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This B.C. city is using short-term rental tax funds to build affordable rentals for hospitality workers

Money collected from short-term rental taxes in Victoria, a city that has some of the highest rents in country, will be used to fund affordable housing units that will prioritize hospitality workers. 

At a meeting on Sept. 7, Victoria city council unanimously agreed to allocate $2.5 million from its housing reserve fund — which includes tax revenue collected from online accommodation platform bookings such as Airbnb — for the non-profit Greater Victoria Housing Society to build an apartment building with 40 units of affordable workforce housing.

“We’re getting all sorts of attention from all over B.C. and Canada because it is dedicated workforce housing in the city, which is quite novel,” Paul Nursey, CEO of Destination Greater Victoria, told CBC’s All Points West. “It’s taxation with a purpose and a plan that’s being executed.”

The project will cost about $18 million overall and the rest of the funding will be acquired by the housing non-profit through grants and loans from the Canada Mortgage and Housing Corporation.

It’s a move that has been lauded by workers and experts alike, and one that can’t come fast enough for Aaron Walters, a server at a downtown Victoria hotel restaurant. 

For the past year, Walters has been splitting a two-bedroom apartment with two roommates to afford rent, which costs him half of his pre-gratuities income. Now that the roommates are going their separate ways, Walters is about to move into a $2,100/month one-bedroom that will cost his entire paycheque.

WATCH | Feds remove GST from new rental builds: 

The Liberal government has announced that it will be removing the GST from the construction of new rental apartments. What is the potential impact on a market where affordable housing is in short supply? CBC News Network’s Hannah Thibedeau discussed the move – and the issue – with Jennifer Keesmaat,, former chief planner for the City of Toronto and now a partner at Markee Developments.

“I’m basically going to have to live off [gratuities] and most likely get a second job,” said Walters, who works the breakfast and lunch shift at Aura Waterfront Restaurant and Patio. “It’s absolutely insane.”

As of last year, the Canadian Centre for Policy Alternatives found that Victoria is one of 27 urban centres across Canada where there are no one- or two-bedroom units that would be affordable for a full-time minimum-wage worker.  

The move to build affordable workforce housing specifically for hospitality workers is a first in Victoria, and one of the latest initiatives answering a need for more purpose-built rental housing in Canada.

According to the latest report from the CMHC, the country still needs to build 3.45 million new homes by 2030 to properly address the supply shortage. 

Staring down the barrel of high rents

Walters said finding a place to rent is particularly challenging for service industry workers who rely on tips for much of their income, which is why workforce housing is particularly important for people like him.

“It’s almost impossible to prove what we make [as a server],” he said. “Some places will just look at what the net is of your paycheque coming in, and you just don’t hear back from them.”

After a six-week search, he found an apartment that will cost far more than what he can afford, but one he could rent  because the landlord had dined at his restaurant and “saw eye to eye” with his situation. 

Once the 40 units of workforce housing are built — which Nursey estimates will take three years to complete — about one-third of the building will have rent capped at 80 per cent of market value. 

According to Virginia Holden, executive director of the Greater Victoria Housing Society, this means the studio units will charge $900/month, while the two-bedrooms will cost up to $1,300. The other 70 per cent of the building, she said, would be priced at around $1,500 for studios and up to $1,900 for the two-bedroom units. 

“You’re staring down the barrel of $1,800 a month for a one-bedroom,” Holden said. “If you were new to Victoria or you needed to change your housing, that’s just not sustainable on the wages that are available. [The hospitality] industry has really been struggling to find accommodations.”

Once built, the units will be managed by the housing society while Destination Greater Victoria — the local tourism crown corporation — and hotel associations spread the word to their members. 

In Victoria, short-term rental tax funds had been earmarked to be used for workforce housing through an agreement between Destination Greater Victoria and the City of Victoria that was made in 2018. This money has been flowing into the city’s housing reserve fund for the past five years.

Smaller, more tourism dependent communities like Whistler and Tofino in B.C. and Banff in Alberta have dedicated organizations whose purpose is to build or find affordable housing for the people who work in hospitality. 

In Victoria, which has a much larger population, this is the first time a housing non-profit is partnering with the city and tourism board to use provincially collected tax funds to create specific workforce housing, while the rest of the funding comes from the federal CMHC. These 40 units will therefore involve all levels of government partnering with a non-profit. 

The way hospitality sector workers will be prioritized for these rentals in Victoria is under discussion, but there are footsteps they can follow.

“This is being done in Whistler and Tofino, so there’s already been a proven approach here,” Holden said. “But in terms of fleshing out what it’s going to mean to prioritize [hospitality workers], we’re still working through that with Destination Greater Victoria.”

WATCH | Building more rentals: 

this b c city is using short term rental tax funds to build affordable rentals for hospitality workers 1

Government moves to speed up construction to ease housing crisis

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Duration 2:02

Federal Housing Minister Sean Fraser says the government is considering setting aside federal land to build rental homes as Canada’s housing crisis intensifies. Ottawa may also do away with the GST on affordable housing projects. Conservative Leader Pierre Poilievre has relentlessly criticized the Liberal government for inaction on Canada’s chronic housing shortage.

The affordability problem

At the Victoria council meeting on Sept. 7, several councillors lauded parts of the proposal — the idea and proximity to a transit hub and amenities — and some brought up their desire to see more than 40 units of affordable workforce housing. 

“For the next project related to hotel and hospitality workers, we would like to see probably some more scale,” said Coun. Jeremy Caradonna.

“I would really love to encourage affordable housing providers to think much bigger and more boldly,” said Coun. Dave Thompson.

The proposal had been in the works for several years but faced delays as a result of rising costs, Holden said. 

“Unfortunately developers and non-profits and anybody who’s trying to build housing over the last couple of years has been really challenged by high construction costs and the increasing interest rates.” 

WATCH | Average rents above $2K across Canada: 

this b c city is using short term rental tax funds to build affordable rentals for hospitality workers 2

Average rents in Canada soar above $2K for first time ever, new data suggests

9 months ago

Duration 5:08

The average monthly cost of renting a home in Canada surpassed $2,000 for the first time ever in November, according to a report released Wednesday.

The cost of constructing affordable rental housing is a problem that requires federal financial reforms, according to a group of housing experts, advocates and industry representatives across Canada who authored a report titled A Multi-Sector Approach to Ending Canada’s Rental Housing Crisis that was released last month.

Prime Minister Justin Trudeau announced Thursday that the federal government will act on one of these recommendations immediately, by getting rid of the GST on the construction of new rental apartments.

Other reform ideas in the report include creating a tax credit for developers who invest in community rental units and offering fixed-rate financing through CMHC or the Canada Infrastructure Bank on rental builds.

“If the person who’s serving you a cup of coffee in the morning can’t afford to live in the neighbourhood anywhere near that coffee shop, we’ve got a problem, and municipalities get this,” said Ray Sullivan, executive director of the Canadian Housing and Renewal Association and a co-author of the report.

“This partnership between the City of Victoria and the Greater Victoria Housing Society is the kind of affordable rental housing that we need to see across the country.”

He echoed the report’s findings, saying the federal government needs to take charge of funding and reforming the housing market. 

Regardless of how it happens, Walters looks forward to more rental stock that is not impossible to afford and attain. 

“It would mean some actual quality of life,” he said. “I could spend my money on my kids instead of just working to pay rent.”

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