The Toronto housing market is one of the most competitive in Canada and the world. As the provincial capital of Ontario, Toronto is an important political and historic center, besides its major role as a driver of the economy. Because of these characteristics, Toronto has made a name for itself as a powerful tourist destination.
Toronto’s tourism industry is bustling and has become one of the biggest destinations in Canada. In 2017, Toronto had almost 44 million tourists (roughly 10.4 million from elsewhere in Canada and just under 3 million from the United States). All told, 2017’s tourism alone brought almost $9 billion in revenue.
Toronto’s role as a top destination for national and international visitors is poised to keep growing. This makes any changes to regulations in the Toronto housing market something to watch. Recently, Toronto passed new rules for Airbnb rentals. Many buyers are asking what this means for the local real estate market.
What Did Toronto Change?
As of November 2019, Toronto has ruled to place restrictions on Airbnb and other short-term rentals. The new regulations allow for landlords to rent out spaces for a maximum of 180 nights each year. Up to three bedrooms per property can be rented all year long for a maximum period of 28 days. Landlords can no longer list basement apartments or secondary suites as short-term rentals. Only tenants can rent these spaces, and only for 28 days at the most.
The decision took about two years to implement, with the process beginning in 2017. Before the process was finalized, Toronto asked Airbnb to voluntarily follow the proposed regulations. Airbnb is currently facing scrutiny for its verification and refund practices after an American VICE investigation uncovered a nationwide scam on the platform. The Local Planning Appeal Tribunal (LPAT), the provincial organization that approved the regulations, estimates that they could return 5,000 of the approximately 21,000 Airbnb units to the Toronto housing market.
What Happens Next?
In a city experiencing a lull in rental vacancies — only 10 available rental units for every 1,000 — these regulations could mean a sudden influx of new residential and rental properties hitting the market. Those who only use Airbnb periodically or less than 180 days are unlikely to notice any differences. However, current landlords must register their rentals with a $50 fee, and rental platforms must also pay a one-time application fee of $5,000 (and $1 for every booked night). Landlords now also must pay an accommodation tax of 4 percent on any rentals that are less than 28 days.
Landlords will be prevented from using Airbnb as a quasi-hotel business. Instead, many of these homes will be available on the long-term rental or even buyers’ market. Since Toronto is currently one of the most expensive places to rent or own in Canada, this is good news for buyers looking for an opening into what is always a competitive market.