Today it was announced that the City of Toronto is looking at new measures to restrict long-term housing from being converted into short-term rentals i.e. Airbnb style tourist accommodations.
The idea is to lessen the impact on rentals, neighbourhoods and housing affordability. The plan is aimed at the short-term rental market and is targeting units that are not a host’s primary residence.
Airbnb style short-term rentals will be required to register with the city stating that it is their primary residence, pay a fee and submit emergency and safety information to guests.
What this means;
- – Sites like Airbnb would only be allowed to list properties with a city administered registration number.
- – Approximately 3,200 units listed in 2016 would not be allowed to list.
- – A host can rent up to three rooms, with a unit or the entire dwelling as long as it is principal residence or legal secondary suite.
- – The province gave the city authority to begin collecting a hotel and short-term rental tax. Being reviewed is the impact of taxing short-term rentals at up to 10 percent, compared to the suggested 4 percent for hotels.
You can chalk these changes up to more measures the city has put together designed to ‘cool’ the booming Toronto housing market and make housing more affordable. But, let’s break down the arguments for a moment.
Short-term rentals are not legal in most condo buildings. Property managers had been watching intently, and in October of 2016 articles pronounced “Toronto Cracks Down on Illegal Airbnb Rentals.” The Toronto Star states that approximately 3,200 units listed in 2016 would not be allowed to list as short-term rentals if these new laws pass… but it’s quite hard to say how many of these units were already removed from the short-term rental supply after the Property Managers began their ‘raids’ last year.
Maintaining the safety of buildings is understandably a primary concern of the previous crack downs however, it has not been addressed as a concern in the ‘primary host’ conversation.
Personally, I am not a fan of the government manipulating the free market, period. For those hosts that are legally listing their units for short-term rentals, they purchased them as investment properties and they should have the right to rent as needed, whether short-term or long-term. There are added risks with short-term rentals and vacancy, but an individual should be allowed to assess their investment in a free market and take those risks when needed.
There are clearly enough individuals looking to rent, to sustain and make the investment profitable. With the new rent control guidelines, a year long tenant may not give an investor the security that they need. Beyond the safety issue, there just isn’t a good enough reason to prohibit this, whether primary or secondary residences. If we keep turning around at every corner and diminishing an investor’s ability to make a return it will eventually have a negative effect. Remember, historically investors have driven new construction growth.
I should note, I own seven properties and I have year-long tenants. I don’t Airbnb, it’s just too much hassle. But as an individual civilian I use my after tax money to make an investment for my future. I don’t want the government stepping in and telling me what I can and cannot do with my investments.
Proposed regulations will be released next Monday. For more details you can read the entire article from Toronto Star here.