This post was written using a transcript from the above video. It’s been edited for clarity.
Gibsons to end short-term rentals
PAUL: At the end of July the town of Gibsons passed new bylaws that essentially eliminates short-term vacation rentals in the town, and these new rules will come into effect in January of 2023. But the end result is that in a few years there won't be any short-term rentals in Gibsons, and I'm wondering what are your thoughts on short-term and long-term real estate prices? Will this bylaw change affect the real estate market?
TONY: My first concern when I heard this is a lot of businesses rely upon tourist dollars, and if we're not building hotels, and the motels and hotels in the town are not being used for tourist accommodation because a lot of them are being used as long-term, low income accommodation, and they're eliminating vacation rental, what's the plan to build more hotels in areas which allow the short-term rentals?
TONY: But as far as a direct impact on real estate, from reading what came from the town, their primary goal is to limit short-term vacation rentals because they feel if they do that it's going to reduce house values and make it more attainable for local people to be able to get into the housing market. They also are making the assumption that without the ability to rent out a suite on a short-term basis, people are going to then go, “Oh, OK. Well, I'll rent it out long-term.” Which, in my opinion, is completely inaccurate and isn't going to happen.
TONY: That being said, I'd imagine that people that have short-term rentals like not having to deal with any of the issues that come with long-term tenants (tenants not wanting to leave or not paying rent). Owners that live off-coast and have a vacation home on the Sunshine Coast like short-term rentals because they get some revenue from it and they can use their property when they want. So there’s a lot of flexibility for them. Plus, on average, if you rent a property short-term, you make about four times the rent that you would renting it out long-term. That's why short-term rentals are so appealing to owners.
TONY: All of those people (I've already had five or six in the last few weeks) want to list their homes because they're not interested in renting long-term. They've done well, and so they're going to just sell the property to try to get ahead of these bylaw changes. An increase in inventory on the market, in addition to what is going on with interest rate hikes and the softening market, is only going to soften the market further so it's going to be good for buyers and not so good for sellers.
Secondary suites still desirablePAUL: If owners can't use suites as short-term rentals, but can still use them as long-term rentals, would that be attractive to buyers potentially wanting to buy those houses specifically because they have suites that can be used as mortgage helpers?
TONY: If you have rental revenue coming in a house, and it's a legal suite or there's some history there for it being rented out, then a lender would look at the potential revenue that comes in as revenue or income for the buyer and buyers may qualify for a higher value home because they've got that mortgage helper built in there. Inventory with long-term secondary suites coming on the market is going to be good for buyers that are not able to get into the market at current prices. In conjunction with the softening market, that's good news for buyers, and not necessarily great news for sellers, especially if the seller bought a vacation rental in the last year with the intent of using it as a vacation rental. Now they find out that they can't do it, or they've got to pay the $1,500 to apply for a license which they may or may not get.
Add to housing supplyPAUL: There's a lot to cover on the residential guest accommodation policy, or bylaws that the Town of Gibsons put out, and we'll leave a link in the description where you can download the summary the town put out.
TONY: Most of the people I speak to that have a short-term rental like it for the experience and they're not necessarily interested in renting it out. I think people that need that mortgage helper are going to definitely take advantage of it, but I'm not convinced that these bylaw changes are going to result in a ton of new long-term rentals, because that hasn't really been the problem as far as that goes.
TONY: Going back to what I originally said, I think business owners in Gibsons would be concerned that there isn't anywhere for your clientele to stay. I know the Garden Hotel has been filled up. The Ritz Hotel down in Lower Gibsons, that's being used for long-term monthly rental for mainly construction workers. And hotels up on North Road and Gibsons Way, they're rented out long-term to low income people. Without potential vacation rentals, where are the tourists going to stay? Is Gibsons pushing them up to Sechelt or to Pender Harbour, I mean, what's the plan as far as that goes?
PAUL: It's not like Davis Bay and Sechelt and Pender Harbour have tons of empty hotel rooms that are just waiting for tourists. The story on the Sunshine Coast, whether you're living here full-time or seasonally or you're on a vacation, there's just not a lot of places for people to buy or to rent or to holiday in.
