JOANNAH CONNOLLY (REW) The strict new regulations on short-term rentals – such as AirBnB, HomeAway, VRBO etc – were announced last week by Vancouver mayor Gregor Robertson and approved by council this week to go to public hearing in the fall.

To recap briefly, the new rules ban short-term rentals on investment properties, second homes, secondary suites and laneway houses. Only those homeowners and renters out their principal residence – whether a room or the whole residence (if the owners are away) are permitted to use short-term and vacation rental services. Those doing so will be required to get a $49-a-year business licence from the City, and non-homeowners will need permission from their landlord to get a licence. There will also be a transaction fee applied as a tax for the City.

Somewhat amusingly, the City is positioning its new measures as more lenient than the current status quo, since strictly speaking, all short-term rentals of less than 30 days are currently prohibited in City bylaws. However, this rule has not been in anyway policed or enforced, whereas the new rules certainly will be when they are enacted, which is scheduled for April next year.

And for most people who rent out their units on a short-term basis at the moment, the new rules will certainly feel more onerous. Sure, it’s fine for those homeowners with a spare bedroom or two who are supplementing their income with short-term visitors. They’ll easily be able to get a licence and continue to run their little business.

But what about those people who genuinely rely on short-term rental supplementary income, who will be prohibited under the new rules? The City’s proposal document, presented to and approved by council Tuesday, helpfully lays out several scenarios in which short-term rentals would be allowed… or not.

One example is clear. “Dev” has an investment condo that he doesn’t live in and he wants to rent it out short-term as it makes way more money than long-term renting. No way, Dev – this is exactly the kind of unit that the City – rightly – wants to see in the long-term rental pool. Even I, as an owner of an investment unit myself, can see this is fair.

But a more questionable example is the couple (“Rick and Andy”) who built a laneway home on their property for family and friends to stay in, but want to rent it short term when they have no guests – especially now that they are retiring and have more time to run it as a business. Tough luck, Rick and Andy. You have to rent it out long-term, make way less money to supplement your meagre retirement income, and your family and friends will just have to stay at the exorbitantly priced nearby hotel, or in a room in someone’s house. Serves you right for building a home that someone could live in – it belongs to the people now.

The City of Vancouver’s reason? “Laneway homes are very important to Vancouver’s long-term rental stock, and should be rented for 30 days or more.”

What about “Marissa”, who short-term-rents out her rented apartment when she’s away, without her landlord’s knowledge? Tut-tut, Marissa. You’ll have to stop that, and get your landlord’s permission in order to secure a business licence. Which, of course, no landlord in their right mind will grant. As a landlord myself, the idea of a parade of tourists staying in my Vancouver studio when my tenant is away, vetted only (or not) by my tenant, give me the shivers. Not a chance, Marissa.

And the City does not set out this scenario, but let’s say “Jon and Sara” have a finished basement in their home, or perhaps a nanny suite in an apartment or townhome. If it has a separate entrance and can be locked off, then bad luck, Jon and Sara. Long-term renters only for you. But if it’s part of your house and the bedrooms just happen to be in the basement, no problem – AirBnB away.

Which of course will presumably lead to a whole bunch of people either a) lying on their licence application forms about whether their suite is locked off, or b) removing locks, and facilities such as full kitchens, from suites so that they are arguably no longer secondary suites and become eligible.
(Side note: I’m not sure that if I’m inviting strangers to stay in my home that I would want to be removing the locks, but I guess it’s still OK to put locks on your own residence’s doors…)

My point? With the possible exception of Marissa, who really should be transparent with her landlord, these are people who own their homes, should be able to do with them what they like, and oftentimes bought them with the expectation of being able to supplement their incomes. And most of the units in these regulatory grey areas will not end up in the long-term rental pool. Rick and Andy will probably keep their laneway home for exclusive use by visiting friends and family, thereby removing an affordable short-term rental option from the vacation market. Same goes for Jon and Sara’s suite. And they won’t even have to pay the Empty Homes Tax, as properties with multiple units such as these are exempt if one of the units is the principal residence.

