How Will New Airbnb Rules Impact the Short-Term Rental Market?

Torontostoreys.com
January 10, 2020

Several news stories over recent months have covered a seemingly growing trend of trouble with Airbnb rentals. Noisy parties, property damage, and even gunfire have all been reported at some short-term rentals in Toronto, leaving many to question the safety of Airbnb rental activity.

Just last month, gunshots erupted following a fight-filled party at a semi-detached home at Pape and Danforth that was being rented out through Airbnb. Three months before that, in September 2019, a similar situation took place at an Airbnb-rented home in Vaughan.

Back in April, a 19-year-old was shot at a “mansion party” in Toronto’s west end that was being hosted in an Airbnb rental. He is now suing the short-term rental company for damages suffered.

Sure, there’s plenty of opportunity to build wealth with real estate rentals, and Airbnb has given many average homeowners a way to capitalize on this opportunity by allowing them to advertise their properties for rent on a short-term basis.

But as lucrative as short-term renting may be, there are clearly potential issues with it. Some are more of a nuisance, while others can turn out to be much more than that.

In an effort to better manage these short-term rentals and to closely scrutinize both who is renting them out and who they’re being rented to, the City of Toronto has been taking some big steps to implement new regulations in this sector.

After almost two years of complaints from short-term rental operators, the Local Planning and Appeal Tribunal (LPAT) approved Toronto city council’s plans to subject the short-term rental market to more stringent rules.

So, how will these rules affect short-term rental companies and operators?

Rundown of New Short-Term Rental Rules in Toronto

According to new regulations, short-term rental operators who list their properties for rent on sites like Airbnb must live on premises. If not renting out the entire home (up to a maximum of 180 nights per year), homeowners are only permitted to rent out a maximum of three bedrooms (up to a maximum of 28 days per year). They’ll also have to register with the city of Toronto before renting out any space in their homes.

Short-term rental operators have to pay a $50 registration fee every year and make sure their registration number is posted when they market their units. Another 4% municipal accommodation tax on rentals under 28 consecutive days is also required.

Companies like Airbnb will have to pay a one-time license fee of $5,000, plus an ongoing $1 fee for each night reserved through their company. All listings must have valid registration numbers, and records of short-term rental activity must be recorded and provided to the city if requested.

The new rules won’t be slammed on short-term rental companies and operators all in one big wave, however. Instead, they will be implemented in phases. The first phase, which is currently ongoing, involves dealing with any issues that are happening as a result of these types of rentals. For instance, any issues of noise and waste will be handled appropriately by the city after complaints are issued.

The second phase is set to take place sometime this spring and involves ensuring that all short-term rental companies and operators are appropriately licensed and registered with the city. The final phase is slated to take place in the summer, during which time all details and requirements of the new rules will be strictly enforced.

What are the Benefits of the New Rules?
Proponents of the new rules believe that these new regulations will help regulate the short-term rental market and protect the value and safety of properties and communities throughout the city. A more balanced market is more advantageous to both homeowners and tenants.

The new regulations will also have a positive impact on the long-term rental market. More specifically, the new rules are meant to help expand the availability of long-term rental properties by scaling back the number of short-term rental properties advertised on platforms such as Airbnb and the like.

The new rules were initially supposed to be effective as of June 2018 after Toronto city council approved zoning bylaw amendments. But several appeals made by short-term rental operators who are against the city’s proposed bylaws put these changes on hold until just recently.

While some may consider these rules a lot of red tape, others would argue that the extra steps that need to be taken and the additional fees will help create safer communities and protect the values of properties where these short-term rentals are taking place in Toronto.

So, will these new Airbnb rules ultimately work to balance out the city more? For now, only time, and money, will tell.