Draft regulations for short-term rentals in Yellowknife could let people in effect open hotels on the cheap, a city councillor and construction boss alleged on Tuesday.
Regulations being proposed by City Hall would, for the first time, allow the municipality to govern how short-term rentals like Airbnb are operated in Yellowknife.
However, Councillor Niels Konge said the proposals left a gaping loophole by which anyone with the money could potentially turn entire apartment blocks into Airbnb units, making them the equivalent of hotels.
The issue arises as proposed regulations don't require that you live in a property you choose to list as a short-term rental, and don't restrict where in the city you can set one up.
In fact, whereas Yellowknifers renting out their principal homes must get both a home-based business licence and development permit under the draft rules, people renting out homes they don't occupy won't need the development permit.
"As soon as it's a house that isn't occupied as a residence, in my view it becomes a hotel," said Konge, owner of a local construction company, to nods from residents who attended the meeting with concerns about the proposals.
"I could build a 16-unit apartment building with really small rooms, get a multi-family commercial rate on it, and rent the sucker out as a hotel," Konge continued. He said doing so would be likely to generate a lucrative profit.
"I can't get over that one and it's a dealbreaker for me supporting this," he concluded, referring to the draft regulations. "Right now, I certainly would not support it."
Responding, Kerry Penney – the City's director of economic development – said staff had been endeavouring to avoid over-regulating Airbnbs and the like, in line with the request of many residents.
"One potential way to address concerns is to go with a more complicated, tiered system," said Penney. "That's how Calgary proceeded recently. They have, essentially, a tier one and tier two. Tier one is a home-based business and tier two is a non-principal residence, and there would be a higher cost associated with that."
'Conglomerate hotel' danger
Councillor Julian Morse said he understood and appreciated the "light touch" shown by the City, but agreed with the essence of Konge's concerns.
Under the proposed regulations, Morse said, "If you own three or four houses in town, it's starting to sound to me more like a commercial endeavour. Effectively, you're running kind-of a conglomerate hotel. You do have a fairly large business at that point and you are starting to compete at the hotel level.
"How much do we want to regulate this now?" he asked. "We said 'light touch' and I'm still committed to that, and yet there are some concerns. I would like the bylaw to address the concern when a business is getting big enough that it's effectively a commercial enterprise."
Currently, residences and hotels are taxed at different mill rates. Joining together multiple residences to create an "Airbnb hotel" would, councillors said, confer an unfair tax advantage while gaming the system in a way detrimental to Yellowknife.
Earlier, presenting to councillors, banker and recent federal election candidate Yanik D'Aigle expressed a similar concern.
"There needs to be a difference between what is there to supplement income versus actually operating a business," he said. "There is a fine line between the two, but it needs to be clear.
"If I have multiple properties that are not owner-occupied, when does it become a commercial establishment?"
The City's proposed regulations effectively eliminate much of the difference between a short-term rental and a bed-and-breakfast. That is achieved by significantly deregulating bed-and-breakfasts – a current burden Faith Embleton, who operates a bed-and-breakfast in the City, raised with councillors.
"When I applied for my licence, in 1999, I had to have a development permit, I had to register with the federal government, I had to have liability insurance, and so much parking attached to my house. The City told me we could not open our doors until we had a sprinkler system put in," Embleton said on Tuesday.
"We've had a bylaw, now, since 1999. It has never been struck from the books yet, in 2014 – when we came and said there were 20 illegal B&Bs we wanted dealt with – nobody did anything. And here we are.
"It's a concern to me that, if you open the door wide open, you might not be able to close it in future and you might end up with a problem like they did in Vancouver. I resent the fact that I've been paying my business licence and everybody else has been doing nothing."
Cllr Morse acknowledged the City had been over-regulating bed-and-breakfasts, saying that was "unfortunate" but he was glad to see the issue addressed.
Compliance and fines
Cllr Shauna Morgan supported the regulations, saying the proposals "adequately captured" what council had initially intended in calling for regulation of short-term rentals.
"We need to keep in mind the things we realistically can control, and should control, and what is really within our sphere," Morgan said. "And what are the best, and most effective, systems of enforcement and quality control? Sometimes, that's not us."
Mayor Rebecca Alty took issue with the requirement that people in their own home get a development permit for their short-term rental, while people not living in a home need not acquire a permit.
Konge agreed. "In the current wording, it's easier to buy a house and short-term rent it if you don't live there," he said, describing his concern for the consequent impact on a neighbourhood.
Alty asked if permits could be required across the board to provide a simpler approach. City staff said the need for permits is wrapped up in a number of bylaws which govern when such permits are required, and work would be needed to assess the impact. Councillors decided not to ask for that work to take place, fearing a delay to the eventual rollout.
The proposals will now go forward to a future full council meeting for further consideration and approval. If the regulations pass, anyone operating a short-term rental will require a business licence.
Research and consultation about the regulations have been ongoing over the past year. The City recently identified more than 200 separate Airbnb listings within the municipality, alongside more on sites like Homeaway, Flip Key, and Craigslist. By comparison, there are 27 licensed bed-and-breakfasts.
Under the proposed regulations, people who have not yet rented their space will be required to get a business licence before advertising it. Those who already operate short-term rentals will have until May 31, 2020 to get a business licence.
As of June 1, 2020, any rentals without a posted business licence could be fined up to $1,000 per day. While fines and legal action are possible, City administrators expect to reach most operators through "voluntary compliance, education, and awareness" without things escalating to that point.