The City’s hope that around 1,000 units will be freed up for long-term rentals is, I believe, highly optimistic. AirBnB itself agrees, with Alex Dagg, public policy manager, saying recently, ““We think there is a mistake or assumption here that all of those units will be placed in the long term rental market. We don’t think that is the case.”

What’s more, city staff expect that the cost of implementing and operating the rules will be $1.644 million in the first three years, and that it won’t break even (through licence fees and taxes imposed) until 2024.
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Will it be worth it for a few hundred new rental units?

CRAIG WONG (FINANCIAL POST) The Bank of Canada has raised its key interest rate as expected to 0.75 per cent — the central bank's first move upward in the cost of borrowing in seven years.

The bank's target for the overnight rate — at which major financial institutions make one-day loans to each other — moved up by one-quarter of a percentage point from 0.50 per cent.

In a statement accompanying the rate decision, the central bank said the Canadian economy has been robust, fuelled by household spending.
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"As a result, a significant amount of economic slack has been absorbed," the bank said, adding that the remaining slack is expected to be gone around the end of this year, which is earlier than the bank anticipated in its April Monetary Policy Report.

The move means consumers will likely pay more for borrowing such as variable-rate mortgages and lines of credit. 

In the wake of the rate hike, the Canadian dollar shot up. The loonie was up 1.05 cents at 78.48 cents US as of 4:33 p.m. ET on Wednesday. The daily average exchange rate for the Canadian dollar on Wednesday was 78.16 cents US, up 0.76 cents from Tuesday's average.

The interest rate increase had been widely expected after senior Bank of Canada officials signalled in speeches and interviews over the past weeks that lower rates had done their job, and the Canadian economy was performing well.
Speaking at a news conference on Wednesday in Ottawa, Bank of Canada governor Stephen Poloz acknowledged that the bank raised its key rate despite inflation currently lagging below its stated target of two per cent. Poloz said the bank considers that weakness in inflation to be temporary.

"It is worth remembering that it can take 18 to 24 months for a monetary policy action to have its full effect on inflation. This means that central banks must target future inflation by anticipating future deviations from target."

"It is about where we expect inflation to be," Poloz told reporters.
The bank is currently expecting a "modest overshoot" of the two per cent inflation target in 2019.

More increases seen coming
RBC chief economist Craig Wright thinks the bank's move signals a turning point to a longer-term trend in rising interest rates.

"I think it's the Bank of Canada having confidence that the breadth and durability of the expansion in Canada can sustain these small increases in interest rates," Wright told CBC News Network.

'We're going to see more [rate hikes] as we move forward, assuming growth holds up," he said.Sherry Cooper, chief economist at Dominion Lending Centres, said she expects another rate hike in the fourth quarter of this year.

"The Federal Reserve will also likely increase rates in [the fourth quarter]," Cooper said in a release. "Look for a slow crawl upward in interest rates from both central banks in 2018."

The economy "can handle very well this move we have today and of course you need to preface that with an acknowledgment that of course interest rates are still very low," Poloz told reporters.
"People need to understand that in the full course of time I don't doubt that interest rates will move higher, but there's no predetermined path in mind at this stage."

Any future changes to the central bank's key interest rate will depend on economic data in the months ahead, he added.

The bank's next decision on interest rates is scheduled for Sept. 6.

Performing well
The Bank of Canada hadn't increased the overnight rate since August 2010, when it nudged it up to one per cent. After Poloz took over as governor of the bank, the rate was lowered twice in 2015 to 0.5, where it remained until Wednesday.

With the economy performing well, the bank has also nudged up its forecast for growth this year. The bank said real gross domestic product (GDP) is now expected to grow by 2.8 per cent in 2017, up from the April outlook of 2.6 per cent. 
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The central bank said growth is expected to moderate over the next two years, coming in at two per cent in 2018 and 1.6 per cent in 2019.