On December 6th 2017, Toronto’s city council voted rules regulating short-term rentals into municipal law. Toronto’s new Airbnb regulations take effect on July 1, 2018 and the city has promised to review the new rules in 2019.
Toronto’s new rules apply to all short term rental websites
The so-called ‘Airbnb rules’ apply to all units rented for fewer than 28-days at a time. The regulations are not specific to Airbnb; they equally affect sites like Homeaway, VBRO, Craigslist and others (the City of Toronto says they know of 16 such sites). Any future start-ups will quickly find themselves added to this list.
Say goodbye to professional Airbnb landlords
Under the new ‘Airbnb ban’, hosts will only be allowed to rent out their principal residence. Within their principal residence, they’ll be allowed to rent their entire home while they are away for a maximum of 180 nights per year. Hosts can rent up to three spare bedrooms in their principal residence for an unlimited number of nights. This is meant to stop people from investing in properties which they intend to rent on Airbnb, and force existing Airbnb landlords to rent their units to long-term tenants.
And homeowners can say goodbye to extra income from secondary suites
The new ban prohibits homeowners from offering self-contained ‘secondary suites’ for short term rent. Although secondary suites often take the form of basement apartments, the rules apply to any self-contained residential unit with a kitchen and bathroom, which may occupy an upper floor, the back of a house and even separate structures on the same property (above a garage, for example). But their long-term tenants will be allowed to Airbnb their apartments.
Long-term tenants will be allowed to Airbnb their apartments
The City of Toronto has defined ‘a principal residence as a dwelling owned or rented by an individual person, alone or jointly with another person, where he or she is ordinarily resident.’ Under the new rules, it seems that long-term tenants will be able to sublet their apartments on a short term basis for less than 180 days of the year.
Whether this contradicts the Ontario Residential Tenancies Act rule that tenants are not allowed to charge sub-tenants more rent than they pay the landlord is not addressed in the new rules. Our guess is that this will have to be tested in court before it’s clear how these rules impact Toronto’s long-term tenants. It’s also unclear whether the list of registered hosts will be made public and therefore available to landlords. If so, it likely wont be long before this is tested.
These rules will have almost NO effect on the Toronto rental market
In 2016, Airbnb released a report conducted by their head economist, former Harvard Business School assistant professor Peter Coles. Using AirBnB’s own data, the company found that of the 9,500 active listings in Toronto in 2015, only 760 (0.07% of Toronto housing units) brought in at least $16,100 a year, or the equivalent a landlord would receive from a long-term tenant paying the city’s average monthly rent of $1,339.
The typical Airbnb listing for an entire unit in Toronto brings in much less, just $6,560 a year, the company says, with 46 per cent rented for less than 30 nights, and nearly 90% for fewer than 180 nights. These patterns suggest that most Toronto hosts are home sharing on a small scale, renting space that would likely not be available on the long-term rental market. Fewer than 10% of Toronto’s Airbnb listings (about 760) are likely to be affected by the new regulations.
All hosts and booking platforms will owe money to the City
Hosts will have to register with the city and pay an annual fee of $50 per listing. To enforce this, Toronto will require that hosts post their City-issued registration number in all advertisements. Hosts who are found to violate this bylaw could be fined up to $100,000. Ouch.
Short-term booking agencies (like Airbnb) will have to pay the city a $5,000 annual licencing fee and $1 per night per booking, and have policies in place to deal with noisy, disruptive tenants. They’ll also have to provide the City with information about all short-term rental activity in the city. An additional potential tax on short-term rentals will be discussed at the November 29, 2017 meeting.
The new Airbnb regulations will cost Toronto at least $1 million to implement
The City estimates that under the new regulations there will be 8,000 hosts registered, one short-term rental company licensed, and 765,000 nights booked in the first year after the By-law comes into effect. This would result in earnings of $1.17 million.
The fees will be used to fund the administration and enforcement of the regulations, which the City estimates will cost $1.172 million inclusive of salaries, benefits, operating, overhead and indirect costs. Five full-time staff members will be hired to administer the regulations. In addition, it is anticipated that $906,000 in one-time expenditures, including three temporary full-time staff will be required to implement this new bylaw.
So rather than a cash-grab, the regulations will cost Toronto tax-payers at least $1 million in implementation costs, and that’s assuming that there is almost no decrease in the number of hosts who decide to list their properties with the city. Given that this will put fewer than 1,000 units back on the long-term rental market, is it really worth the expense? What do you think?