Short-Term Rentals in Canada After Bill 35: What's Left of the STR Investment Play
The short-term rental investment play that minted operators between 2016 and 2022 is functionally dead in most of British Columbia, and most clients who walk into my office asking to finance an STR investment property don't realize the math stopped working when Bill 35 hit on May 1, 2024. The headlines covered the rules, but they did a bad job covering what the rules actually do to your financing, your insurance, your tax position, and your exit strategy, which are the four levers an investment actually runs on. I see this every week with clients who saw a property listed as "STR-zoned" and assumed that was the same thing as "financeable as an STR," and those are now two completely different conversations.
That doesn't mean the entire category is closed, because the rules carved out specific designated resort municipalities, principal-residence operators still have a legal play, and the workaround everyone's quietly moving to is mid-term rentals at the 30-day-plus threshold where most of the STR regulations don't apply. The real question for any buyer in 2026 isn't whether short-term rentals are back. It's whether the specific property in the specific municipality with the specific use case you have in mind will actually fund, comply, and cash flow once you add up the regulatory cost, the financing premium, and the insurance reality.
TL;DR: BC's Short-Term Rental Accommodations Act (Bill 35) restricts most STRs to principal-residence operators only, designated resort areas and exempt municipalities are the main exceptions, and A-lender financing for STR-purpose investment properties has largely dried up since mid-2024. Mid-term rentals at 30-day minimum stays are the most common workaround. Other provinces are following BC's playbook with their own variations, so the actual question for any STR purchase is whether the specific address in the specific municipality will fund, comply, and cash flow once you add up the costs.
What Bill 35 actually changed for BC investors
The core of BC's Short-Term Rental Accommodations Act is the principal residence requirement, which says you can only offer short-term rentals in the property where you live for the majority of the year, plus one accessory unit on the same parcel like a secondary suite or carriage house. That single change took roughly two-thirds of the existing STR inventory in BC's regulated municipalities out of the legal market overnight, and the enforcement layer has actual teeth this time because municipal fines were raised dramatically and the platforms like Airbnb and Vrbo now share booking data with the province through a mandatory registry.
What that means practically is that the classic STR investment thesis, where you buy a condo in Whistler or Kelowna or downtown Vancouver, list it on Airbnb, and run it as a hands-off cash flow asset, doesn't work anymore in most of those markets. The principal-residence requirement means the property has to be where you sleep most nights, the data-sharing requirement means non-compliance gets caught fast, and the fine structure is set high enough that getting caught once wipes out a year of operating profit. The investors I talk to who tried to ignore the rules for the first six months after the Act came in mostly stopped after either getting fined or getting a letter from the municipality telling them they were about to be.
The exceptions are real but narrow. The Act carved out about a dozen designated resort municipalities and specific exempt geographies including parts of Whistler, Sun Peaks, Big White, and a handful of other resort areas where the STR economy was deemed core to the local tourism business, and within those zones the principal-residence requirement doesn't apply. The list is published by the province and gets updated, so anyone buying for STR purposes needs to verify the specific address sits inside an exempt boundary before they commit to the file, because the boundary often runs through a single neighbourhood and a property two blocks over might be subject to the full restriction.
The other provinces are following BC, with their own variations
Quebec moved on STR regulation before BC did, with provincial legislation requiring registration with the Corporation de l'industrie touristique du Québec and a principal residence requirement in most urban municipalities, and the enforcement there got real after the 2023 fire in Old Montreal that exposed an illegal STR with no permits. Ontario operates as a patchwork where the province leaves it to municipalities, but Toronto, Ottawa, and a growing list of mid-size cities have implemented their own principal-residence rules with licensing systems, and the trend across the province is toward more regulation rather than less.
Atlantic Canada and the Prairies are less aggressive overall, but the major cities including Halifax, Calgary, and Edmonton have all rolled out their own rules and licensing requirements over the last three years, and the smaller communities are watching the larger ones and writing similar bylaws. The single most important thing I tell clients looking at an STR purchase outside BC is that the question isn't "what does the province say." It's "what does the specific municipality say, and what's the trend in their bylaw committee," because municipal rules can change between the offer and the closing date, and there's no grandfathering built into most of these bylaws.
How the financing side actually changed
Most A-lenders pulled back on STR-purpose financing in the back half of 2024 because the regulatory risk made the cash flow projections unreliable, and the underwriting departments started either declining STR-intent files outright or requiring the borrower to qualify on traditional long-term rental income rather than the higher STR projections they used to accept. That single underwriting shift took the cash flow math from "this property carries itself on Airbnb income" to "this property has to qualify like a regular rental at maybe half the gross income," which is what kills most of the deals at the application stage.
B-lender financing is still available for STR-purpose properties, but the rates run 1% to 2.5% higher than A-lender pricing, the down payment requirements are usually 25% to 35% minimum instead of 20%, and the lender fee on the funding can run another 1% to 2% on top of that. By the time you stack the higher rate, the higher down, and the lender fee, the financing cost has eaten enough of the projected cash flow that the deal only works in very specific high-yield situations, and most of the buyers chasing those situations through 2024 and 2025 ended up either selling at a loss or converting to long-term rentals.
The viable financing play for most clients now is to buy in their personal name as a principal residence in a municipality where they can legally operate STR on the property, and to qualify the file on personal income rather than on STR projections. That keeps the file on the A-lender side, keeps the rate at conventional pricing, and avoids the underwriting risk of trying to prove STR income to a department that's actively distancing itself from that income source. The constraint is that this only works if the buyer actually intends to live there, which is exactly what the regulators wanted to engineer.