TONY: (sarcastic) People I've talked to are very appreciative of the ineptitude of BC Ferries because they're limiting the amount of tourists that can actually come here and that's alleviating any strain on hotels or vacation rentals. So if BC Ferries keeps up the good work, this isn't going to be a problem because we're not going to have any tourists over here anyway, because they can't get here.
Principal residence redefinedTONY: I was reading the summary of regulations and frequently asked questions and I'm interested to get your take on what you think it means. The thing that jumped out to me was it seems the town has redefined the definition of a principal residence.
PAUL: That's my takeaway too. I don't have a vacation rental, I don't have a secondary suite at my home, so this doesn't really impact me. I only listened casually when the debate was going on, and my very basic understanding of what the town was talking about was that vacation rentals would be allowed in your principal, or your personal residence. But when I read the summary from the town, it reads that the bylaw redefines what is considered a principal residence in Gibsons.
TONY: I’ll give you an example and you tell me what you think will happen. Let’s say I own a house in Gibsons’ Bay area (I don’t but just pretend that I do). In this hypothetical example, I've got my primary house that I live in, but I also have a coach house in the back that I use as a short-term rental to earn some additional income. Family might use it when they visit, but most of the time it's rented out on a nightly basis. Is this bylaw change going to affect me?
PAUL: My understanding is that it will. My understanding is that you cannot have vacation rentals at a residential residence anymore. In the next five years, the Town of Gibsons will phase out the number of vacation rentals with the goal of there eventually being none. In the town’s summary of regulations, there is a section where they show floorplan examples and they talk about the specific example you just mentioned. The example shows that if you're living in a property where the house is your primary residence and you also have a laneway house as a separate structure, that laneway house needs to rented to a long-term tenant. If you want to operate a short-term rental, you’ll be limited to renting out bedrooms in your house.
PAUL: In this example, Gibsons says there are two principal residences on your property. The house you live in is your principal residence and the laneway house would be a principal residence for a long-term tenant. That's my understanding of it, and maybe I've got it backwards, but I've been through it three or four times and I think I’ve got it right.
TONY: That's also how I read it. It also looked like if you have your house that you live in, so you're physically living in a house and there's a suite downstairs, whether it's legal or illegal, what I got from this is that you can apply for a temporary use permit to be able to rent out the suite in the primary residence, but they look at where you live and the other suite both as primary residences, even if that secondary suite is not a legal or conforming suite, that still would be considered a primary residence, and if they came to inspect that they would turn a blind eye to the fact that it was an illegal suite and grant you permission to rent that out for a temporary basis for Airbnb.
PAUL: My interpretation of this is that that's largely right, that I think for minor infractions they would turn a blind eye, but something major I think that they would say, no, you can't have anybody live down here at all on any level. But I think for small infractions, I think they’ll turn a blind eye.
TONY: Knowing the Town of Gibsons, and knowing they are limited as far as employees, and there aren’t a lot of bylaw offices, what's your understanding on how this is going to be enforced?
PAUL: My understanding of how this is enforced is that you will apply for your permit from the city, they will give you a license number, and wherever you advertise your short-term rental, you'll have to include the license number. I'm guessing that it'll be for other people to tattletale to the town and say, "My neighbour is renting a house and he doesn't have a permit number on his advertising.” Like you, I don't know that there's enough manpower for the town to actively police this bylaw. Maybe they're going to hire somebody full-time to do this for the next five years.
Remote owners may decide to sellTONY: In a real estate context, this means that more than likely there'll be a lot of off-coast remote owners that won’t be interested in renting the property out long-term. And if they’re counting on using revenue from short-term rentals to service a mortgage, we’ll likely see quite a few of these type of listings coming on the Sunshine Coast real estate market in the next six months or so. Owners that want to get ahead of the market might even choose to list in the next couple of months.
TONY: If you’re a buyer looking at one of these properties, you want to beware and make sure that you're working with a local agent that understands the local zoning, and probably putting a subject on the offers to check out what the zoning is, and what you're allowed to do and what revenue you can be expecting to get. I'm sure there are a few owners out there that recently bought properties expecting to be able to use it as a short-term rental and didn’t dig into this as much as they should have. Now they’re faced with not being able to get that revenue and they're probably going to have to adjust their plans a little bit.
