Airbnb is the best-known operator of short-term rental services, of which there are many providers. Based on the concept of “the sharing economy”, much like Uber, Airbnb connects property owners/landlords with renters and travellers. The service has until recently been a boon for investors who have found it to be a good way to find tenants willing to pay good income for the flexibility of arranging short-term rentals, at rates that are very competitive relative to traditional short-term rentals (ie hotels).
With that said, there are some headwinds that are on the way, and homeowners and investors need to be aware of them. In the City of Toronto, the Municipal City Council is looking at placing restrictions on short-term rentals. There are several reasons why including:
- Toronto has an extremely low vacancy rate (less than 1.5% of units are ever vacant). Short-term rentals reduce that number even further, choking off the supply of rental inventory for residents, and thereby increasing rents (which went up by nearly 20% in 2017 alone).
- Operating a standalone short-term rental property is a business. The CRA is looking to clamp down on revenues that were not being reported by landlords. This also means that the zoning for many Airbnb properties (residential) is not consistent with their use as commercial spaces.
- The hotel industry has been damaged as a result of vacancies increasing from the rush of supply of short-term accommodations, and hotels pay significantly higher property taxes – the playing field is not level.
- Last but not least, AirBnB’s operating inside condominiums create security concerns as non-residents are being granted access to private buildings with little to no oversight as to who is being granted access.
The government is looking at implementing policy changes that will address these concerns, and this may or may not restrict a landlord’s ability to use the service. Many condo buildings have already taken a proactive approach, restricting and/or outright banning short-term rentals on the premises. Airbnb has taken a proactive approach to working with the government to find balanced solutions that address these concerns, but as a landlord/investor, it is important for you to be aware that as a revenue stream, AirBnB and the short-term rental market may soon undergo changes that may or may not impact your ability to use them as an income generator.
If you have questions regarding this or any other real estate-related topic, drop us a line! The team at ShirriffWells is always here to help!