The B.C. government will allow Airbnb to collect provincial sales taxes on short-term rentals, which Finance Minister Carole James said will help fund affordable housing. The British Columbia government expects up to $21 million a year in taxes to be collected from the short-term rental market after reaching an agreement with Airbnb.
The money will be used to help fund affordable housing and tourism initiatives in the province.
Finance Minister Carole James said the deal provides additional revenues to address housing affordability and improves tax fairness.
“It recognizes the reality today, not only in B.C. but across the country, in fact across our world,” she said. “The sharing economy is here. We need to make sure as governments that we look at our tax systems, that we look at our arrangements we have in place and we make sure we create that level playing field.”
New legislation will direct Airbnb to collect 11 per cent in taxes from short-term rentals and send the proceeds to the government. The taxes include the eight per cent provincial sales tax and municipal or regional district taxes of up to three per cent on accommodation.
The province estimates Airbnb will remit $16 million a year through provincial sales tax and $5 million a year through municipal and regional taxes, also known as the hotel tax.
Money from the sales tax will be used to improve housing affordability, while the portion from municipal and regional taxes will fund tourism programs.
James did not make any announcements on affordable housing, but said a comprehensive strategy will be announced when the budget is released Feb. 20.
Airbnb spokeswoman Alex Dagg said the agreement allows the province to participate in the economic benefits of home sharing.
“We’ve said for a long time that we want to work with governments,” she said.
Airbnb started collecting a 3.5 per cent provincial tax in Quebec after an agreement with the government last year. It also collects taxes in Michigan, Nevada, California, France and India.
Municipalities will still have the authority to bring in their own regulations on short-term rentals, James said.
Cities such as Victoria and Vancouver have put in rules restricting short-term vacation rentals amid concerns that they are squeezing out renters and creating a near-zero vacancy rate.
Airbnb was originally launched with the idea that homeowners would rent out a room in their home, but some people are using condos as full-time vacation rentals, making the units unavailable for long-term rentals.
The City of Victoria estimates there are 1,500 short-term vacation rental listings concentrated around downtown, with some managed by commercial operators.
The tax is a step in the right direction, but more work needs to be done to level the playing field for hotels, said Tourism Victoria CEO Paul Nursey.
Nursey would like to see the goods and services tax applied to Airbnb rentals and the tax extended to other vacation rental systems such as Vacation Rental By Owner and Flip Key.
Taxes on hotel rooms — which include the hotel tax, GST and PST — total 17.5 per cent, Nursey said. “We need to make sure every accommodation is taxed equally.”
Victoria has lost 1,100 hotel rooms in the past decade as many hotels were converted to condos or affordable housing units, creating demand for Airbnb properties, said Victoria tourism consultant Frank Bourree of Chemistry Consulting.
Fewer people staying in hotel rooms meant less hotel tax being collected and passed onto tourism groups such as Tourism Victoria, he said.
“Now the industry will have the ability to recapture that.”
Bourree said he has sympathy for people who operate an Airbnb in a basement suite as a mortgage helper, but “a number of people specifically bought condos to put them on Airbnb and have never paid any of the hotel tax.”
Victoria Coun. Jeremy Loveday said anecdotally he has heard from people living in downtown condos who report that a large percentage of their building is being used for short-term vacation rentals.
“Not only is that having an impact on the housing market and housing availability … it also impacts the livability of those buildings because [residents] signed up to have neighbours, not live in a hotel,” Loveday said.
In September, Victoria enacted zoning changes covering much of downtown that removed an option to legally offer rentals of fewer than 30 days.
The zoning change means condo units being operated as short-term rentals through platforms such as Airbnb will be grandfathered in, but lose that status if they are not operated as a short-term rental for a six-month period. Short-term rentals will be banned from downtown developments now under construction.
Victoria city staff have proposed a business licensing fee of up to $2,500 a year for a property being used for short-term rental.