Temporary Use Permits and feesPAUL: That's my understanding of the purpose of the temporary use permit (TUP). TUPs will be approved case by case - applying for a TUP doesn't automatically allow you to rent out your unit. It sounds like applications will be considered on a case by case basis, and I'm imagining the scenario that you explained will probably get preferential treatment. Maybe an owner says, “I bought this house and I didn't do the homework I should've, and this bylaw change will bankrupt me if I'm forced to sell, and I can't afford to pay the mortgage renting it out long-term.” I'm guessing that's what this TUP is for, to allow owners to extricate themselves from the situation somewhere in the next one to five years.
TONY: And you said that recently it was $100 licensing fee to be able to run an Airbnb. But the people that have applied for that license in the past are now being contacted by the Town of Gibsons. The town is sending them letters explaining the situation to them?
PAUL: Exactly, explaining their options to them. My understanding of it is that to apply for one of these TUPs, it's a $1,500 non-refundable application fee, whether you’re approved or not.
TONY: (sarcastic) Quite reasonable then, very reasonable. It's got to be an hour's worth of work.
PAUL: Applicants will pay the $1,500 fee, and if the town does issue you a TUP, my understanding is that the business license for you to operate it for a year is another $2,000 and then $2,000 for your second year. By my math, that would be $5,500 for you to run a short-term rental in the next two years.
Sharing space with vacationersPAUL: I keep saying short-term vacation rental, but Gibsons changed the name of short-term rentals to Residential Guest Accommodations (RGA) in this new policy. With an RGA, you’ll still be allowed to rent short-term to guests, but only if they're sharing your space. That means if you had a short-term guest, they're going to share your living spaces. Things like your kitchen and your living room and maybe share a bathroom. My understanding is that kind of short-term rental will be allowed indefinitely. What will not be allowed is to have a short-term rental with a separate entrance and a separate kitchen and separate bathroom.
TONY: Because the town wants that housing for long-term rentals.
PAUL: That's right.
TONY: And the town’s belief is that if owners can't get revenue from short-term rentals, they’re going to rent to long-term tenants instead, thus created more rental housing supply.
PAUL: That's my understanding.
TONY: If owners don't do that, then they're going to sell their home and that home becomes an entry level house for buyers that can't afford to buy the house without the long-term rental revenue that the suite will allow them to collect. We’ll see if it works.
Market outlook for SeptemberPAUL: August was a hot month on the Sunshine Coast temperature-wise, but I think the opposite was true for the market, it was relatively cool.
TONY: Cool, very cool, yeah, yeah.
PAUL: And what do you see going into fall, will that carry over?
TONY: Yeah, the last two weeks has been trying to pick up. The ferries and the cancellations and the mechanical issues and staff shortages, and all of that stuff has limited the amount of potential buyers that are able to make the trip to the Sunshine Coast. In the last week I've noticed things have picked up. Two properties I'd listed went to multiple offers. A couple of listings have had initial offers and backup offers come in. There seems to be a lot more interest in getting into the market. What I think is happening is that people finished their vacations and now they're back to thinking about real estate. There’s also the threat of a couple of large interest rate increases coming before the end of the year, so maybe people are biting the bullet and jumping into the market.
TONY: We are seeing still a lot of price reductions, and the properties that have adjusted for the softening market are selling, so our local Sunshine Coast real estate market is seeing a bit of a rally. I think we'll probably be busy in September but then we're going to be a ghost town in October. Depending on what's happening with the economy, and everything else that's going on in the world, if a ton of inventory comes on the market, I think we'll move into a buyer's market next year. Then we’d see how long it takes to turn around coming out of that. But I think it's going to be good for buyers for the next at least the next 18-ish months.
Advice for sellersPAUL: In September, if somebody called you to sell their home, what would be your advice to them?
TONY: (joking) I'd ask them why they want to sell. Depending on their answer, I'd ask them what took them so long. “Aren’t you listening to my podcast!?” The three people that watch this, I've already sold them all homes! It's crazy.
