Cortes Island Pioneers Tax on Short-Term Rentals to Address Housing Crisis


In a pioneering move to combat the adverse effects of short-term vacation rentals on rural housing availability, Canada’s remote Cortes Island has begun to impose a tax on such rentals, directing the funds towards addressing the pervasive housing crisis. Cortes Island, in British Columbia, is the first community in the province to redirect funds accrued from such a tax towards affordable housing initiatives.

Area director Mark Vonesch of the Strathcona Regional District notes a three per cent municipal and regional district tax (MRDT) that has been in effect on vacation lodgings since July. Collected by the provincial government, these funds will be assigned to the Cortes Housing Society, being utilized primarily for the development of Rainbow Ridge, a 24-unit affordable rental project. This marks the first occasion in the province’s history wherein such a levy, originally implemented with tourism advertising in mind, will be used entirely for housing.

The policy applies to rental proprietors making use of online platforms such as Airbnb or Vrbo and other short-term rentals generating more than $2,500 annually, even if they do not utilize internet booking engines. Platforms like Airbnb are set to collect the tax from vacation rental operators.

The picturesque island, home to just over 1,000 residents, mirrors the housing crisis faced by communities across Canada. Here, housing prices drastically outstrip the median incomes of residents, with a significant proportion of the population confined to poor quality, exorbitantly priced living conditions. Particularly affected are certain groups such as single-parent families, elderly residents, women, and members of the LGBTQ community.

In fact, during the peak tourist season, many locals are driven to take up temporary residence in tents, campers or cars due to their homes being rented out. Solely in 2021, almost 94 per cent of short-term rentals listed included entire dwellings, meaning these properties could not be inhabited by anyone else.

The scarcity of affordable housing has wider implications on both business and the community. Issues range from a dearth of labour to a graying population, as younger individuals and families unable to afford homes choose to relocate. However, tourism remains an essential facet of the island economy.

Despite acknowledging the role platforms like Airbnb play in exacerbating the housing crisis, Vonesch indicates that the new tax, while not a complete solution, is an important step towards addressing the problem. It asks short-term rentals and tourists to assist in mitigating the negative impacts of the tourism industry.

The tax is not only anticipated to be non-problematic for local bureaucrats and operators but also unlikely to affect tourism levels. Banning short-term rentals is not a feasible option. Instead, Cortes Island plans to explore further measures to mitigate the impact of vacation rentals, following the lead of the neighboring small tourism-centric communities.

For instance, Ucluelet, a small resort community on West Vancouver Island, has revised its bylaws to curtail the surge in online short-term rentals. Other destinations, like the tourist magnet Tofino, are also re-examining existing bylaws to determine how best to offset their impact on local housing.

However, enforcement of such measures remains a challenge; data is challenging to aggregate and operators often ignore regulations. It is reported that in 2021, short-term rentals removed nearly 14,000 units from B.C.’s long-term rental market, a notable two per cent of the province’s total rental capacity.

Despite these issues, communities are slowly implementing restrictive bylaws and business licence requirements. The Union of BC Municipalities is urging better accountability from online platforms and the development of local operator data collection and regulation.

As regional districts advocate for the ability to issue business licenses and increased fines for non-compliant operators, plans for new legislation on short-term rentals are currently under consideration. However, repeated calls for swift action have been made by the BC Green Party, indicating the complexity and scale of the issue at hand.


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