It was just a year ago that Capital Daily examined Victoria’s rental crisis and found an extreme shortage of rentals to be driving rents sky high. At the time, anyone moving from the average rental was facing a rent increase of hundreds of dollars. 

That tight market was exacerbated by short-term rentals like Airbnb, which, though tightly restricted by the City, had maintained a strong foothold especially in the downtown core. 

Then the pandemic hit and everything changed.  

With some 36,000 university students in town suddenly faced with mostly remote classes that could be done from anywhere, the city faced a substantial outflow of renters. In addition, the collapse of Victoria tourism put the short-term rental market into jeopardy. The effects for hotels were obvious, but for short-term rentals — usually operated independently or as part of small businesses — it was less clear how many operators would hang on through the quiet period, how many would switch to long term rentals, and how many would be sold.  

Nine months later we are beginning to get some answers to these questions. Data on local Airbnb bookings shows that activity as measured by frequency of reviews dropped 85% during the peak of the pandemic after years of high-double-digit growth. Short-term rental activity mirrored the path of the virus, with bookings nearly recovering the year before levels in the fall, before falling precipitously again in November and December as cases increased.

Despite international tourism falling to near zero, the Airbnb market may have gotten some reprieve as snowbirds — discouraged from visiting their southern homes — flocked from their Winnipeg winters to our warmer Meditteranean climate. However, that hasn’t prevented the Airbnb world from undergoing an unprecedented contraction. After growing at a rate of 50% per year since 2016, active Airbnb inventory dropped by 30%, or 1000 units, before rebounding slightly to end the year.  

There is evidence that some of those missing Airbnb units have ended up on the resale market. Despite sellers being hesitant to list their homes during a pandemic, in 2020 new condo listings were up 13% with an additional 460 condos listed compared to the year before. It’s impossible to tell if these additional listings were motivated by empty vacation rentals, pandemic economic impacts, or simply people upgrading to houses in the quest for more space. However it was enough additional supply to keep condo prices roughly flat in the last 12 months, while the median single-family house gained an astonishing $145,000.  

Municipalities are moving against vacation rentals, but enforcement is lacking

Vacation rentals were facing headwinds even before the pandemic. With an extreme shortage of long term rentals available, the City of Victoria introduced a short-term vacation rental bylaw in 2018 that effectively banned whole-home short-term rentals in most of the city. They are now only allowed in some grandfathered buildings that previously had transient zoning, or for a short time if the owner is on vacation. The goal of those restrictions was to bring short term rentals back as homes for locals, whether in the long-term rental or resale markets.

Has that worked? That depends on who you ask. In 2019, the city touted a reduction of 172 active Airbnb units in Victoria as a sign that the regulations were working. Data from InsideAirbnb, which uses listings and reviews to count active rental listings, did not reflect this decrease (active listings may have been defined differently by the City). According to these data, Victoria’s regulations put the brakes on the growth of Airbnb in the city while they continued to proliferate elsewhere, but was not successful in actually bringing down the number. Part of the reason for the lacklustre results may be a lack of enforcement of unlicensed and thus illegally listed units.

Although Victoria’s short-term rental bylaw requires that a valid business number must be displayed on rental listings and advertisements, a review of current Victoria listings shows that none of them are complying with that requirement. This is unlike Vancouver, where most listings do advertise a business license number. So while the City encourages citizens to report illegal Airbnb listings, that seems to be impossible in practice.

The pandemic has done what regulations have not, with the number of active listings in the City of Victoria dropping by a quarter since March. Some of those will be back when tourism returns. With the pandemic raging on, however, some previously legal vacation rentals may never be able to resume operations: the City’s bylaw states that grandfathered buildings where Airbnbs are not operated as a vacation rental for six months lose their status forever and can no longer be returned to the vacation rental pool.   

Rental vacancy surges, but not enough to halt increasing rates

Turning to the rental market, the impact of the pandemic is clearly felt. After five years with an average vacancy rate of 0.8% and an associated jump in rents, vacancy in Greater Victoria more than doubled to 2.2% last year.  While that was enough to keep the advertised rents from increasing, the large gap between the average asking rent compared to what people are paying meant that rents for occupied units continued to increase in most parts of the region. The average rent being paid for one-bedroom units increased by 5% to $1185/month while two-bedroom units increased 4% to $1507.     

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As expected, vacancy rates increased most around the university and college campuses, rising from 0.9% in 2019 to 3.3% last year in Saanich, which was enough to freeze rents at last year’s levels. The impact of absent students would have been even greater, but UVic reduced their on-campus beds from 2150 to 800, which kept some more of the remaining Victoria students living in the community. 

‍The pandemic brought some relief, but the fix for this crisis remains years off

The temporary easing of rental vacancy rates has brought some relief to apartment hunters in the past year, but it is no cure for the rental crisis. Vacant units remain hundreds of dollars more expensive than the average occupied unit, with the average advertised rent for a one bed coming in at $243 more than what the existing tenants are paying, while the average vacant two-bedroom is advertised for $561 more.

Data from Victoria shows that rents generally stop increasing when vacancy rates exceed 4%. With steady population growth even during the pandemic, it’s clear that demand for rentals will not decrease anytime soon. In the last 30 years, dedicated rental units per capita have declined by 22%.  

The secondary rental market (condos and basement suites) has partially filled the gap, but those units tend to be more tenuous accomodation and investors push up the price of housing. In recent years the surge in rental construction has closed some of the supply deficit, but it’s clear it will take many years to dig ourselves out of this hole. 

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Correction posted Feb. 8, 2021 at 11:10 am: A previous version of this article stated that a unit that has been grandfathered into being able to host Airbnbs can lose its exempt status if it is not rented in a short-term manner for six months. In fact, the grandfathered status extends to the entire building, in which no short-term rentals must take place for six months for the building as a whole to lose its status.