The Airbnb logo displayed in an illustration, taken May 3, 2022.Dado Ruvic/Reuters
Jonah Prousky is a management consultant and freelance writer who focuses on business, technology and society.
New York instituted a de facto ban last year on short-term rentals listed on platforms such as Airbnb ABNB-Q and Vrbo EXPE-Q, and Barcelona has plans to do the same. In Paris, London, Toronto, Montreal and Vancouver, those rentals are limited to primary residences.
Meanwhile, in May, British Columbia introduced a province-wide measure to limit short-term rentals to principal residences plus one accessory dwelling, for example, a basement suite or laneway house.
The key to regulating short-term rentals effectively is balancing the competing interests of investors, tourists, and, most importantly, permanent residents. But the blanket restrictions emerging across the country get this delicate balance wrong. They do too little to bring housing costs down for renters and too much to handicap real estate investment and tourism.
This is largely because, for all the fuss over short-term rentals, they only account for a tiny portion of the country’s housing stock. According to Statistics Canada, less than 1 per cent of homes in this country are short-term rentals that could be converted into permanent housing. Hence, housing prices have not generally fallen in cities like New York or Toronto, which have restrictions in place.
In a study of New York’s housing market, Sophie Calder-Wang, at the Wharton School of Business, found that Airbnb Inc. contributed to just 1 per cent of aggregate rent growth over the past decade. A similar study on the Canadian housing market, in collaboration with Airbnb, found that “Airbnb activity at the current levels has not generated an economically meaningful increase in rents across Canada’s major cities.”
Even still, policy makers in cities facing housing affordability crises might be willing to clamp down on short-term rentals if it gives rise to even small reductions in rents. Doing so might also benefit tenants who find themselves sharing a wall with noisy Airbnb guests.
But policy makers ought to consider whether the juice – a potentially tiny reduction in average rent – is worth the squeeze. Because, to date, the way many municipalities have crafted these restrictions has unnecessarily handicapped property owners as well as the country’s tourism industry.
The problem with this type of bylaw is that it treats every short-term rental as a home that could otherwise be rented long-term. Yet, plenty of those rentals offer luxury stays at premium price points – imagine, for example, a home in one of Toronto’s many upscale suburbs. These homes can be difficult to rent long-term. And, of course, these aren’t the kinds of properties that have much bearing on Toronto’s affordable housing crisis.
As well, families that own cottages as second properties – say, in Squamish, B.C., or Whistler, B.C., where the primary residence rule is in place – might never consider renting these properties long-term. But, by listing their cottages on a platform like Airbnb, they provide a valuable service to tourists, who, especially if they’re travelling with children, might not be able to afford multiple hotel rooms in the B.C. countryside.
To expose a luxury cabin in Squamish to the same short-term rental restrictions as a condo unit in downtown Vancouver, therefore, makes little sense. And the ramifications for investors – even mom-and-pop shops that might own one or two rental properties – are significant. Imagine remortgaging your home to finance a rental property only to learn that you can no longer legally list the unit on Airbnb, where your rental income might be three to four times higher than a traditional lease.
Thorben Wieditz: Airbnbs only a tiny share of potential long-term housing? Still a problem
Additionally, tourism in Canada never fully recovered from the pandemic. Between China’s travel restrictions and the growing threat of wildfires, we don’t want to make it more difficult for visitors to spend their vacation dollars in Canada. But that’s usually the effect that restricting short-term rentals has on tourism.
In New York, for example, hotel prices shot up 20 per cent following the city’s ban on short-term rentals, according to the New York Post. Consequently, a survey conducted by Airbnb after the new rules were passed found that 65 per cent of respondents were less likely to visit New York because of the cost of lodging.
So, when it comes to regulating short-term rentals, the solution is not to make the rules stricter, per se, but rather, to make them more specific – to tailor the rules to individual communities and property types, as opposed to broad-strokes restrictions that treat vacation destinations like big cities, and cottage owners like serial real estate investors.