The GTA is a huge place. Six million captives. There are hundreds of thousands of rental units in Canada’s biggest hunk of urbanity. Currently 99% of them are unavailable if you happen to be looking for digs. That vacancy rate of just over 1% is bad, but last year it was 0.3%.
Fewer rentals means higher rents, despite rules designed to keep costs down. And although tens of thousands of new units are in plans or in construction, condo prices have jumped four times faster than single homes.
Why is it so hard to find a rental in such a big place? Why do they cost so much to rent ($2,400 for the average one-bedder)? And why have condo prices escalated when single family homes have been in a torpor?
One word: Airbnb.
Almost four in ten condos in the GTA are owned by investors. About half of all new sales go to people with no intention of living there. Some of those are rented out to long-term tenants. A load are not. They get Airbnb’d. Currently more than 21,000 units are listed on the company’s site for Toronto.
Do the math. It’s a helluva lot more lucrative to rent out a downtown condo for $200 a night than get $2,500 a month from a tenant. Plus tenants have rights. They’re needy. They can refuse to move out. They can haul your LL butt before a tribunal. They can wear-&-tear your place with abandon. They can stop paying you, and still stay. Even an expiring lease is useless in getting rid of a melonhead. In contrast, Airbnb guests are quickie cash. They come. They go. They pay big. Badda-boom.
Of course, short-term rentals are a social scourge. They put hotel employees out of business. They seriously damage the hospitality business. They take tens of thousands of rental units off the market. They skew the economics of property values, as residences are turned into businesses. In big cities they crash the vacancy rate and raise rents. In small towns they suck off rare rental accommodation and leave streets dark in the off-season. They’re antipathetic to local economies – grocery and hardware stores, dry cleaners and bank branches – that rely on a stable year-round population. And they help lift real estate out of reach for locals.
Yes, Airbnb lets homeowners collect cash they would not otherwise get and, yeah, it’s cheaper to rent a condo in downtown Toronto for three nights than to stay at a hotel. But the societal costs are staggering. So what just happened in T.O. is a good thing.
It’s been a two-year fight. Landlords and the booking site have resisted every step of the way, and refused to voluntarily comply with municipal regs. For more than 20 months the issue has been before a tribunal, and now the decision’s been made. City, 1. Airbnb, 0.
All those units bought to rent out by the night (usually against condo board rules) are now illegal. Short-term rentals will be allowed only inside a landlord’s principal residence, and for no more than 180 nights s year. Homeowners can rent a max of three bedrooms, and not for more than 28 days at a time. No rentals will be allowed in basement or secondary suites. Landlords need to register and pay a fee plus a 4% accommodation (hotel) tax on revenues.
Of course by registering, landlords also join a database which is shared with the CRA – so anyone not declaring Airbnb (or VRBO) income is probably asking for an audit.
The expected result – about 5,000 units will be returned to the long-term rental pool, which is good. Says the lobby group out to geld the short-term landlords: “Commercial hosts are real estate investors who commodify our residential housing stock. They operate anywhere from two to many dozens of so-called entire homes, be these houses, apartments or condo units. They use residential housing stock as hotel inventory in buildings that were not planned, zoned, approved and built as hotels, but as residential buildings.”
Toronto joins Vancouver in trying to reign in the Airbnb beast. In YVR landlords have to secure a business license and can only operate out of a principal residence. Owners also have to pony up provincial sales and tourism taxes, which are collected and remitted by Airbnb. The city says over 70% of the 4,700 short-term rentals listed are legal, but suspicions remain a lot of other landlord are operating under the radar.
Meanwhile Airbnb continues to accumulate bruises for allowing ‘party house’ rentals to be listed and turning a blind eye to the incredible neighbourhood problems which short-term rentals cause – from North York to Venice.
Okay, kids, I know this is all part of the sharing economy. Like Uber. Or Rover. We’re all supposed to be collaborative now. Owners get cash for the bedrooms. Guests get a deal. Hilton gets zip. It feels good in an iconoclastic, screw-da-man kind of way.
But it’s not really sharing. More like stealing. From yourself.