Update November 2019: Toronto City Council had approved the regulations for short-term rentals. All “proposed” regulations below are now officially enforced by the City of Toronto.
When it comes to Airbnb, Toronto — and its residents — have a serious love-hate relationship. It, of course, isn’t surprising then that they are back in the news once again as the city of Toronto announces continued efforts aimed at regulating these short-term rentals. The proposed regulations would restrict anyone from renting a property that isn’t their principal residence on any short-term rental agency, such as Airbnb. The ongoing regulations are said, in part, to be one approach in dealing with the low-inventory of long-term rentals for residents of Toronto, bringing about a whole new conversation: are we just looking for someone to blame for the lack of rental inventory?
PROPOSED SHORT-TERM RENTAL REGULATIONS
• A short-term rental is considered anything fewer than 28 days.
• Eligible short-term rental properties must be the host’s principal residence.
• Hosts can rent up to three rooms or their entire home.
• Secondary suites, such as in-law or basement units, are eligible for short-term rental as long as they are the host’s principal residence.
• Hosts can only rent their property for a maximum of 180 days of the year.
• Hosts would have to pay an annual $50 fee and register with the city.
• Hosts will have to pay a 4$ Municipal Accommodation Tax (MAT) on rentals fewer than 28 days.
• Short-term agencies, like Airbnb, pay a one-time licence fee of $5,000 and $1 per night that’s booked.
The regulations are aimed at preventing property owners in Toronto from commercializing multiple properties as short-term rentals, which removes them from much needed long-term rental inventory. However these new regulations would also deny homeowners with secondary suites, such as basement units, from using them as short-term rentals.
In San Francisco, home of Airbnb, the city limits any hosts from renting more than one unit rather than altogether banning homeowners the right to use their secondary suites as they see fit. Ultimately, secondary suites are part of a homeowner’s property and they should be able to do with it whatever they so choose. Not everyone wants to be a landlord and sometimes having a flexible secondary suite is ideal for the lifestyles of certain people.
Take the young family in this recent article who just had their first child and use the basement apartment in their home for their parents when they visit. In between, they rent it out when it’s convenient for them, earning some extra income for their growing family.
Or this couple in Scarborough who both lost their jobs within two months of each other. Renting out their basement apartment on Airbnb helped keep them afloat financially when times were tough. That being said, they could move into the basement and Airbnb their main floor instead. But this really begs the question, should they have to just to appease these regulations?
THE SAN FRAN WAY
In Airbnb’s home city of San Francisco, they’ve established an Office of Short-Term Rentals whose mandate is to “work with the residents of San Francisco to ensure that short-term rental activity respects neighborhood character, preserves housing supply, and complies with the City’s rules.” To become a host of any short-term rental property, individuals must first register as a business with the city before they are even eligible to become hosts on any short-term rental platform. Similar to Toronto’s proposed rules, hosts must be the permanent resident of the unit they wish to rent. Other rules included are as follows:
• Hosts must have property insurance.
• Tenants may become hosts with proof of a lease. The owner of their property will be sent a courtesy notice.
• Neighbours within 100 metres of a short-term rental must be notified.
• Hosts are charged a 14% Transient Occupancy Tax on bookings fewer than 30 days.
AIRBNB ISN’T THE ENEMY
Airbnb gets a bad rap even though they’ve been working with cities around the world to accommodate their individual concerns. Neptune Condos near Fort York is the first condo in Canada to sign on to Airbnb’s Friendly Buildings Program. The goal of the program is to give condo boards more transparency with those residents hosting and the visitors they host. It’s also customized to the individual property.
At Neptune Condos, hosts renting out their entire unit must pay $50 per month to the building for general upkeep but not those renting out just a room in their unit. Both security and the condo board have access to current rental activity, so they know who is hosting, who and how many guests are staying, and how much money is being being earned — 5% of which is given to the condo board from Airbnb.
There are ways to work together to ensure the residents that aren’t raving supporters of Airbnb know that the building has their best interests in mind. The program entitles condo boards to file complaints with Airbnb towards hosts who have abused their hosting privileges, which could remove them from the platform altogether. By partaking in the Friendly Buildings Program, it helps weed out any of the individuals who would likely abuse the system anyway.
INVESTORS AREN’T TO BLAME
Not every Airbnb host is attempting to start a commercial off-shoot with their property. While the rental inventory may be low, Urbanation’s recent study said there are currently “105,000 condo apartments under development, the highest on record.” There are lots of misconceptions hovering around short-term rentals, mainly that investors are opting to use their properties on platforms like Airbnb rather than adding rental inventory to the city. This is a highly exaggerated narrative.
Related: The Truth About Rent Control and Increasing Toronto Prices
The reason there are 105,000 condo units under development is greatly in part because of the many investors that use real estate as a safe investment practice. To presume that these properties are primarily used as “ghost hotels” is false and I’ll tell you why.
• Investors who purchase pre-construction properties in Toronto will get attractive tax breaks when they rent their property for a minimum of one year.
• Thanks to the recent guidelines around rent control, rents are now at an all time high, which is a huge incentive for owners to rent their investment properties.
There are lot of factors at play in a city whose population is growing as fast as Toronto. The demand for housing is definitely outweighing the supply, and it’s hard to keep up. But the reality is we live in an incredible city that people want to both live in and visit. In 2015, Toronto set a record of 14 million visitors and it’s been growing ever since.
As one of the world’s fastest growing tech cities, we’ve got to keep up with the innovative ways the tourism industry operates. We need to embrace short-term rental agencies and work together to ensure we’re creating a safe, respectable platform that offers visitors an affordable and fun alternative to experience Toronto. Regulations are needed to evolve with the times, but we need to be cognizant of the reasons behind the rules we are fighting for.