Toronto cracks the whip on Airbnb-style rentals

If you rely on Airbnb rentals as a primary source of income, you might want to start coming up with a Plan B. The Municipal Licensing and Standards division of the City of Toronto has issued a slew of proposals that, if implemented, will significantly curtail the ability to list multiple homes out for short-term rentals.

“The objective is really simply to bring about a fair playing field, to make sure the housing that isn’t a principal residence can be restored to the rental pool, that there is fair competition between the established industries and the relatively new industry, and finally, but very important, to make sure we maintain the stability of our existing neighbourhoods,” Toronto Mayor John Tory told reporters at a press conference Monday afternoon.

The proposed regulations will still permit Torontonians to list their homes on Airbnb and other short-term rental sites, but only if those homes are their principal residences. If you own multiple condominium units for instance, you won’t be allowed to use those units for short-term rentals. You can, however, rent them out long-term.

“I’m not particularly thrilled,” said Zack (not his real name), a 32-year-old downtown Toronto resident who derives his primary income from leasing out multiple Airbnb units. “I lease out my spare room and my brother’s empty apartment to tourists, and medical students on a short-term fellowship, mainly. I just don’t get why that’s wrong. I’m going to be losing more than half of my income if this takes effect.”

New Airbnb rules

The new zoning bylaw proposals will not only limit the number of homes you can list out, but the number of rooms used in a home used for short-term rentals. They will now be capped at three.

Those who use Airbnb to list properties might soon have their information included on a “registry for residents who operate their homes as short-term rentals.” A fee of $40 to $150 will be slapped on residents who rent out their spaces on Airbnb, and other similar websites.

In addition, all companies that facilitate short-term rentals, like Airbnb, will now have to be licensed. The City is proposing an “associated fee between $5,000 and $20,000, plus fee per night booked” in order to register for and maintain a valid license as a short-term rental business. We can only imagine that these additional fees will not be absorbed by Airbnb, but passed down to the consumer.

The proposed regulations come after months of research and consultations with anti-Airbnb advocates, short-term rental listing sites like Airbnb and VRBO (Vacation Rental By Owner), and other industry players. Between 2014 and 2016, the number of Airbnb rentals in Toronto tripled — in 2016, there were 10,800 listings for short-term rental, mostly of condominiums, lofts and apartments in the downtown Toronto area.

The lack of long-term rental units

City officials are concerned that the soaring number of short-term rentals is taking away from the pool of available long-term rental units. It can be much more lucrative to rent out an apartment for a bunch of short-term stays at a higher price, rather than sign a lease with one tenant for a period of say, 12 months.

“I could, of course rent out my brother’s place long-term,” Zack told VICE Money. “But he’s based in Pakistan and sometimes travels back to Toronto in the summer. He needs the flexibility of being able to rent out his condominium for short stays.”

Rent prices in Toronto have gone up approximately 30 percent in the last five years. Part of why renting is getting more expensive is the dwindling number of units available for long-term rent in Toronto. Vacancy rates for condo-apartment rentals are at one percent — the lowest they’ve been in seven years.

A 2016 report by Airbnb however, disputes this theory. It claims that of the 16,000 listings that were rented on Airbnb in 2016, 97 percent were for a period of 30 days or less.

In fact, Airbnb’s spokesperson Alex Dagg claims that more than 80 percent of the people on their website are listing their primary residence to rent out, and aren’t operating a widespread short-term rental business using Airbnb as a platform, like Zack.

That does not quite tally with numbers from the City of Toronto — the proposed regulations will permit approximately 7,600 properties rented on Airbnb in 2016 to continue to operate, but roughly 3,200 will be de-listed as “they likely did not occur in a principal residence”, according to Mayor Tory.

If accepted by city council, the proposed bylaw changes to short-term rentals will likely come into effect in the fall of this year. The city council will debate these new proposals next Monday, June 19, at the meeting of the executive committee led by Mayor Tory.

Follow Vanmala on Twitter