Report shows the impact of ‘ghost hotels’ on long-term rental market

'Ghost hotels' hurt renters

As the City of Kelowna mulls over stricter rules governing Airbnbs and other short-term rentals, a new report is highlighting how they impact overall rental rates in the community.

McGill University professor David Wachsmuth, working with advocacy group Fairbnb Canada Network, looked into the influence of commercial short-term rental growth on rental costs in B.C.

He found that in the Thompson-Okanagan, the number of commercial STRs increased by 40% between 2021 and 2022, and jumped another 17.6% from June 2022 to June 2023. Commercial short term rentals were defined as those where the entire home, condo or other unit is rented out, not just a room or a portion of a house where the homeowner lives.

Wachsmuth’s report found 10% of hosts in B.C. earn nearly 50% of the revenue, while 1,930 operators (1%) bring in more than 20% of all the revenue in the province.

At of the end of 2022 in the Thompson-Okanagan, 3.4 out of every 100 units were operated as a dedicated STR. The research suggests this translates into the average renter’s household rent climbing $34 a month over the course of 2022, or a total of $25.7 million more rent paid because of the presence of commercial short-term rentals.

“In general, what this data shows is that the more intensive commercial short-term rental use is, the higher the proportion of local rent increases and housing cost increases,” said Thorben Wieditz of Fairbnb.

He says the Thompson-Okanagan is one of the regions that is most impacted by commercial STRs or ‘ghost hotel’ activity, with Vancouver Island taking the biggest hit, according to the study. “This report marks the first time we can quantify the far-reaching effects that the transformation of homes into ‘ghost hotels’ has on tenants’ rents across the province.”

So, what does Fairbnb hope to accomplish with this report? Wieditz says they want the provincial government to step in regulate STRs across B.C. in a way that is helpful to local municipalities.

“We are keenly aware that there are a lot of municipalities that don’t have the resources like the big cities like Vancouver, to come up with their own short-term rental registries or enforcement mechanisms. And for that reason, I think it is important for the province to step up to create a provincewide registry where people that want to participate in this industry have to register their property, show that this property is indeed a principal residence and then share data with the province,” Wieditz explains.

He says Fairbnb isn’t opposed to home sharing, because that doesn’t removing housing from the long-term rental market, but they want a crackdown on ‘ghost hotels’.

“We would like to see a line drawn in the sand where investors and absentee landlords cannot just buy up and lease up housing stock and turning this into dedicated short-term rentals year-round.”

The organization has been putting pressure on governments across the country to do more about the impact of STRs. Wieditz points to a new law in Quebec that would see Airbnb facing $100,000 fines on all unregistered listings on the platform. Individuals who offer up a fake registration number could be fined up to $50,000.

He’s hopeful the British Columbia government will beef up regulations soon.

In the meantime, Kelowna city council instructed staff earlier this year to come up with stricter rules to address a number of concerns including unlicensed short-term rentals. A report with recommendations for bylaw changes is expected sometime this fall.

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