The province just made it official. On April 17, 2026, BC Housing and Municipal Affairs Minister Christine Boyle announced that Kelowna will be exempt from the provincial principal residence requirement for short-term rentals, effective June 1. That is six weeks away. The summer tourism season is live. And for condo investors who have been sitting on units that haven't cash-flowed since January 2024, this is the news they have been waiting on for two years.

Kelowna is the only city in BC that requested the exemption this year. To qualify, a municipality needs a rental vacancy rate of at least 3% for two consecutive years. Kelowna's CMHC vacancy rate now sits at 6.3% to 6.4%, more than double the threshold. That number is worth pausing on. As recently as 2023, the vacancy rate was 1.2%. The STR ban contributed to flipping it to a 20-year high in roughly two years. The City of Kelowna delivered 3,467 net new units in its first reporting cycle against a provincial target of 1,363, exceeding it by 150%. Combined with the removal of Airbnb units from the market, that supply surge is what drove vacancy this high, this fast.

The policy worked, on the housing side. But it had costs. Kelowna's tourism operators reported a rough 2024 and 2025. Condo investors who bought into STR-capable buildings before 2024 found themselves either converting to long-term leases at much lower rents or sitting on empty units during the summer peak. The presale condo market in Kelowna cooled partly because the STR income assumptions that made the numbers work simply disappeared. The city's own November 2025 council report noted that feedback from the real estate and development community pointed to negative impacts on the condo presale market and, consequently, on new housing construction.

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What the exemption actually means

The exemption removes the provincial principal residence requirement for Kelowna. That means property owners in eligible buildings will be able to operate short-term rentals without living in the unit themselves. But the exemption is not blanket. It does not apply to every condo in the city.

Kelowna structured its approach around a new zoning designation called the STR subzone. Properties have to apply to be rezoned into this subzone. When a property receives the STR subzone designation, short-term rental operations become permitted as the principal use, not just a secondary or principal-residence activity. The property can then be rented short-term for any duration without the owner being present or occupying the unit for a minimum number of days per year.

There are meaningful restrictions built in. The STR subzone is not available to properties that already carry a rental subzone designation, because the city explicitly does not want STR operations eating into the long-term rental supply it worked hard to build. Buildings also need strata council consent to apply, which means individual owners cannot unilaterally push their building into the subzone. The strata has to agree. And city staff have indicated that buildings should generally have a minimum of 70 units to qualify, though that is a guideline rather than a hard rule in the bylaw.

As of the March 2 council meeting, 16 properties had applied for the STR subzone: three at McKinley Beach Resort, seven in the downtown core, two in the South Pandosy-KLO neighbourhood, and three near Mission Creek. Three more applications had been submitted after that meeting. These properties were already being encouraged to apply for business licences in anticipation of provincial approval, which has now arrived. Final adoption of the rezoning still requires council approval per property, and the city has confirmed that approvals will not be finalized until the exemption is in force, which is now June 1.

If your building is not on that list, or has not submitted an application, the principal residence requirement still applies to your unit. You can still operate a short-term rental in Kelowna as your principal residence under the minor designation. What you cannot do yet is rent out a unit you don't live in. That right now flows only through the STR subzone process.

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The investor math, honestly

Whether this exemption makes the condo investment math work again depends entirely on three things: what you paid, what your financing costs are, and whether your building qualifies for the subzone.

The optimistic framing is straightforward. A well-located Kelowna condo in a tourist-capable building, running STR from May through September at reasonable occupancy, can generate significantly more income than a long-term lease covering the same period. A two-bedroom unit near the waterfront or in McKinley Beach Resort capturing even 60% occupancy at $180 to $220 per night from June through August would generate roughly $9,700 to $12,000 over those three months alone. A long-term lease on the same unit might bring in $2,200 to $2,500 per month, or $6,600 to $7,500 for the same period. The STR premium in peak season is real.

The cautions are also real. Kelowna's STR income is intensely seasonal. October through April is not Vancouver Island or Whistler. Occupancy rates drop sharply outside the summer window. Investors who pencil in high year-round occupancy on Kelowna condos are doing optimistic math. The hybrid model, pairing long-term tenants through the off-season with STR income in summer, is probably the most realistic path to positive cash flow for most units.

There is also a strata layer to this that matters practically. Even in buildings that successfully rezone to the STR subzone, individual stratas can add rules on top. Noise policies, guest registration, keyless entry requirements, insurance conditions. Some stratas that consent to rezoning will still impose operational restrictions that affect how easily you can actually run a short-term rental. Read the strata documents for any building you are evaluating. The rezoning approval opens the legal door; the strata bylaws determine how wide it opens.

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Finally, consider timing. The exemption is effective June 1. The Memorial Cup runs May 21 to 31, which is before the exemption kicks in. The FIFA World Cup overflow from Vancouver begins June 11, which is after. BC Lions games in late June and early July, the BC Summer Games in late July, and the general Okanagan summer season are all within the window. Thompson Okanagan Tourism Association president Ellen Walker-Matthews has described 2026 as shaping up to be a very good and early tourism season, with FIFA World Cup visitors potentially extending into the Okanagan before or after Vancouver matches.

What the exemption does not do is erase two years of softened condo prices and investor exits. If you bought a unit in a now-eligible building at 2021 or 2022 prices and have been covering costs with long-term tenancy, the return of STR income may help your cash flow without restoring your equity position. If you are looking at buying now at 2025 or 2026 prices in a qualifying building, the income story is more interesting but still needs careful underwriting. The number that matters most is not the summer peak rate. It is the annual blended yield after strata fees, property management, mortgage, and all the quiet months between Thanksgiving and Victoria Day.

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The city's approach is more surgical than a full rollback of the ban, and that is probably the right call. A complete exemption that opened every residential zone to non-principal STRs would have driven housing speculation and pushed vacancy back down quickly. The subzone model keeps the long-term rental stock protected while unlocking specific buildings that were purpose-built or tourism-oriented. It is a reasonable compromise, and for investors in those buildings, it is the opening they have been waiting for.