Preliminary results from a new report commissioned by Penticton city council confirms short term rentals are putting pressure on local housing affordability and availability.
At Tuesday's meeting, council heard initial results from a short term rental benefits and impacts study they had previously ordered ahead of pondering changes to local regulations.
"In recent years, questions have been raised about short term rentals' impacts on housing availability and affordability, especially during this period of very low vacancy rates," said Blake Laven, Penticton director of development services.
"It is acknowledged that vacation rentals haven't created the housing crisis but what we do want to study is to what extent are they exacerbating conditions in Penticton, and what impact they may have on the business equity with tourist commercial accommodation providers."
Odete Pinho with EcoPlan International, an independent company hired by the City of Penticton to conduct the study, walked council through early findings, which will then be solidified into a final report and made available publicly.
Pinho said the number of short term rentals in Penticton ranges season to season, from roughly 320 to 502 unique addresses. Close to 2,000 motel, hotel and resort rooms exist, according to data from Travel Penticton, including an under-construction hotel due this summer.
The city currently has an extremely tight long term rental market, and a 0.8 per cent vacancy rate.
There are approximately 18,000 dwellings in Penticton, and the estimated current housing shortfall is 1,400 units. An estimated 200 homes were converted to short term rental units in 2022, a roughly 40 per cent growth over the previous year, and the equivalent of three per cent of the city's total rental dwellings, Pinho explained.
“In such a tight market, what seems like a relatively small number of short term rentals can have a very surprising degree of impact,” Pinho said.
"We're seeing that it's growing rapidly."
According to the study, approximately 178 to 216 short term rental units, or roughly 40 per cent of the listings, were non-residences, where no one lived other than when it was rented.
"Meaning the city had lost or converted that number of entire homes to short term rental units. And that's equivalent to one per cent of Penticton's total housing stock or three per cent of its total rental housing stock," Pinho explained.
Short term rentals now make up roughly seven per cent of Penticton's overall travel accommodation inventory.
The benefit, Pinho said, is more availability for tourists. The travel industry, according to Travel Penticton, generates $126 million per year in revenue.
But in a nutshell, what the study found is that short term rentals are reducing rental and ownership housing stock, increasing rental and ownership housing costs, and impacting businesses' staff recruitment and retention.
"In the past 10 years, the average rental rates have increased 55 per cent," Pinho said, citing econometric modelling commissioned from Dr. David Wachsmuth, Canada Research Chair in urban governance.
"During the 2017 to 2019 pre-pandemic period, the increase of commercial short term rentals in Penticton accounts for nearly half of the increase in rents faced by local renters, and compared to rents at the end of 2021, long term rents in 2023 are estimated to be $332 per year higher because of the presence and growth of commercial short term rentals."
Short term rentals were also shown to decrease homeownership affordability for newcomers to the market.
"We see an aggregate decrease in affordability, and market wide, a decrease in affordability of individual units that have already been licensed or are operating as short term rentals, because they can demand a higher price, and an increase in affordability for some of the individual homeowners who can use the short term rental to offset the cost of their purchase," Pinho said.
Through conversations with local businesses and stakeholders, a pervasive theme became clear.
"Employers are attributing staff shortages to lack of affordable housing supply, staff recruitment and retention are negatively being affected by the shortage and high cost of ownership and rental housing," Pinho said.
A City of Penticton public survey seeking input from the community was live from Jan. 9 to 27, and attracted 1,102 feedback responses. Seventy-eight per cent were homeowners.
The survey showed that 48 per cent of the group wants to see fewer short term rentals with more limits compared to 33 per cent who think it is fine or should be expanded.
Concerns expressed included the need for more enforcement, lack of rentals for workers and impacts on neighbourhoods and overall housing affordability.
Council received the preliminary report for information only at this time. Once the report is finalized, they will participate in a workshop to facilitate goal-setting and priorities for future short term rental recommendations and policies, and final report recommendations will follow.
Coun. James Miller expressed his eagerness, and intentions to crack down on secondary homes used as vacation rentals.
"I look forward to this whole process and I also look forward to making motion in April that we limit short term rentals to primary residences only."