A growing number of property investors in Calgary are turning to short-term rentals despite increased demand for long-term tenancies.
The number of short-term rental listings for entire units available on Airbnb and Vrbo was 8-per-cent higher between January and July of this year than in 2019, according to AirDNA, a U.S.-based analytics provider for the short-term rental industry.
With a monthly average of 2,472 listings, entire units represented about 80 per cent of all listings during that time period, up from 60 per cent prior to the COVID-19 pandemic, according to the firm’s data.
At the same time, the added pressure of higher interest rates and inflation on potential buyers has created a tight rental market in Calgary, said Ray Wong, vice-president of data operations at Altus Group.
Interest rates “are pushing away those people that want to purchase and no longer can, causing more tightness and pushing rents higher in the traditional rental market,” Mr. Wong said.
In the first quarter of 2022, Altus Group recorded a rental vacancy rate of 2.31 per cent in Calgary, down from 5.1 per cent in 2021 and 6.6 per cent in 2020, while rental rates have steadily increased.
In July, the average rent of a one-bedroom unit in Calgary was 27-per-cent higher than a year earlier, the second largest increase recorded in Rentals.ca’s national rent ranking.
As Calgary’s economy recovers, this situation is expected to continue. “Calgary is benefiting from the resurgence in oil prices,” Mr. Wong said. “That’s causing a push for some of the rentals in the downtown area.”
Yet, investors appear to be gravitating toward short-term rentals rather than taking on long-term tenants. Mr. Wong notes that short-term rentals offer the prospect of higher revenue than long-term rentals because of the higher turnover.
Duncan Haldane, co-owner of Your Key, a short-term rental management company based in Calgary, said short-term rentals offer property owners a higher rate of return, among other benefits, than long-term rentals.
“It is a way to create more value from their property,” he said. “When you look at a short-term rental, the economics are better than if you compare it to a long-term rental.”
The AirDNA data show that entire units listed on Airbnb and Vrbo brought in an average of $2,000 a month during the first seven months of the year, despite being occupied half of the time they were available – a 40-per-cent increase from 2019.
The average rent for units in the rental listing website RentFaster was about $1,700 over the same period.
In July, Airbnb listed Calgary as one of the most popular markets for long-term stays in Canada, alongside Toronto, Vancouver, Montreal and Victoria.
While July is the busiest month in Calgary’s short-term rental market, AirDNA data shows that long-term stays are changing seasonality trends. During the first seven months of this year, the monthly number of nights booked in entire units has been roughly 10 per cent higher than in 2019.
Short-term rental services have also faced criticism for disrupting local housing markets by reducing supply and driving up rents.
Researchers at McGill University published a study in 2019 that found Airbnb had removed 31,000 homes from the Canadian rental market. Airbnb has denied its service has a negative effect on the traditional rental market and said it works with local governments to follow regulations designed to control short-term rentals.
While municipal governments in Vancouver, Victoria, Ottawa and Toronto require all properties listed be the owner’s principal residence, effectively banning entire units from becoming available in the short-term rental market and affecting renters, Calgary is comparatively permissive.
In 2020, the City of Calgary implemented a business licence requirement for short term-rentals to ensure property owners follow regulations such as limits on the number of guests and recordkeeping.
Lindsay Tedds, an associate professor of economics at the University of Calgary’s School of Public Policy, said policies and regulations adopted by local governments should also consider the role platforms play in driving both the demand and supply of short-term accommodations.
Dr. Tedds said cities should adopt a “co-regulation” model, working together with short-term rental companies to ensure property owners are following local rules – rather than what she describes as a “hammer of Thor” approach that could stifle the market.
“The big issue is [that] the platform is not just an agnostic player,” Dr. Tedds said.
“It wants more and more ‘listers’, and more and more short-term renters. And so it’s always making sure that from their perspective there are sufficient rentals of sufficient type in certain areas, and then they want to drive certain renters to them.”
Still, Dr. Tedds rejects the idea that short-term accommodations in Calgary are undermining the traditional market, as according to her team’s research, between 2017 and 2021 the average number of short-term rentals available in Calgary has remained flat at about 2,500 units a month, including both entire units and shared accommodations.
“We’re not seeing this being a hollowing-out of the rental market,” she explains. “The tightness of the rental market cannot be subscribed to Airbnb, it’s a function of poor housing policy for 20, 30 years.”
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