Airbnb and Vrbo must be put in their place

There are no silver bullets when it comes to housing affordability in Canada. But there are still some live rounds lying around, if governments can find the stomach to actually pull the metaphorical trigger. Ideas like taxing capital gains on people’s principal residences are probably off the table, if only because the politics would be so obviously and immediately suicidal. Properly regulating short-term rental services like Airbnb and Vrbo, on the other hand, is worth a shot, and the impact would be felt almost immediately.

This is hardly a new conversation. I wrote about it for The Walrus back in 2019, when the City of Toronto was trying to figure out how to properly regulate Airbnb and the like. But for all the time and effort that went into those rules, there has been little slowdown in the spike in rents and housing costs there. Similar regulations in Vancouver and Montreal have had similarly underwhelming results. Now, with affordability spiralling out of control in most cities across Canada and any homebuilding target bound to take years before it starts to show up in the data, it’s time for more drastic measures.

If municipal governments are looking for inspiration, they should look to the new regulations introduced in New York City. As in Toronto, Vancouver and Montreal, hosts who list their properties for short-term stays have to register with the city or face a fine. But it’s the terms of its regulations that are so interesting — and potentially transformative. First, according to New York’s Office of Special Enforcement, landlords can’t rent out an entire apartment or home to anyone for fewer than 30 days, and that’s even if you own or live in the building. In Canada, that sort of restriction doesn’t exist.

Then there are provisions requiring the host to be present, imposing a maximum of two guests and mandating that hosts and visitors must leave the doors inside the dwelling unlocked, so occupants can access the entire unit. “The person renting out the home or apartment must ‘maintain a common household’ with the guests,” the rules state. “Otherwise, the short-term rental is illegal.”

This would dramatically curtail the number of use cases for short-term rentals since most people involved in these businesses either can’t or won’t share a household with strangers. As such, New York’s new rules will crack down on the approximately 10,000 illegal short-term rentals listed on Airbnb at the end of 2022, and return most of them back to the supply of units available for people actually living and working in New York.

The people paid to spin on behalf of companies like Airbnb and Vrbo will deny the correlation between short-term rentals and rising rents, and they’ll raise concerns about the impact these sorts of attempts to regulate their business will have on the tourism industry. Let them. As McGill University’s David Wachsmuth told Global News in June, “When you take a bunch of supply off of a market and don’t really change anything about the demand, the result is that prices are going to go up. And that’s indeed what happened.”

It’s not rocket science, in other words. Short-term rental sites and the financial opportunities they present effectively remove thousands — or in New York’s case, tens of thousands — of units of supply that would otherwise be available for long-term rental. Putting those back in circulation would inevitably apply downward pressure on rents, as researchers saw in Vancouver when its regulations took effect. The only real question is whether that would be enough to counteract the upward pressure applied by in-migration from other parts of the country, immigration and other demand-side factors.

For a federal government that needs to show some progress on housing affordability, this a question the Liberals should at least try to answer. The federal government should lean on the municipalities as hard as it can, with both carrots and sticks, to pass regulations that put the people who actually live and work in these cities ahead of visitors. Yes, the tourism industry might take a bit of a hit, and yes, so will some highly leveraged homeowners who bought so-called “income properties” and are renting them out through these sites. So be it. Renters, students and other people on the bottom of the property ladder have been taking hits for years now, ones they either didn’t see coming or couldn’t avoid.

If nothing else, it will help expose some of the so-called “gatekeepers” in our collective midst. According to recent research from The Maple’s Davide Mastracci, more than one-third of Canadian members of Parliament meet the definition of a landlord, with many — including Opposition Leader Pierre Poilievre — owning more than one property. More than 40 per cent of the Liberal cabinet generates income from real estate, and even NDP Leader Jagmeet Singh owns a rental property in British Columbia in partnership with his wife. Our political class, in other words, has a shared conflict of interest here that might prevent it from seeing things as clearly as it ought to.

But fear is a very effective motivator, and the Trudeau Liberals should be running scared right now on housing. In the same recent Abacus Data poll that showed them 14 points behind Poilievre’s Conservative Party of Canada, respondents were asked if they thought the government had a plan when it came to building more housing and making it more affordable. The results: Just 19 per cent thought they had a “good plan,” while 39 per cent said they had “no plan” at all.

Tightening the screws on short-term rentals isn’t, in and of itself, a plan. But it’s a big step in the direction of one, and it would take some of the fire out of Canada’s white-hot urban rental markets. That might buy the government a bit of time to actually get moving on other aspects of a full-fledged housing plan, one that encourages more building while ensuring it gets done in ways that promote and protect affordability. On this front, after all, a failure to plan is effectively a plan to lose the next election.