Co-authored letter from Bear Country and Top of the Mountain To Municipality Council To Protect Short Term Rentals and Tourism

December 1^st 2017

Dear Members of Council,

This is a co-authored letter from Reiner Brecht of Bear Country Property Management Ltd. and Cage of Top of the Mountain Accommodations & Management Ltd. (TOTM). Reiner and I have spoken at length and in detail about the topics in this letter and while we are aggressive competitors in the nightly rental market, we put aside our differences to draft this letter because we are both concerned about the actions the municipality is taking with regard to short term rentals that we feel will harm Sun Peaks Resort in both the short and long term.

Collectively, we represent approximately 300 property owners who have invested in Sun Peaks and based on conversations we've had with many of them, they feel as strongly about this as we do. We are very concerned about the municipality taking actions that will diminish the amount of inventory available for nightly rentals by either limiting spot zoning options anywhere in the village, or by enforcing zoning bylaws in strata complexes that have never previously been enforced.

We know that the municipality is trying to be responsive to their constituents who are complaining about noise issues, abusive guests, parking problems and bylaw enforcement and feel strongly that actions must be taken. We agree that action must be taken. This letter offers suggestions we hope you will strongly consider before proceeding.

Sun Peaks has no other significant industry but tourism. Therefore, all council decisions must first consider the impact of their actions on tourism. While the markets are strong currently with demand for nightly rentals at all time highs summer and winter, any reduction in available inventory currently may cost us heavily in the long run. Would you be considering these same actions in 2008?

In this letter we hope to address all the arguments we can think of for why you might be enforcing strata zoning bylaws that block nightly rentals or limited the numbers of single family homes able to apply for spot zoning. We will argue that doing so may be ineffectual in addressing the problems you hope to resolve, and may have long term detrimental impacts on Sun Peaks Resort's ability to compete with other resorts in the event of a recession or worse.

But before we address the arguments we think you're trying to solve, we want to express our concerns about the impact those actions will have aside from whether those actions will even solve the problems you're hoping to address. We believe that the risks vastly outweigh the benefits, that disruptive changes in technology make them impractical and impossible to enforce and that they will unfairly penalize some to the benefit of others.

Major Risk #1: - You will cause nightly rental price increases, reduce the number of guests to the resort, and alienate existing customers.

There is currently insufficient accommodation during much of the winter, especially at peak demand periods like Christmas & New Years, Wine Festival, all of February, some Spring Break and Snowbombing. The shortage is particularly true for larger groups who want to stay under the same roof that would typically rent chalet homes.

Every guest turned away will simply find another resort able to accommodate them. It's unlikely they will decide not to go skiing or snowboarding because Sun Peaks has no room for them.

If you reduce supply through your actions, existing supply will increase their prices. This may feel like a boon to those able to charge exorbitant rents, but the impact on guest satisfaction will have long term impacts. We're already hearing from guests that our prices are too high by comparison to other resorts but they are booking anyway because the economy is strong.

Each guest we turn away today may make a habit of going to the other resort in the future. How many guests do we now count as regulars that we've stolen from Whistler and other resorts? Lets not send them back!

Shortages of availability, increased prices and the alienation of potential guests are all predictable outcomes of diminishing the supply. It's already occurring right now and your actions will only exacerbate it. Reiner and I have spoken to many home owners frozen out by your moratorium on spot zoning this fall. How many potential guests were lost by this decision made too quickly and without warning to those intending to rent?

Major Risk #2: - Technology is disrupting city planning and forcing change globally and your actions run counter to this rising tide.

In the years since many antiquated bylaws were adopted, the Internet has disrupted concepts of home based business and made it possible for homes to become nightly rental revenue generators. Before the Internet in general and AirBnB like technologies in particular, it was practically impossible to rent a home for a few days efficiently (and safely) and it may be for this reason that a “month” has been viewed as a logical period of time for renting. However, in truth, the renting of a home for a week or a month is only different in period of time.  They're both simply commercial transactions, contracts exchanging access to a property for money. And yet, in Sun Peaks, short term rentals provide significant financial advantages to home owners and efforts to block them will be stymied by advances in technology.

