A commentary by a Shirley resident.
The housing crisis was caused by government intervention and it can be solved by government intervention.
First, some background.
As a septuagenarian who grew up in Canada, I was always aware that saving was necessary. Mainly because we were told we would have to look after ourselves in old age.
Money was to be saved and invested at a rate of somewhere between five per cent and seven per cent. Compounded over our working lives we were told that would be sufficient for us to live on in our retirement.
Things changed. Interest rates did not really co-operate for those of us who had saved for retirement. The government decided that in order to prevent a depression, interest rates had to go to zero.
And for the 10 years up to 2022, savings rates went to zero. Dreams of a reasonable retirement went up in smoke.
How could we possibly earn enough income to be able to retire? This was the issue that created the current housing crisis. And here is why.
Just about the time that many folks were trying to figure out how they could earn some income with their hard-earned money, along came very fast internet, Airbnb and VRBO.
For those who are not familiar with these companies, here is a quick explanation. Airbnb is a website that advertises rooms for rent for a short time, typically from one night to a week or so.
These rooms are usually in someone’s house or in a “granny flat” or in garages that have been converted to private rooms. There are usually no cooking facilities but many of these rooms offer breakfast.
VRBO is a website that advertises entire private homes, condominiums or cottages for rent. Like Airbnb, rentals are for very short time frames, from a day or so to a week or more.
Both of these kinds of accommodation have, in the past, been the purview of motels and hotels. But that’s another story.
The problem: In the past, rooms that could be rented to college students or new arrivals or those looking for cheap accommodation for few months or a year were available.
They were rented for a few hundred dollars a month. With the advent of Airbnb these rooms could be rented for $80 to $200 a night.
Now, people looking to add to their income are much better off to rent their room for $2,400 ($80 times 30 days) to $6,000 ($200 times 30 days) a month.
And most don’t pay provincial or federal sales tax (like the hotels and motels) and many don’t declare the income for income tax purposes.
Again, another story to be told. In the case of VRBO, people with houses or condominiums to rent would rent them for $1,500 to $3,000 a month. Now, VRBO rentals can go as high as $1,000 a night ($30,000 a month) for a large home.
Generally the rates for the Victoria area are between $83 and $815 a night.
This is a great investment opportunity for people with cash that need to earn income. And this is how they have done it. They buy houses and condominiums and rent them on Airbnb and VRBO.
New houses and condominiums are built and purchased by people (and now companies) that buy them to rent them on a short-term basis. Many people own five or more units that they rent on a short-term basis.
Companies own thousands in some places. So we no longer have a housing market, we have a market that caters to tourists and people on business trips.
Today, as in the past, interest rates have risen back to a level that allows those with some retirement cash to put that cash in a bank and safely earn five per cent in a money market account.
Bonds are paying a bit higher rates. So those folks who have been hunting for a return on capital in the rental market can now put their funds into the bank or into bonds and let the housing market get back to normal.
The solution: Stopping short-term rentals of houses and condominiums will fix the housing crisis within six months. All those extra houses and condominium units will go on sale or revert to monthly rentals.
Prices will go down because the inventory of units for sale will go up. People who have been renting their houses and rooms as short-term rentals will go back to renting rooms and houses by the month.
The market will open up, prices will go back down, hotels and motels will be full again. They will be able to hire more workers.
More taxes will be collected by the federal and provincial government. More income tax will be collected. So everyone’s taxes could go down a bit.
Housing problem solved. Just pass a bylaw that disallows short-term rentals in any area in B.C. that is zoned residential. Make the penalties increase severely for multiple offences.
