PAUL: At the end of July the town of Gibsons passed new bylaws that essentially eliminates short-term vacation rentals in the town, and these new rules will come into effect in January of 2023. But the end result is that in a few years there won't be any short-term rentals in Gibsons, and I'm wondering what are your thoughts on short-term and long-term real estate prices? Will this bylaw change affect the real estate market?

Principal residence redefined

TONY: I was reading the summary of regulations and frequently asked questions and I'm interested to get your take on what you think it means. The thing that jumped out to me was it seems the town has redefined the definition of a principal residence.

PAUL: That's my takeaway too. I don't have a vacation rental, I don't have a secondary suite at my home, so this doesn't really impact me. I only listened casually when the debate was going on, and my very basic understanding of what the town was talking about was that vacation rentals would be allowed in your principal, or your personal residence. But when I read the summary from the town, it reads that the bylaw redefines what is considered a principal residence in Gibsons.

TONY: I’ll give you an example and you tell me what you think will happen. Let’s say I own a house in Gibsons’ Bay area (I don’t but just pretend that I do). In this hypothetical example, I've got my primary house that I live in, but I also have a coach house in the back that I use as a short-term rental to earn some additional income. Family might use it when they visit, but most of the time it's rented out on a nightly basis. Is this bylaw change going to affect me?

PAUL: My understanding is that it will. My understanding is that you cannot have vacation rentals at a residential residence anymore. In the next five years, the Town of Gibsons will phase out the number of vacation rentals with the goal of there eventually being none. In the town’s summary of regulations, there is a section where they show floorplan examples and they talk about the specific example you just mentioned. The example shows that if you're living in a property where the house is your primary residence and you also have a laneway house as a separate structure, that laneway house needs to rented to a long-term tenant. If you want to operate a short-term rental, you’ll be limited to renting out bedrooms in your house.

PAUL: In this example, Gibsons says there are two principal residences on your property. The house you live in is your principal residence and the laneway house would be a principal residence for a long-term tenant. That's my understanding of it, and maybe I've got it backwards, but I've been through it three or four times and I think I’ve got it right.

TONY: That's also how I read it. It also looked like if you have your house that you live in, so you're physically living in a house and there's a suite downstairs, whether it's legal or illegal, what I got from this is that you can apply for a temporary use permit to be able to rent out the suite in the primary residence, but they look at where you live and the other suite both as primary residences, even if that secondary suite is not a legal or conforming suite, that still would be considered a primary residence, and if they came to inspect that they would turn a blind eye to the fact that it was an illegal suite and grant you permission to rent that out for a temporary basis for Airbnb.

PAUL: My interpretation of this is that that's largely right, that I think for minor infractions they would turn a blind eye, but something major I think that they would say, no, you can't have anybody live down here at all on any level. But I think for small infractions, I think they’ll turn a blind eye.

TONY: Knowing the Town of Gibsons, and knowing they are limited as far as employees, and there aren’t a lot of bylaw offices, what's your understanding on how this is going to be enforced?

PAUL: My understanding of how this is enforced is that you will apply for your permit from the city, they will give you a license number, and wherever you advertise your short-term rental, you'll have to include the license number. I'm guessing that it'll be for other people to tattletale to the town and say, "My neighbour is renting a house and he doesn't have a permit number on his advertising.” Like you, I don't know that there's enough manpower for the town to actively police this bylaw. Maybe they're going to hire somebody full-time to do this for the next five years.

Remote owners may decide to sell

TONY: In a real estate context, this means that more than likely there'll be a lot of off-coast remote owners that won’t be interested in renting the property out long-term. And if they’re counting on using revenue from short-term rentals to service a mortgage, we’ll likely see quite a few of these type of listings coming on the Sunshine Coast real estate market in the next six months or so. Owners that want to get ahead of the market might even choose to list in the next couple of months.

TONY: If you’re a buyer looking at one of these properties, you want to beware and make sure that you're working with a local agent that understands the local zoning, and probably putting a subject on the offers to check out what the zoning is, and what you're allowed to do and what revenue you can be expecting to get. I'm sure there are a few owners out there that recently bought properties expecting to be able to use it as a short-term rental and didn’t dig into this as much as they should have. Now they’re faced with not being able to get that revenue and they're probably going to have to adjust their plans a little bit.

Temporary Use Permits and fees

PAUL: That's my understanding of the purpose of the temporary use permit (TUP). TUPs will be approved case by case - applying for a TUP doesn't automatically allow you to rent out your unit. It sounds like applications will be considered on a case by case basis, and I'm imagining the scenario that you explained will probably get preferential treatment. Maybe an owner says, “I bought this house and I didn't do the homework I should've, and this bylaw change will bankrupt me if I'm forced to sell, and I can't afford to pay the mortgage renting it out long-term.” I'm guessing that's what this TUP is for, to allow owners to extricate themselves from the situation somewhere in the next one to five years.