Vancouver recently passed bylaw amendments legally allowing nightly rental to take place in a vast number of homes for a $49 licensing fee. (read NY Times article). There are limitations on which homes can be rented and why, but they're trying to solve different problems than our council was when they began spot zoning at a price of $1,500 per property. Our municipality was on the forefront of trying to respond to changes brought on by technology, but many owners may now be feeling your approach is clunky, costly and inefficient compared to the solution Vancouver has come up with. Imagine if Vancouver council members must sit through three readings for each home seeking to rent short term through AirBnB as our council currently does.

Meanwhile Toronto's Acting Chief Planner and Executive Director, City Planning Division has recommended a zoning bylaw change to allow short term rentals as follows (See PDF):

“This report recommends the adoption of a city-wide stand-alone zoning by-law and zoning by-law amendments to all applicable general zoning by-laws to permit short-term rentals.”  Further, “The proposed zoning by-law and zoning by-law amendments will permit short-term rentals across the city in the principal residence of any owner or tenant in residential and mixed use zones. Within their principal residences, people could rent: up to three rooms within a dwelling unit; the entire dwelling unit; and one lawful secondary suite.”

So while these two major cities with vast economies are taking steps to broadly allow short term rentals, Sun Peaks, who's only economy stems from tourism, is considering diminishing it's supply? Will it even be possible to block owners from renting nightly if they are stealthy and make agreements with renters to lie about the nature of their stay? Ultimately, owners who bought only because they could cover expenses with short term rentals may have little recourse but to ignore the rules and force the municipality to prove their cases in courts as fines go unpaid.

Major Risk #3: - Your actions will artificially impact property values throughout the resort benefiting some at the expense of others.

First off, to begin enforcing zoning bylaws to block nightly rentals in strata complexes and private homes seems incredibly unfair to owners who purchased at a time when these bylaws were not being enforced. Sellers and realtors had no certainty about what and when this might happen or if it would ever happen and so naturally would not discourage sales by warning potential buyers about something so uncertain. Our resort has been built on the backs of home owners who first purchased these properties, then on the tourists these homes could accommodate. If these bylaws were enforced from the beginning, would the resort even exist?

Some owners unable to rent will struggle to pay their mortgages without the help from nightly rentals and will put their homes on the market to sell. We don't think it's an unreasonable estimate to say that 90 percent of Sun Peaks homes and condos are owned by people who are not full-time residents. This ratio will likely hold for potential buyers until Sun Peaks has other industries besides tourism to support a local economy. Why would someone unable to live here want to buy a house they couldn't rent to visitors when they aren't using it? Even if they don't plan or need to rent it, not having that option will be considered a disadvantage. With a diminished number of potential buyers compared to those who will prefer the option, prices will be forced downward.

Reducing short term rental inventory by enforcing zoning will increase the property value of those homes in the tourist zoned complexes. While this will seem a boon to those owners, the enjoyment may be short-lived if the negative impacts on guests mentioned above arise when the business cycle eventually returns us to recession conditions. In any case, does council really want to punish some home owners while benefiting others?

Some owners will be forced to choose monthly rentals to make ends meet. Since winter is the only time the demand is sufficient to generally attract renters, they will no longer be able to enjoy their own homes to ski. How unfair and unpleasant it will feel to many home owners who will be unable to both afford their home and enjoy the resort that caused them to buy in the first place. Surely, many of these will sell their homes in frustration. What will be the impact of a growing number of angry former home owners on tourism at Sun Peaks?

Summary of Major Risks:

We hope the risks we've outlined above and the futility of trying to impede change generated by technology will be sufficient to cause you to abandon the plans to diminish nightly rental supplies at Sun Peaks. Major cities like Toronto and Vancouver are broadly allowing short term rentals and if we don't do the same, the other resorts we compete with will reap the benefits of our contractive policies. If Sun Peaks generally has a surplus of rentals, home owners will be motivated to compete more aggressively for visitors. That activity, while generating lower returns per sale, will generate higher overall returns for the resort and set Sun Peaks up as the resort of choice when the business cycle brings back a recession and consumers think very carefully about spending their money.

