Kelowna’s Exemption from the Principal Residence Requirement under B.C.’s Short-Term Rental Accommodation Act

Since the introduction of British Columbia’s Short-Term Rental Accommodations Act (the “Act”), property owners, municipalities, developers, and tourism operators across the province have been operating within a significantly restructured regulatory framework. In practical terms, the Act is intended to redirect residential properties away from commercial short-term rental use and back into the long-term housing market.

At the same time, the framework allows for some flexibility in areas where local housing conditions improve. Municipalities that meet certain criteria may qualify for an exemption from the principal residence requirement. Kelowna was recently granted such an exemption by the Province, effective June 1, 2026. This exemption provides an early example of how the framework may balance the need for long-term housing with the economic realities of tourism-driven markets.

The Principal Residency Requirement and Eligible Vacancy Rate

In general, the principal residence requirement restricts short-term rental activity to an individual’s principal residence or a prescribed secondary dwelling unit associated with that residence.

Under the statutory framework, municipalities may be exempt from the principal residence requirement upon satisfaction of a prescribed eligible vacancy rate. In particular, section 7 of the Short-Term Rental Accommodations Regulation (the “Regulation“) provides that a municipality may qualify for exemption if it maintains an eligible vacancy rate of at least 3% for two consecutive years immediately preceding the relevant reference date. This eligible vacancy rate threshold functions as a key indicator of whether a local rental market has achieved a level of supply sufficient to accommodate both long-term housing needs and limited short-term rental activity.

Kelowna’s Exemption

According to data published by the Canada Mortgage and Housing Corporation (“CMHC“), Kelowna’s vacancy rate increased from approximately 3.8% in 2024 to 6.4% in 2025. On that basis, Kelowna became the first municipality to be granted an exemption under the regulatory framework.

In connection with that approval, the Province enacted a one-time regulatory amendment accelerating the effective date of the exemption to June 1, 2026, rather than requiring Kelowna to wait for the next implementation cycle. This accelerated implementation reflects a combination of factors, including the Province’s recognition of Kelowna’s tourism driven economy and the role that short-term accommodations play in meeting peak seasonal demand.

Practical Implications for Property Owners

Owners of properties located within designated tourism zones or approved short-term rental subzones (otherwise referred to as “STR subzones“) in Kelowna may now apply to operate short-term rentals without satisfying the principal residence requirement, subject to compliance with applicable municipal licensing and zoning requirements. This may be accomplished by obtaining a short-term rental business licence from the City of Kelowna and completing the required provincial registration.

While the exemption creates an exciting opportunity for property owners, participants in the market should remain mindful that:

• strata corporations may still restrict short-term rentals;
• provincial registration and compliance obligations may still be relevant; and
• regulatory conditions may continue to change as municipalities reassess local housing conditions.

Conclusion

Kelowna’s exemption from the principal residence requirement represents the first use of the exemption mechanism under British Columbia’s short-term rental framework. More broadly, it demonstrates that the framework may preserve the Province’s core housing objectives while allowing for measured, evidence-based flexibility in communities with sufficient rental supply.

As British Columbia’s short-term rental framework continues to evolve, property owners, developers, and municipalities should carefully consider how provincial requirements and local regulations may impact their operations and long-term planning. For more information, please contact Rachel Lum.