Mid-term rentals are where most of the displaced STR operators went
The 30-day minimum stay threshold is where the bulk of the post-Bill-35 workaround activity is happening, because most of the STR regulations including BC's only apply to bookings shorter than 30 days, and a property rented on 30-day-plus terms can usually be operated as a furnished mid-term rental without triggering the principal-residence requirement. The clientele changed entirely though, with mid-term rentals catering to traveling nurses, insurance-claim displacements, executive relocations, and remote workers on extended stays, which is a different supply chain than the tourism demand the original STR play was running on.
My take here is that mid-term rentals are a real business, but they're not the same business as the old STR play, and most of the operators who moved over without recalibrating their expectations got hit on three things at once: the per-night yield is lower, the marketing channels are different and slower to build, and the tenancy laws sometimes apply to longer stays in ways that don't apply to true short-term rentals. The investors making it work in 2026 are usually combining mid-term rental with the right municipality, the right property type, and a furnishing package designed for traveling professionals rather than tourists.
The tax and insurance side that most operators learn the hard way
The CRA treats STR income as business income in most cases rather than passive rental income, which has knock-on effects on expense deductibility, capital gains treatment on eventual sale, and GST registration if gross revenue crosses $30,000 in a rolling four-quarter window. The capital gains treatment matters because if the CRA classifies your STR operation as a business, the principal residence exemption can be partially or fully lost on the portion of the property used for STR, which is a tax bill most operators don't see coming until they sell.
Insurance is the other reality check, because most standard home insurance policies either exclude STR usage entirely or require a specific endorsement that runs $300 to $1,500 per year on top of the base policy, and operating an STR on a standard policy without disclosure can void the entire policy if there's a claim. Specialized STR insurance products exist, but the premiums are usually three to five times standard homeowner pricing, and some carriers won't write the policy at all in municipalities with active enforcement against unregistered STRs because the regulatory risk gets priced in to the underwriting.
What I'd actually do in 2026 if I were buying for STR purposes
If a client walked in tomorrow with the cash for an STR purchase and asked me what I'd do, the answer would depend on whether their goal is the cash flow or the lifestyle, because those are now two different files. For a pure cash flow play I'd point them at long-term rental in a city with good rent-to-price ratios and demographic tailwinds, because the STR yield premium has compressed below the regulatory friction it now carries, and the long-term rental math is simpler, more financeable, and less politically exposed.
For a lifestyle play where they actually want to use the property and offset some of the carrying cost with rental income, the principal-residence STR or the mid-term rental in a designated resort municipality is still viable, and the math can work if the property is one they'd want to own anyway and the rental income is treated as a partial offset rather than the whole investment thesis. The mistake I see most often is clients trying to make the lifestyle property pencil as a pure investment, which forces them into B-lender financing and aggressive cash flow projections that the regulations are actively working against.
Frequently asked questions
Can I still get an A-lender mortgage on a property I plan to use as a short-term rental?
Most A-lenders will only fund the file if you're qualifying on personal income or long-term rental income, not on STR projections, and the property has to be either your principal residence or set up for traditional long-term rental for the underwriting to clear. If your only path to qualifying involves using STR income to make the file work, you're almost certainly looking at B-lender financing with higher rates, higher down payment, and lender fees on top.
Do BC's Bill 35 rules apply to existing STRs that were operating before May 2024?
Yes in most municipalities, with very limited transition exceptions, and the province did not grandfather pre-existing STR operators broadly. Operators who were running secondary properties as STRs before Bill 35 came in had to either convert to long-term rental, sell the property, or move into the property and convert to principal-residence operation, and the enforcement timeline has been moving steadily through 2024 and 2025 in the larger municipalities.
What is a designated resort municipality and how do I know if my property is in one?
Designated resort municipalities are specific BC communities where the provincial government has determined the STR economy is core to the local tourism business and the principal-residence requirement should not apply, and the list includes parts of Whistler, Sun Peaks, Big White, Silver Star, and a handful of other resort areas. The provincial registry publishes the full list and the exact geographic boundaries, and the boundaries can run through individual neighbourhoods, so you need to verify the specific address against the registry rather than relying on the municipality name alone.
Is a mid-term rental the same as a short-term rental for regulatory purposes?
No in most jurisdictions, because most STR regulations including BC's Bill 35 only apply to bookings shorter than 30 days, and a property rented on 30-day-plus terms is usually classified as a furnished rental that falls outside the STR rules. The underwriting side is also different because A-lenders are generally more comfortable financing mid-term rental properties than STR-purpose properties, which is part of why mid-term rentals became the post-Bill-35 workaround for displaced operators.
If I rent out my principal residence on Airbnb when I'm away, is the income taxable?
Yes, and the CRA generally treats it as business income rather than passive rental income, which means it gets reported on your personal tax return as self-employment activity, with associated deductibility rules for expenses and GST registration thresholds if you cross $30,000 in gross revenue over a rolling four quarters. The principal residence exemption on capital gains can also be partially affected depending on how much of the property is used for the STR business, so the tax conversation should happen with an accountant before you launch the operation rather than after.
Bottom line
The short-term rental market in Canada in 2026 is not dead, but it's a fundamentally different business than what minted operators from 2016 to 2022, and the buyers walking into the category now need to understand the regulatory layer, the financing layer, the tax layer, and the insurance layer before they sign anything, because each of those layers can take a viable-looking deal and turn it into a money loser. If your goal is cash flow, the long-term rental path is cleaner. If your goal is lifestyle plus partial offset, the principal-residence STR or the mid-term rental in a designated resort area is still on the table.
If you want to run the numbers on a specific property before you commit, the Flow rate tool at rate.getflowmortgage.ca covers the financing side, the WealthFlow newsletter covers the weekly policy and market updates that affect investment financing, and you can book a 15-minute consultation if you want to walk through the specific file before writing an offer, because the homework has to happen before the deposit, not after.