Prince Edward County (PEC) is a popular destination for both tourists and real estate investors looking to take advantage of the vibrant short-term rental market. However, the municipality established strict regulations to balance tourism, community needs, and housing availability. Understanding these regulations is essential for prospective investors before purchasing a property intended for short-term accommodation (STA).
Two Types of STA Licenses: Primary and Secondary Residence
The County offers two types of STA licenses depending on the nature of the property: Primary Residence STA and Secondary Residence STA.
Primary Residence STA License
A primary residence is defined as a property where the owner lives for more than six months of the year. With a Primary Residence STA license, homeowners are allowed to rent out a portion of their home or the entire property temporarily when they are away. This type of license is more accessible and is designed to accommodate homeowners looking to earn supplemental income. This was formerly called an owner-occupied STA license.
Secondary Residence STA License
A secondary residence refers to any home that is not the owner’s primary residence, such as a vacation home or investment property. However, for several years, the County has stopped accepting applications for new Secondary Residence STA licenses. This means that unless a property already has this type of license, new buyers will not be able to secure a permit for short-term rentals for these properties. This was formerly called a whole home STA license.
Why the County is No Longer Issuing Secondary Residence Permits
The decision to halt new Secondary Residence STA licenses was influenced by several factors, primarily housing availability and community impact. The County wants to ensure that residential homes are primarily used for long-term housing rather than investment properties. By restricting new permits, PEC aims to maintain its local housing stock and reduce the strain on long-term rental availability.
For buyers looking to invest in a secondary residence STA, this restriction means that purchasing an existing STA-licensed property is the only option to legally operate a short-term rental in a non-primary residence. This has led to a surge in demand for properties with existing STA licenses, making them particularly valuable on the market. A well-appointed home with a Primary Residence STA license is worth more than an identical property without.
License Restrictions: Who Qualifies?
For those looking to acquire a Primary Residence STA license, the criteria are relatively straightforward. Owners must prove that the property is their principal residence, which involves providing documents such as a driver’s license, tax records, or utility bills. Properties with a history of by-law violations or nuisance complaints may face additional scrutiny and restrictions during the application process.
It’s important to note that not all properties are eligible for STA licenses, even if they meet the basic requirements. Zoning, property type, and the number of existing STAs in the area are all taken into consideration. This makes it crucial for potential investors to conduct thorough due diligence before purchasing a property in PEC.
Buying a Home with an Existing STA License
With the freeze on new Secondary Residence STA licenses, purchasing a home that already has a license is currently the only way to operate a short-term rental in a non-primary residence. However, this isn’t as simple as it sounds. STA licenses in PEC are non-transferable, meaning that when a property changes ownership, the new owner must reapply for a license.
While the current policy allows new owners to apply for a license renewal, it’s not a guaranteed process, and buyers should be aware of the potential risks.
It’s advisable to work closely with a local real estate professional familiar with PEC’s STA regulations to navigate this complex landscape. They can provide guidance on properties that may qualify for Primary Residence licenses or have strong potential for approval post-purchase.
Current Forecast for STA Properties in PEC
Investors considering the Prince Edward County market should be aware of shifting trends in short-term rental performance. According to AirDna, the market has seen a notable decline since its peak during the pandemic.
- Average Daily Rate: As of now, the average daily rate for short-term rentals in PEC is $306.80.
- Occupancy Rate: The average occupancy rate over the last 12 months is 50%, a significant drop from the 82% occupancy rate seen during the height of the pandemic.
- Annual Revenue: The average annual rental revenue is approximately $41,100, down from nearly $70,000 in previous years.
- Number of Licenses: There are presently 850 licensed short-term accommodations in Prince Edward County according to the municipal GIS map.
This decrease in revenue is partly due to increased competition, changing travel trends, and the introduction of stricter municipal regulations. As a result, new investors need to adjust their expectations and plan for more conservative rental returns.
What Does This Mean for Prospective Investors?
For investors, the STA landscape in Prince Edward County is both an opportunity and a challenge. While the value of properties with existing STA licenses has increased, the tighter regulations mean that finding and purchasing a compliant property can be tricky. It’s essential to weigh the cost of acquisition and the expected rental income carefully.
If you’re considering a property purchase in PEC, focus on primary residences that can be dual-purposed as a personal cottage and a short-term rental. This approach not only aligns with current STA policies but also provides flexibility if regulations change in the future.
For those determined to operate a secondary residence STA, partnering with a knowledgeable real estate agent who understands the nuances of local policy is a must. The team at Quinte Living can help you navigate the complex world of STA regulations to ensure your investment is set up for success.
By staying informed and working with experts, investors can find profitable opportunities even in a regulated market like Prince Edward County’s short-term accommodation sector.
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