New short-term rental regulations coming in 2018

The City of Toronto just announced a new bylaw to regulate short-term rentals. The new bylaw was mostly brought on by the growth of Airbnb in Toronto.

The bylaw allows homeowners and tenants to operate short-term rentals in their principal residences. They can rent out up to three bedrooms or the entire residence, but for no more than 180 days out of the year. Any stay for 28 days or less is considered short-term.

The City will set up an online registration for operators and there will be an annual $50 fee. Short-term rental companies, like Airbnb, will require a licence from the city. The application will cost $5,000 and there will also be an annual licensing fee of $1 for every night booked through the platform.

The City hasn’t said how they plan on distributing the extra funds pulled in by the new bylaw, but affordable housing can always use more support in Toronto and there is the matter of a $1.7 billion park that people want built.  

The bylaw will kick in June 1, 2018.

“These regulations do the right thing in the right way. They strike a balance that embraces new technology and allows short-term rentals while protecting communities,” says Mayor John Tory. “I’m proud City Council has found a way to regulate short-term rentals in a way that will keep housing affordable.”

As you may have noticed, the press release from the City doesn’t mention anything about secondary units. That’s because the City has already passed a motion banning secondary units from being listed on short-term rental platforms in an effort to increase the long-term rental inventory.

Basement apartments are also banned, though there are only around 1,700 registered secondary units, the City believes it could total 70,000 with these new regulations.

While we’re on the topic of basements, what about a whole other apartment in the attic? There are many three-storey houses where the owners have converted the attic space into a unit with a kitchen, bathroom, bedroom, and separate entrance. Are these secondary units or part of the primary residence?  

One thing that’s odd is that long-term tenants in secondary units can rent out a bedroom in their unit as a short-term rental. So, the owner of the secondary unit is banned from short-term rental, but their tenant can make money off that unit.

With a decreasing vacancy rate, it’s clear that Toronto is in need of more rental, so we think this might be the right move for City. That said, there are probably many condo investors with secondary units that found they make more money in the short-term rental market, so they’re probably not happy right now. There may even be some potential condo investors deciding to invest elsewhere because of the new bylaw.

The 180-day limit is also interesting. We don’t understand the reason for the maximum. Why restrict people to making more money throughout the year? If one person can keep a bedroom occupied for 5 days out of the week, why should they have to stop 36 weeks into the year?

The new bylaw is a step in the right direction, but we see a lot of confusion in the future and a lot of people blindly disobeying the rules.