Town of Drumheller continues to work on regulations on Short Term Rentals (STRs) as part of its proposed Business License Bylaw, and during the Tuesday, November 14 Committee of the Whole meeting administration was directed to implement an annual cap on the number of STR licenses, and introduce a differential rate for principal and non-principal residences.
Council previously gave second reading of the Business License Bylaw in October of this year, and made some recommendations to Economic Development manager Reg Johnston to further investigate STR regulation in other municipalities, including how these units are taxed to align with commercial taxation, insurance requirements, and any caps on the number of licenses permitted per year.
It was proposed to implement a differential rate for STR business licenses of $245 for principal residences in which the property owner also resides, and $810 for non-principal residences, also considered investment properties. This would reflect an estimated $55,000 annually, which would help offset administrative costs.
Along with researching business licensing fees, Mr. Johnston also investigated how municipalities tax these properties. Following discussions with Wildrose Assessment and Corporate Services, it was determined other municipalities such as the Town of Canmore had implemented a new municipal tax rate for these properties which sees STRs charged 3.28 times higher than other residential properties.
A new residential subclass would allow for STRs to be taxed at a higher rate to better align with commercial tax rates. However, it was noted this would not be able to be implemented until 2025 due to information required. Another consideration into STRs was whether to limit the number of business licenses approved annually.
With the ongoing housing shortage in Drumheller, it was recommended council implement a cap of 120 STR business licenses per year; there are currently about 104 STRs operating within the Drumheller Valley.
While there were some concerns that limitation could pose some additional challenges, such as reducing competition and increasing administrative work, this could also help to alleviate strain on the local housing market. It could also help to encourage growth within certain sectors of the housing market such as secondary suites, while reducing the number of investment properties which were seen as “primary contributors” to reduced housing stock.
There were also recommendations regarding the insurance coverage required to be held on these properties by the property owner, mandating proof of liability insurance during the business licensing process, requirements to be outlined regarding guest health and safety such as an Emergency Evacuation Plan, and safety measures including fire extinguishers and smoke and carbon monoxide detectors within the property.
It is expected the Business License Bylaw will be brought back to council for third reading consideration in the new year.