What are the problems the resort is trying to solve?

Both Reiner and I feel that some action needs to be taken to manage the growing problems generally associated with increased nightly rentals throughout the resort. But taking action means thoroughly understanding the problems we intend to solve. Below we outline the most pressing issues we think the council is trying to address and then further down, we respond to each of these in turn with counter arguments and proposals for how they might be better solved. We don't address the issue of parking even though at times it may be a significant issue because the solutions are likely straight forward using fines, towing, and wheel locks. In speaking with other residents and our owners, we feel the following three issues are likely the key factors council hopes to resolve by their actions.

• Reduce noise complaint problems in residentially zoned areas?
• Increase Monthly rental availability usable for staff housing?
• Respond to pressure from special interest groups to enforce bylaws that will make future development more profitable.
  

Problem #1: - Council wants to reduce noise complaints and trouble guest problems in some areas zoned for permanent residents.

When guests stay in properties rented for short periods of time, they are often inclined to celebration. If they drink, they can be hard to reason with and disruptive to neighbors. At the town hall meetings in October and since, we've spoken to many locals like those on Lookout Ridge who feel strongly about the need to solve the noise and problem guest issues they feel are caused by short term rentals.

However, noisy and disruptive people are not the exclusive domain of nightly rental guests:

Monthly rental tenants can be every bit as disruptive. A household of young people here for a season working on the mountain can cause every bit as much noise as nightly guests, and monthly renters have considerably more rights and are harder to evict than nightly guests.

Home owners can be disruptive. One owner of a TOTM property was responsible for three late night noise complaints on two different occasions called in to me by the full time renter downstairs.

The worst noise complaint issue TOTM responded to in the past several years was caused by a friend of a Bella Vista home owner who was on a boys' weekend out. He was staying at the house for free and disturbed neighbours on both sides until 4 AM the night they arrived.

On Nov 27 2017, the municipality supplied us with a copy of all officially registered noise complaints recorded (see PDF). Since 2015 there are 30 complaint records. Since Jan 1 2015 Top of the Mountain has taken slightly more than 3,800 bookings. However, of those 30 registered complaints only two were attributable to TOTM properties: 4102 Sundance & 2215 Sunburst (4131 Douglas was not managed by us at that time). With two complaints in 3,800 bookings it's clear mathematically that my short term customers are not a significant source of the problem.

Naturally, we know that more noise problems occur than are officially registered, but the reason Bear Country and TOTM have so few registered complaints even though collectively we represent a huge portion of the market, is because we have 24/7 on mountain support and the neighbors of our properties know who to call to solve these issues. We also ensure our guests know the rules and are aware of consequences of misbehavior.

A final note about the list of complaints lodged officially since 2015. It's not clear which of these complaints were generated by nightly rental guests. Several of the Burfield properties are likely from monthly. Several others are in the village and not associated with properties. Based on TOTM's statistics alone it would seem ludicrous to a statistician that the municipality is looking to take any actions to curb short term rentals to solve 2 noise complaints in 3800 bookings.

Solutions to Problem # 1:

Nightly rentals have been painted as the cause of noise problems but the arguments above should throw that assumption into some doubt. They are part of the problem when mismanaged, but reducing the supply of nightly rentals will not solve the problem.

All homes being rented must be licensed and supply 24/7 on mountain support phone numbers. A single official page containing the name and phone number of emergency after hours contacts for all nightly rental licensees will diminish the frustration of neighbors who don't know who to call to get support. Rather than have the first call to a bylaw officer, someone who is related to the rental should be alerted and be able to respond in 15 minutes or less. If the noise continues, a call to the by-law officer could generate fines for the perpetrator and licensee.

You must ensure rental homes are properly managed. This is not a self serving argument from two of the most successful property managers. We are not suggesting that all home owners hire a company like ours, but they should ensure they conduct themselves similarly to us to get similar results. We invite council to discuss with us some policies licensees could be educated about to reduce the noise complaints of their guests and ensure neighbors know exactly who to call when problems arise.

