Proposed Airbnb regulations pretty much get it right

City government is acting to try to regulate the market and curb its worst elements, Edward Keenan writes.

Thestar.com
June 21, 2017
By Edward Keenan

Over the past couple of years, my wife and I have indulged idle daydreams of getting in on the latest investment-real-estate gold rush by going into the “home-sharing” business. I once spent an afternoon looking at condo unit sales prices and doing math about potential daily rates; Rebecca will sometimes say to me, “We should have bought the house next door when it was for sale and listed its three apartments on Airbnb.”

We’ll talk about how we would decorate and advertise, how we’d arrange cleaning and key drops around our schedules, how much cash might come our way.

It’s not actually a plan - we have neither the financial capital nor the inclination to actually do it. For us, it’s just the familiar middle-class imagining of easy money. Like talking about how you’d spend lottery winnings, or envy-searching New Brunswick mansions listed for relative pennies on realtor.ca, or planning the perfect heist.

But for many Torontonians - even some we know - it isn’t just a conversation topic, it’s a business. And the collective effect of all those businesses on the Toronto apartment rental market is beginning to look like a kind of heist - snatching what have been homes, or would-be homes, right out from under tenants and selling them by the day to tourists.

It’s not hard to see why the owner of an investment property would make the choice. The average monthly rent on a one-bedroom condo downtown in Toronto is $1,800. That number itself sounds outrageously expensive - it is outrageously expensive - but at $200-$300 per night for the same condo during the tourist season, you can make that monthly amount per week renting it out on Airbnb. Some friends of ours who went the home-sharing route after their basement apartment tenants left (of their own accord) said they can make a year’s worth of rental income in two months of the summer by using the home-sharing service instead of signing a residential lease.

Airbnb, the largest of the internet and mobile app-enabled home-sharing services that have turbo-charged the amateur hotel market in Toronto and other cities, says it’s intended as a way for average people to make some extra cash by renting a guest bedroom here and there; or letting someone else stay in their home while they themselves are on vacation.

Fair enough - people have been renting out extra rooms for as long as people have had them, and it feels reasonable that people be given some latitude to use their own home as they please. We know some people personally who use the service in exactly that way, a way to use their home as an occasional boost to their bottom line.

But there’s another whole element of the market that has basically seen what used to be rental apartments available to Torontonians converted into what amount to unlicensed hotels.
The Star reported this week on a so-called “ghost hotel” that appears to have replaced an apartment house in Kensington Market - allegedly, tenants were forced out in favour of paying overnight guests. Similar reports from around the city are common and some residents of the condo tower neighbourhood downtown have told me their buildings are constantly full of tourists rather than neighbours.

This becomes a problem in the apartment rental market, as supply contracts in an already low-vacancy market. Places to live become harder to find. Rents become more and more unaffordable.

The home-sharing services are only becoming more common and more popular: in 2010, Airbnb had fewer than 100 properties listed for rent in the city of Toronto, according to a report prepared earlier this year by the hotel worker’s activist group Fairbnb. A report from the city of Toronto that was considered at city hall this week estimates there are now 10,800 properties listed. And of those, the city estimates that 3,200 are not the owner’s principal residence. That is, 3,200 are not “home-sharing” listings at all, so much as they are investment properties offered as a hotel service instead of as residential apartments.

That’s a lot of apartments removed from the residential market already, less than a decade after the main home-sharing service launched. In a city with a rental apartment vacancy rate under 1.5 per cent, this is a disaster for tenants looking for someplace to live, and one that, if left alone, we could only expect to get worse as more landlords stop daydreaming and follow the financial incentives.

Which is why the city government is acting to try to regulate the market, and curb its worst elements. And refreshingly, the proposal for regulation the mayor’s executive voted on this week, which will be refined and presented to city council later this year, seems to be generally considered fair by almost everyone involved. A representative from Airbnb expressed support, and a representative of the hotel industry offered qualified support as well. Councillors from both the left and the right of the political spectrum seemed generally supportive. Fairbnb wants stronger regulations and a focus on enforcements, but was reported in the Star to be encouraged by the proposal.

The proposal would regulate and tax those who legitimately share their homes - part or all of their principal residence - requiring registration and a tax rate higher than that charged by hotels. It would outlaw using home-sharing services to rent out separate investment properties. Still under consideration after debate is whether legal secondary suites - such as basement apartments - would be considered part of a principal residence or not.

It is that rare thing at city hall: a reasonable set of regulations that (mostly) please everyone by sensibly allowing and setting rules for what’s new and unobjectionable, making sure businesses in competition face a relatively fair competitive field, and forbidding that which is hurting the city at large.

Of course, it will put an end to the idle daydream of easy money from fantasy tourism-property moguls like us. But it will be a great benefit to those facing the real-life nightmare of Toronto’s rental market.