airbnb takes a blow to the chin

As the calendar year winds down our real estate market typically goes into a slight slumber as the holiday season approaches and we all grapple with our stuffed bellies and potential New Year’s eve hangover. Fun times for sure.

But this past week saw two major announcements that should have a huge impact on Toronto’s hot housing market and the way real estate is transacted throughout the province.

The first would be the handing down of a judgement that’s been in front of the courts since mid 2018, relating to airbnb. And this one is huge!

The second one titled the Trust in Real Estate Services Bill, is even bigger! The new bill addresses much needed changes to the way real estate is transacted in Ontario. You can read my blog post on it here.

The city passed regulation in 2017 on regulating the airbnb market but it was challenged by a group of hosts (with some financial backing by the company airbnb itself!) Well, the judgement was handed down in favour of the city and the path to regulation has begun.

There still may be some tweaking but this much is for sure, you will now have to register and pay a one time $50 fee plus 4% tax on any stays less than 28 days. It also now only applies to ones permanent residence, which can be rented out up to a maximum of 180 days per calendar year.

The city projects this will effect about 5,000 properties which should make interesting on how they will regulate it. Of course, airbnb is not happy with the verdict and may choose to appeal.

Also not to be confused on the condominium side, but many buildings already ban airbnb type rentals which is their choice. Each building has it’s own set of by-laws, rules and regulations that apply to the building itself. So if you are considering buying a condo for this purpose, even as a principal residence, make sure it’s in a airbnb “friendly” building.

Nonetheless, this will have an impact on Toronto’s real estate market. This should see less houses and condos being bought and run as short term rentals freeing up property for owner occupied buyers.

The not so discussed side affect of this ruling is the impact it will have on Toronto’s rental market, which in my opinion is the real target of the city.

Rents in Toronto have increased upwards of 30% over the past two years in many parts of the city, and for some reason, renters tend to be much more vocal than homeowners.

The city believes affordability in the rental market will be had by limiting the number of allowable airbnb rentals, thus freeing up property to be made available for longer term tenants while completely ignoring that many (well at least some of my investor clients), moved their rental units into the airbnb market to avoid the provinces strict rental housing rules.

Not everybody is looking for more revenue, although that has become an offshoot of the short term rental market.

With the province restricting rental increases over the past 4 years between 1.5%-2.2%, if you are the owner of a condominium you are losing out every year as it’s guaranteed that your property taxes and monthly maintenance fees will both increase by at least 2%. Already many condo investors are experiencing hefty cash flow problems, so add in a tight rental market where tenants are staying put longer to preserve their rent controlled space, and it can become difficult to maintain your investment pretty quickly.

There are bigger issues at hand such as a major shortage of housing in the GTA while demand has spiked due to the large amounts of immigrants our city attracts. An imbalance in the rights of tenants verse landlords is another. So this recent ruling on airbnb to me is more a win for vocal advocacy groups of tenants, and the renters themselves.

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