stakeholders" are going forward. As of now, I have only heard it stated that they will be "rental platforms, accommodation hosts, the hotel industry in Kelowna, neighbourhood associations and some housing agencies". Long term renters as a group are not explicitly mentioned, and if you are one, or do not want to see short term rentals take up a majority of downtown, you might want to follow up on the hearing at City Hall on July 31st, where the Mission Group applied to add a whole ton of floors to their first proposed building (of potentially three) of their Brooklyn development.
The Kelowna City Council minutes from the public hearing regarding rezoning Mission Group's Brooklyn development from C4 to C7, as well as public intervenors concerns about STRs can be found here. Some very interesting points and experiences were shared. It begins around the 2:29 mark.
Update: Mayor Basran appeared on CBC Daybreak today, July 31st (starts at 1:07:15), and to his credit sounds concerned about the negative affects of having STRs in commercial zones (aka: downtown). He told host Chris Walker that they are discussing STRs in commercial zones and he will ask staff to look into it "a bit more formally". Something tells me the interview Chris Walker did with Laura Bentley previously may have coaxed him to come forward and say something about STRs in commercial zones, and with citizen pressure like letters to council, or groups like Renters United Kelowna, perhaps new zoning that foster long term liveability downtown will become a reality!
1 From Report to Council: Healthy Housing Strategy Proposed Actions (p 1,2) actions recommended in this report position the City into a leadership role [emphasis mine] to make real change on Kelowna’s housing market that is facing unprecedented housing challenges. The goal for the Healthy Housing Strategy is to accomplish a set of actions that seek to have real, measurable and positive impacts on our housing challenges.
These are laid out as 1. Bottleneck in the Housing Wheelhouse (demand for rentals is pushing housing vulnerable out of market housing market) 2. Need for greater housing diversity (not single-detached) 3. Limited supply and high demand for purpose-built rentals (500 units year will be needed to meet demands of rental market. presently we have a 0.2 vacancy rate ) 4. Security of tenure and short-term rentals (short term rentals are taking units out of the rental pool) and 5. The cost of housing is increasing and income isn’t keeping pace (most Kelownians are spending over 30% of their income on housing costs).
2 From the above report (p3). "The path forward requires bold, innovative and new directions. As Kelowna grows into a mid-sized City and is faced with the related challenges, innovation and leadership is needed to tackle the complex issue of housing"".
3 Since we started up Hello Kelowna, we are astounded by how much exciting stuff of interest to visitors is not talked about by Tourism Kelowna – actual activities by hardworking creative and unique local businesses. And honestly, we're a bit mortified by some of the classifications they make and where they send tourists – seriously, is Quality Greens a destination to send tourists in the "Farm" section of a TK tourist pamphlet? That's just one example. There are more. Pay to play, the only determiner I guess smh.