We have spoken to many of the most vocal local residents seeking to block nightly rentals and in every case, their frustration would have been significantly mitigated or outright resolved if they had been able to call someone at the time who had the power to fix things. If the frequency of these abuses could be curbed significantly, the sense that there is even a problem might not exist.

When the municipality rolled out the spot zoning bylaw changes, they didn't simultaneously roll out a system to ensure residents disrupted by guests staying at a newly zoned home could make a single call and get a resolution. If your goal is to resolve noise complaints and troublesome people impacting their neighbors, you must increase policing and penalties. We believe that if you change nothing whatsoever but policing and penalties and do it effectively enough you would virtually extinguish complaints from locals who almost unanimously are very supportive of the need for tourists to have places to stay in Sun Peaks.

Problem #2: - Council hopes to increase the supply of monthly rental properties for the staff housing needs of its businesses:

As businesses needing to accommodate our seasonal staff, both Reiner and I can attest to the difficulty in finding monthly rentals. We've also heard many other businesses express concerns about staff housing. One of the responsibilities of any municipality is to ensure there is accommodation for the work force of its economy. Vancouver's bylaw change allowing AirBnB rentals also limits some types of rentals in order to deal with their affordable housing shortage. While the zoning attached to many strata complexes at Sun Peaks were originally designated to ensure housing would be available, the fact that many home owners have done short term rentals instead has contributed to this shortage.

However, Sun Peaks is not a 365 day resort and trying to make some home owners responsible to solve this problem for everyone is unfair and financially punitive:

If a property owner can earn considerably more revenue from short term rentals with less wear and tear and utility usage than from monthly rentals, it's financially unreasonable to expect them to do otherwise. And since bylaws were never enforced in the past or at the time of their purchase, expecting those owners to bear the responsibility of solving the staff housing crisis is unfair and punitive.

Consider the frustration of property owners who may no longer be able to afford their homes or sell them because of a diminished demand and therefore are forced to take on monthly renters providing less income and greater wear and tear. Further, because there is simply not enough economy to employ winter staff annually, do you expect these owners to get by on six months revenue in most cases as tenants depart at the end of April?

While enforcing bylaws in non tourist accommodation strata complexes may solve some of our monthly rental needs, it will in fact create a glut of monthly rental availability lowering rates while owners compete to retain annual renters. Winter monthly rates will drop and off-season rates will drop even more. There simply isn't enough demand annually for monthly rental so we'll create surpluses in winter where we currently have too little supply and over supply in the off-season when there is already too much.

Solutions to Problem # 2:

Solving the staff housing challenges at Sun Peaks is not likely to be accomplished by a single action by council and businesses have some responsibility to solve it themselves. Bear Country purchased their own staff accommodations and Top of the Mountain pays a premium to bring staff up from Kamloops who don't ski or snowboard and therefore don't call in sick on powder days.

Ultimately, as businessmen, both Reiner and I feel that most problems should be solved by the market. The hostel owners at the entrance to the Village have spent considerable money to start solving this problem and if council enforces bylaws in strata complexes, you may bankrupt the hostel who will suddenly find significant competition for renters that will prefer to stay closer to the village in complexes like Forest Trails and McGillivray Creek when they are no longer able to rent nightly.  

We believe that the best and fairest approach to enforcing zoning bylaws in strata complexes is to provide a grandfathering solution. For instance, set a deadline of April 30 2019 so that any home owners not currently with tourist accommodation or spot zoning can apply for an annual license indicating they intend to do short term rentals. If a licensee in a future year fails to renew (with appropriate administrative procedure to ensure it's not merely a miscommunication) designate that home as no longer able to do nightly rentals whether by the current owner or if sold. Many home owners will pay annual license fees without renting to ensure they retain the grandfathering. This will allow them to sell their property in the future to others who hope to rent without depressing their property value. Any owner who doesn't get a license by your deadline will have established they will abide by the zoning limitations.

A published record of licensees will act as a public resource for realtors and prospective buyers to determine whether the property they hope to buy is grandfathered in or not.