TONY: No, I'd want to know why they're trying to sell, and providing it's a lateral move, or they've got a reason to sell, I'd give them comparables and say, "This is where the market's at and we should probably be a little bit ahead of that, so we want to price it sharply and get it listed." A lot of sellers say, "Well, I want to fix this, I want to do that, I'm going to paint this, I'm going to do that." And yeah, maybe if the house was painted, or it was in better shape, or had a new roof on it, you could get more money for it. However, if you spend three weeks farting about with the property and the market's dropping out from under you, you've just wasted that time and that money.
TONY: If you need to sell, get your home on the market as quick as you can, price it appropriately, and it will sell. Don't chase the market down, don't overprice it, don't leave negotiating room. Don't think people are just going to make an offer, because even in a market like this you've got to be a pretty aggressive buyer, to offer $795,000 on a $1,000,000 home. Buyers will assume that sellers will be offended and take that offer personally, and despite what most Realtors will say, sellers do take it personally. Sellers need to make their homes attractive enough for buyers to go, “You know what? We're going to be in a recession next year, but I'm going to buy this house anyway.” “You know what? I can't rent this house out short-term, but still I'm going to buy it.” Sellers don't want to be trying to get too much juice out of it at this point.
Strong long-term rental marketTONY: And if you don't have to sell and you're happy renting to long-term tenants, the Sunshine Coast, BC has a strong, long-term rental market. You could do quite well. If you go that route, know that the nightmares and problems and everything else that come from people having a horrible experience with long-term tenants, that really comes from their own laziness. Owners will have a tenant and when that tenant leaves, he recommends a friend as a new tenant. Then that guy moves out and recommends his friend. Now you’re three tenants in, you have no relationship with your tenant, you’ve done no credit check, no screening has been completed.
TONY: Hire a property manager if you're going to rent your home out long-term, even if the property manger just screens tenants and sets up the first lease. It's money well spent. And if you don't do that and you end up with a bad tenant, then it's your own fault. Landlords can't say all tenants are terrible because they don’t take their landlord responsibilities seriously. A property manager can make sure that applicants have decent credit, because if your tenant has decent credit, they'll probably pay their rent. If they've got terrible credit, what bill do you think they’ll not pay first? It's probably going be your rent.
PAUL: One thing I will say about being a landlord is that a lot of the tenant horror stories we hear are representative of a small fraction of tenants. The vast majority of tenants are very good. They do everything they can to pay their rent on time, they want to pay their rent on time, they want to be good neighbours and good community members. But that very small percentage that's bad is so bad that it overshadows all the good tenants. I rented out a lot of homes for a lot of years, and I can count on one hand how many times I actually had to evict somebody. Overwhelmingly my experience with renters was good, but I can see where somebody has a bad experience and gets burnt and doesn't want to be a landlord again. And if you’re investing a million bucks on a house, it's a lot of money to spend only to have to deal with one of these heartaches, even if it's a small chance that it actually happens.
Advice for tenantsTONY: And the other thing I’ll suggest to tenants is if you're living in a house, and you have a rental agreement, resist getting a dog, or resist getting the second cat. Resist letting people store stuff at your place. Resist letting family members live with you without letting the landlord know. Because if something does happen where you’re living and you have to move, it's going to be way, way, way, way harder for you to find another rental if you have more pets and more roommates than you did at first. The rental landscape is so competitive and if you try to rent a new home and you've got all these strikes against you.
TONY: Ideally, if you can, save up and try to get a down payment together. Obviously that's not achievable for everyone, but if you are renting, just keep in mind that you're renting and that you may have to find a new rental in the future. I see a lot of tenants end up in that situation, and the heartbreak of having to give up pets or move off the Sunshine Coast is devastating.
PAUL: The market for rentals is so tight right now that it seems unfair to a lot of tenants that they have to compete for housing by limiting how they want to live. But the truth is that there are dozens of applicants for homes, and the landlord is going to take the person that they think is going to put the least amount of wear and tear on the property and has the best chance at consistently paying the rent. You need to do everything you can to put yourself in a position that you're in that top 1% of rental applicants.
Advice for buyersPAUL: We talked about advice for sellers. What would be your advice to buyers?
TONY: (joking) Buyers, if you see a True Blue Realty Tony Browton listing, just get in there, offer full price with no subjects!
