short-term rentals

The long-term impact of short-term rentals

How will city-proposed regulations affect GTA landlords?
Wednesday, August 28, 2019
by Erin Ruddy

Rules surrounding short-term rentals have been the subject of much debate in housing-strapped cities all across Canada, ever since home sharing services like Airbnb and VRBO became the go-to sources for affordable, temporary accommodations.

Defined as stays of 28 straight days or less, the popularity of short-term rentals has been rising year-over-year. Statistics Canada found that revenue from this market segment increased by almost 10 times between 2015 and 2018 to $2.8 billion. According to Airbnb data, 21,000 listings appeared for Toronto in 2018 versus 15,869 in 2016.

But there’s no denying that the popular housing trend comes with its share of havoc. Fraught building managers and fed-up neighbours left coping with late-night benders and strewn trash are calling for stricter rules. And then there is the bigger question of housing supply—are short-term rentals taking thousands of much-needed dwellings away from would-be long-term renters?

At a six-day housing tribunal that began August 26th in Toronto, those for and against the city-proposed rules have been squaring off on the benefits and downsides. If approved, short-term rental operators would be restricted to an owner’s principal residence, require users to register with the city and pay a four-per-cent municipal accommodation tax. The rules would also allow an entire primary residence to be rented out when an owner or long-term tenant is away for up to 180 nights a year. Multi-residential apartment owners would not be permitted to rent out vacant units for short-term stays; only the renting tenants.

As the tribunal continues throughout the week and the city awaits an official ruling, many multi-residential landlords are uncertain about whether a vote in favour of the new rules would have a positive or negative impact in the long-run.

“There is no simple answer to that,” says Joe Hoffer, a lawyer and partner with Cohen Highley LLP. “On the one hand, landlords may benefit in circumstances where tenants earn supplementary income in order to fund higher rents. The grant of a right to engage in short-term rentals may result in even higher market rent levels when units are turned over. On the flipside, where short-term rentals are institutionalized and random third parties are permitted into a multi-res building with the only oversight being the tenant renting the unit, there is a higher security risk.”

Hoffer does acknowledge that some of the new regulations—i.e. necessitating that all users register with the city and that proper insurance is in place—may mitigate some of the risk, but he says he is doubtful those steps will diligently be taken by all. “It is likely that many tenants will just operate under the radar. In addition, landlords (including condo unit owners) who themselves would like to run short-term rental operations will be adversely affected by the proposed restrictions, since the rules will limit their ability to do so.”

Meanwhile, city officials and housing advocates concerned about the bigger-picture housing supply argue that the rules are designed to limit the impact of short-term rentals on the availability of longer-term rental stock as most major cities face tight rental markets.

A recent study by McGill University’s David Wachsmuth, conducted on behalf of Fairbnb—a coalition of tenant groups, condo boards and the hotel industry—reports that short-term rentals have removed 5,500 housing units from Toronto’s long-term rental supply.

Monica Poremba, a lawyer for Fairbnb who spoke at the tribunal, said: “The city is facing a housing crisis and the proliferation of short-term rentals, which has gone unchecked, is exacerbating that crisis.”

But Hoffer is skeptical the new regulations will have much of an impact on the long-term housing market. “Short-term rentals are most attractive in large urban centres like Toronto or Vancouver where tenants and landlords will make aggressive efforts to meet demand regardless of the restrictions,” he says. “In my view both market demands—short- and long-term rentals—can thrive as long as municipal regulations don’t interfere with development.  At this time municipal cash grabs and political interference are the principal suppressors of new housing supply, not restrictions on short-term rentals.”

The hearing throughout the week will look into 32 issues, including: questions around zoning; justifications for the primary residence restriction; economic impacts of the by-laws; effects on housing supply; as well as potential amendments to the rental by-laws.

In the meantime, it’s been nearly one year since the City of Vancouver passed its own short-term rentals bylaw requiring that all operators have a valid business licence—or risk being fined up to $1,000 per offence.

According to the City’s website, a short-term rental can be an entire home or a room within that home that is rented for less than 30 consecutive days at a time. It can only be operated from a principal residence, or in secondary homes or basements suites as long as the operator lives there full time. Short-term rentals are not permitted in accessory buildings (like a garage or art studio), and nor are businesses, societies, and commercial operations eligible to seek a licence.

So, since taking effect last September, has the bylaw had a positive impact on Vancouver’s housing market?

Initially reports were not all positive. Difficulty with enforcement and a loop hole allowing operators to input fake licence numbers led to thousands of illegal short-term rental listings. Since then the City has been working with Airbnb to support enforcement efforts and crack down on unlicensed operations, with the intent to free up those units for long-term tenants. At the six-month mark, the City of Vancouver issued a statement asserting positive strides had been made.

One thought on “The long-term impact of short-term rentals

  1. Short-term rentals have positive long-term effects, and that’s why I recommend everyone to invest in short-term rentals these days. Some people don’t listen to me, and now they aren’t making as much money as possible.

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