Problem #3: - Special interest groups are applying pressure to council to enforce existing bylaws so future developments will be more profitable:

While this particular possible reason for council's actions feels more like a conspiracy theory, the fact that several of our owners have voiced this concern leads us to document it here. The concern is that private interests who want to develop new condos and town homes, such as those at Echo Landing and Village Walk, may be making demands that the municipality enforce existing strata bylaws which will diminish supply of short term rentals and thereby increase the potential sales value of their developments.

Of all the arguments we've addressed so far, we really can't find anything wrong with this and understand that it may be one of the most legitimate arguments for some kind of action. We own private businesses and agree that private business has both the right to profit and the right to complain when existing laws and bylaws are not being enforced if they feel their enforcement could be more profitable for them.

However, if this is the case and private interests have pressed for these actions, the nature of these requests should be transparent and council should go on the public record about who made the request and what was said. This would eliminate any concerns about impropriety and allow the public to see no conflicts of interest exist.

Let me also now state for the record that I, A Cage from Top of the Mountain Accommodations, do not own any stake in any of the existing (Echo Landing or Village Walk) or future planned development at Sun Peaks.

As we've argued throughout, creating new inventory is critical to the long-term viability of Sun Peaks Resort and our ability to compete for visitors with other resorts. If developers of new complexes want the resort to enforce bylaws of existing strata complexes to maximize profitability, doing so doesn't diminish supply and will increase our competitiveness by attracting potential buyers who might otherwise purchase at other resorts.

Solutions to Problem # 3:

While we state clearly that we can find no arguments why private investors shouldn't be able to press the municipality to enforce existing bylaws that are favorable to them, this doesn't mean we agree that council should do so immediately or aggressively. Doing so, as we've presented above, will be unfairly punitive to owners who've helped build the resort developers will be benefiting from.

We continue to feel that there are few good arguments for enforcing existing bylaws at the municipal level, but if actions will be taken there must be some form of grandfathering in of existing home owners to be equitable and fair and not cause undue financial distress.

Summary

Reiner recently emailed Paul Mathews, the master designer for Sun Peaks Resort and board member of Sun Peaks Resort LLP with his concerns about the municipality's potentially contractive policies and was told, “the whole resort master plan is based upon maximum rentals or warm beds.” Perhaps one of the reasons there has never been a crack down on short term rentals in the past is because they have always been part of the plan which is responsible for our currently thriving community.

Unless council is near certain their decisions will not adversely impact tourism now and in the future, we urge them not to take action. The recent decision to refuse new spot zoning applications has resulted in diminishing the supply this winter. We have spoken to owners who planned to list with us this year but were unable and they will not be renting monthly. Why this action was taken by council before policing was tried is unclear to us.

Not only are contractive policies dangerous given our singular economy, but they are in opposition to the forces of technology which will continue to disrupt the inefficient use of resources. If an owner can earn $15K with 90 days short term rentals and also enjoy the resort themselves or $10K from six month's rental for the entire winter, why would you expect or demand they choose the later? Vancouver and Toronto might not like AirBnB, but they see the wisdom of cooperating with the powerful economy the new Internet technologies enable.

We believe that council should focus its energies on the policing and penalties of noisy and abusive renters and property owners. If you combine this with licensee education about best practices to better manage guests, the entire issue might be tamed to a whimper in coming years. Until you've fully tried and tested policing, we are unsure why you'd try anything else. However, if you feel you need to enforce zoning bylaws, you must allow current property owners to be grandfathered in to do short term rentals as they always have or had planned when they purchased. 

When Reiner first suggested we co-author a letter to council it wasn't initially our intention to also send it to our property owners. However, as the document took shape we realized that many of our owners feel as strongly as we do and will want their voices heard as loudly as the small group of vocal residents demanding change.

We are emailing our owners this letter and asking them to contact council members to ensure they are heard if they are concerned their interests may not be considered. Its not our intention to make a nuisance of ourselves or fill your in-boxes and phone lines with calls, but if that happens, we hope you'll do your best to represent their interests when you decide how to proceed.