TONY: Actually, I'm selective with the buyers that I work with and normally refer buyers to other agents. I am still involved in the process, but I'm not necessarily driving them around to properties. There is a lot more selection for buyers right now and I would suggest that they should feel pretty comfortable in having subjects on offers now. Inspections are commonplace, septic inspections are commonplace. In the frenzy of the last couple of years, everyone was going in subject free.
TONY: Working mostly from the seller side, I've had a lot of deals fall apart because of financing over the last few weeks. I think some buyers don’t understand lending stress tests, or don’t even take the time to get pre-approved in the first place. Some buyers tell their real estate agents that they are pre-approved when they’re not and Realtors need to do their due diligence to make sure that their clients actually are approved.
TONY: What I recommend to the buyers’ agents I work with is that they get a buyer's agency signed. If buyers aren’t committed to writing an offer with you, you can’t be committed to working with them. I also suggest buyers agents verify with a mortgage broker what their buyers are qualified for. Operating in good faith Realtors can't take someone out that can afford $300,000 and show them a million dollar home. Realtors need to know what their clients can afford and if there's any limitations. If buyers have an approval that expires on a certain date, their agent needs to then talk to their client’s mortgage broker and get that updated so that they know what they can buy when they close. It's really important.
TONY: But my main advice for buyers is to enjoy this market. It's been horrible for you for the last couple of years, so enjoy it, but do your homework and make sure that you're prepared should you come across that perfect home. Because if you're out there looking at homes and you haven’t gotten pre-approved, odds are you're going to fall in love with a house only to discover you can’t afford it. Even if you get your offer accepted, you end up having to step away from the property, and then you'll end up comparing that house to every house you look at afterwards. That’s a nightmare for buyers and buyers agents.
Tony’s September 2022 listingsPAUL: Tony, can you give us an idea of what listings you have coming on stream here in September?
TONY: Very excited to say we're going to be selling Phase Two of EagleView Heights starting mid to late September. That's 24 units coming up with beautiful panoramic views. Phase One was the most successful pre-sales that the Sunshine Coast has ever seen, so hopefully Phase Two continues in that vein. There are two units down on South Fletcher in the Cote building, and they're going to be move-in ready, I believe, at the end of September. And I think the Driftwood project is going to be up and going again, we're looking at end of October for that. Lots of nice condos that are available for either pre-sale or are move-in ready. All of those units are geared towards our bigger buyer group, which is the retiree set. I'm excited to have that stuff come online.
PAUL: The Cote has covered parking and there's an elevator, if I'm not mistaken.
TONY: Yeah, there are four units in that building. The top two are under contract, but the ground floor and the middle floor are available. Each unit gets one dedicated parking spot, there's some visitor parking inside, street parking on South Fletcher. Beautiful views for those units, and a great location where you can walk to all the restaurants and shops and amenities that Lower Gibsons has to offer.
PAUL: I was in the ground floor unit. You’d think it wouldn’t have a view, but wow, you've got a really nice view even on the ground floor.
TONY: (joking) Yeah, I got, actually the RCMP sent me the video footage of you sneaking around. That's how we met.
Darkhorse town council candidatesTONY: Going back to the town and the bylaw change and that kind of stuff, I’m interested to know what council's plan is. If they plan to loosen up zoning, or add more tourist accommodation zoning, or if there are any plans for a hotel. The George was going to be a new hotel but that seems to be stagnated. I'm interested to see if there’s a plan for once short-term rentals are eliminated in the next five years.
PAUL: We're moving into an election in October, so maybe we will have some fresh blood that has a new plan for what to expect from the town in the next four years.
TONY: (joking) Yeah. Johnny Fairmont might be running. Or Mark Ritz. Who knows? Barry Hilton! Barry Hilton for mayor of Gibsons!
PAUL: (laughing) Do you want to end on that?
TONY: Yeah sure, that's good.
CALL TONY TODAY
If you’re not already working with an agent, call me when you’re ready to buy or sell and I’ll guide you through the busy and competitive real estate market on BC’s BEAUTIFUL Sunshine Coast.
Tony Browton - TrueBlueRealty.ca
Personal Real Estate Corporation
RE/MAX City Realty (Gibsons)
Email: Click here to email Tony
Personal Real Estate Corporation
RE/MAX City Realty (Gibsons)
Email: Click here to email Tony
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