TONY: And you said that recently it was $100 licensing fee to be able to run an Airbnb. But the people that have applied for that license in the past are now being contacted by the Town of Gibsons. The town is sending them letters explaining the situation to them?

PAUL: Exactly, explaining their options to them. My understanding of it is that to apply for one of these TUPs, it's a $1,500 non-refundable application fee, whether you’re approved or not.

TONY: (sarcastic) Quite reasonable then, very reasonable. It's got to be an hour's worth of work.

PAUL: Applicants will pay the $1,500 fee, and if the town does issue you a TUP, my understanding is that the business license for you to operate it for a year is another $2,000 and then $2,000 for your second year. By my math, that would be $5,500 for you to run a short-term rental in the next two years.

Sharing space with vacationers

PAUL: I keep saying short-term vacation rental, but Gibsons changed the name of short-term rentals to Residential Guest Accommodations (RGA) in this new policy. With an RGA, you’ll still be allowed to rent short-term to guests, but only if they're sharing your space. That means if you had a short-term guest, they're going to share your living spaces. Things like your kitchen and your living room and maybe share a bathroom. My understanding is that kind of short-term rental will be allowed indefinitely. What will not be allowed is to have a short-term rental with a separate entrance and a separate kitchen and separate bathroom.

TONY: Because the town wants that housing for long-term rentals.

PAUL: That's right.

TONY: And the town’s belief is that if owners can't get revenue from short-term rentals, they’re going to rent to long-term tenants instead, thus created more rental housing supply.

PAUL: That's my understanding.

TONY: If owners don't do that, then they're going to sell their home and that home becomes an entry level house for buyers that can't afford to buy the house without the long-term rental revenue that the suite will allow them to collect. We’ll see if it works.

Market outlook for September

PAUL: August was a hot month on the Sunshine Coast temperature-wise, but I think the opposite was true for the market, it was relatively cool.

TONY: Cool, very cool, yeah, yeah.

PAUL: And what do you see going into fall, will that carry over?

TONY: Yeah, the last two weeks has been trying to pick up. The ferries and the cancellations and the mechanical issues and staff shortages, and all of that stuff has limited the amount of potential buyers that are able to make the trip to the Sunshine Coast. In the last week I've noticed things have picked up. Two properties I'd listed went to multiple offers. A couple of listings have had initial offers and backup offers come in. There seems to be a lot more interest in getting into the market. What I think is happening is that people finished their vacations and now they're back to thinking about real estate. There’s also the threat of a couple of large interest rate increases coming before the end of the year, so maybe people are biting the bullet and jumping into the market.

TONY: We are seeing still a lot of price reductions, and the properties that have adjusted for the softening market are selling, so our local Sunshine Coast real estate market is seeing a bit of a rally. I think we'll probably be busy in September but then we're going to be a ghost town in October. Depending on what's happening with the economy, and everything else that's going on in the world, if a ton of inventory comes on the market, I think we'll move into a buyer's market next year. Then we’d see how long it takes to turn around coming out of that. But I think it's going to be good for buyers for the next at least the next 18-ish months.

Advice for sellers

PAUL: In September, if somebody called you to sell their home, what would be your advice to them?

TONY: (joking) I'd ask them why they want to sell. Depending on their answer, I'd ask them what took them so long. “Aren’t you listening to my podcast!?” The three people that watch this, I've already sold them all homes! It's crazy.

TONY: No, I'd want to know why they're trying to sell, and providing it's a lateral move, or they've got a reason to sell, I'd give them comparables and say, "This is where the market's at and we should probably be a little bit ahead of that, so we want to price it sharply and get it listed." A lot of sellers say, "Well, I want to fix this, I want to do that, I'm going to paint this, I'm going to do that." And yeah, maybe if the house was painted, or it was in better shape, or had a new roof on it, you could get more money for it. However, if you spend three weeks farting about with the property and the market's dropping out from under you, you've just wasted that time and that money.

TONY: If you need to sell, get your home on the market as quick as you can, price it appropriately, and it will sell. Don't chase the market down, don't overprice it, don't leave negotiating room. Don't think people are just going to make an offer, because even in a market like this you've got to be a pretty aggressive buyer, to offer $795,000 on a $1,000,000 home. Buyers will assume that sellers will be offended and take that offer personally, and despite what most Realtors will say, sellers do take it personally. Sellers need to make their homes attractive enough for buyers to go, “You know what? We're going to be in a recession next year, but I'm going to buy this house anyway.” “You know what? I can't rent this house out short-term, but still I'm going to buy it.” Sellers don't want to be trying to get too much juice out of it at this point.