Airbnb and others are rental affordability lightning rods. Will reforms help?

Click to play video: 'New study renews debate around tightening the laws around short-term rentals'
New study renews debate around tightening the laws around short-term rentals
WATCH: A new study suggests that there's no causal link between the increase in the number of short-term rentals and the hike in rent increases in Canada. It's renewed the debate about whether tightening the rules governing services like Airbnb will improve the rental market. Phil carpenter reports – Oct 21, 2023

As politicians pitch tighter regulations on the short-term rental market as a path to housing affordability in Canada, there is renewed debate about whether tougher crackdowns on Airbnb and others like it will make a notable improvement.

British Columbia’s announcement on Monday that it would roll out new rules governing short-term rental sites like Airbnb and Vrbo reignited a long-running discussion in Canada about the impact these platforms have on rental affordability in the country.

The regulations would see hosts in the province limited to renting out only their primary residences and one secondary suite, with smaller towns exempt from the rules. Fines would also be increased for those breaking municipal rules.

B.C. Premier David Eby positioned the crackdown as a path to restoring housing affordability.

“Anyone who’s looking for an affordable place to live knows how hard it is, and short-term rentals are making it even more challenging,” he said Monday.

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Click to play video: 'B.C. government to crack down on short-term rentals'
B.C. government to crack down on short-term rentals

Regulating the short-term rental market is typically in the provincial or municipal jurisdiction, with many cities, including Toronto and Vancouver, and the province of Quebec already putting rules and licensing requirements in place to govern how hosts using Airbnb and its ilk can operate.

But Chrystia Freeland, Canada’s deputy prime minister and finance minister, weighed in on the matter on Tuesday, calling B.C.’s crackdown “very important” and encouraging other provinces to follow its lead.

Though she acknowledged short-term rentals are usually the purview of other levels of government, Freeland said Ottawa is looking to see if there are any “tools” in the federal toolbox to “relieve pressure” on the tight rental market.

“We are looking around and are saying, what can we do right away that makes more homes available for Canadians? And the short-term rental is one of those spaces,” she said.

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Click to play video: 'Airbnb and others are rental affordability lightning rods. Will reforms help?'
Airbnb and others are rental affordability lightning rods. Will reforms help?


What impact does Airbnb have on rental markets?

Freeland cited estimates from McGill University in 2019 that 31,000 units could be freed up from short-term rental platforms — particularly in Toronto, Montreal and Vancouver — through further regulation of the space.

That study flagged short-term rentals as incentivizing further financialization of real estate and posing a “threat to housing affordability.”

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“Through removing housing that would otherwise be available on the long-term rental market, Airbnb is reducing housing supply and, in turn, housing affordability,” the report said.

But a recent study using Airbnb’s own internal listings information for the first time shows the proportion of units hosted on the site likely wouldn’t make a dent in Canada’s housing affordability crisis.

“Airbnb, on its own, is simply not large enough to have been impacting overall average rent prices,” says Tony Bonen, director of economic research at the Conference Board of Canada and author of the report.

The think tank, which describes itself as objective and non-partisan, released the analysis of Airbnb’s impact on Canadian rental markets less than a week before B.C.’s new regulations were announced. Other short-term rental platforms weren’t included in the Conference Board’s analysis, though some properties listed on sites like Vrbo are also listed on Airbnb.

The study sought to figure out the connection between rents in neighbourhoods across Canada, which the Conference Board said rose an average of 30 per cent between 2016 and 2022, and the threefold growth in the number of Airbnb units over that time.

Click to play video: 'Could Okanagan’s real estate market be flooded with new listings in wake of new short term rental rules?'
Could Okanagan’s real estate market be flooded with new listings in wake of new short term rental rules?

Bonen tells Global News that the Conference Board found a correlation between the neighbourhoods that saw rents rise the fastest and the areas that witnessed rapid growth in Airbnb units.

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But that correlation doesn’t mean the growth in Airbnb units caused the spike in rents — they just might be rising for the same reasons.

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The factors that push up demand for rentals in any particular neighbourhood — a central location, proximity to public transit or popular restaurants — might also make those areas more attractive for hosts to set up an Airbnb unit catering to tourists, the report posits.

“We find no compelling evidence that the level of Airbnb activity had a meaningful impact on rents,” the report concludes.

Click to play video: 'Deputy PM on B.C.’s short term rental legislation'
Deputy PM on B.C.’s short term rental legislation

Total supply of Airbnb units not enough to impact affordability: economist

The Conference Board said the only exception it found to this trend was in Quebec, where it observed a slight impact from the proportion of Airbnbs in that province.

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Of the average $234 increase in rents between 2016 and 2022, the report pegged about $4 of that hike to the influence of Airbnb after controlling for other factors.

Bonen says it’s not clear why the province was a standout in the analysis, but he suggests the higher proportion of Airbnb units in the downtown neighbourhoods of Montreal and Quebec City might constrain the already tight supply of rental homes more than in other markets.

The report indeed found the rent increase was more significant in areas with a higher density of short-term rentals.

In the Saint-Roch neighbourhood of Quebec City, where Airbnb units made up 7.5 per cent of overall housing stock in 2022, the Conference Board’s models found that a roughly $55 spike in rent over the period could be attributed to the platform, accounting for roughly a quarter of the overall rental cost increases from those six years.

But on a national scale, there just aren’t enough Airbnb units to make a tangible dent in Canada’s low housing stock, Bonen argues.

Click to play video: 'Will buildings already zoned for short term rentals be exempt from new short term rental legislation?'
Will buildings already zoned for short term rentals be exempt from new short term rental legislation?

On average, Airbnb units account for roughly half a percentage point of housing stock in the 330 neighbourhoods surveyed by the Conference Board. At most, this rises to one per cent of total units in the most populous Airbnb markets in Canada’s biggest cities, the report said.

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While Bonen agrees that Canada needs to bring more solutions to the table to rapidly increase the supply of homes in the country to restore affordability, he says increasing that stock by one per cent is no silver bullet for the housing crisis.

BMO senior economist Robert Kavcic, meanwhile, said in a note to clients on Thursday that the short-term rental market is under “full-scale attack” at the provincial and federal levels as of late.

He said that the impact of releasing roughly 30,000 short-term rental units onto the long-term market would not be a “game changer” for supply, with housing starts running around the 250,000 mark annually and policymakers looking to double that figure in the years ahead.

Kacvic added, however, that it’s “not nothing” to add even marginal supply to neighbourhoods in Canada that are currently facing very tight rental vacancy rates.

Regulations not restoring affordability

With the conclusion that the overall proportion of Airbnb units in Canadian neighbourhoods hasn’t made a dent in affordability, the Conference Board report also found that regulations of the space in recent years haven’t helped to improve conditions for renters.

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Vancouver introduced short-term rental regulations in 2018 and Toronto followed suit in 2020. Both cities require operators to sign up for a licence to host on their platform. Like many other municipalities in Canada, hosts in Vancouver and Toronto can only offer a unit in their primary residence for short-term rental.

The Conference Board study found that primary residence restrictions in a market generally led to a decline in Airbnb listings of roughly 50 per cent. But it added that those dropoffs in listings were not accompanied by any relief in the rental markets it analyzed.

“Despite having a clear impact on Airbnb activity, these regulations did not lead to lower rents in the jurisdictions in which they were implemented,” the report read.

Airbnb says its platform ought not to be the face of Canada’s housing crisis.

“While we are always willing to work with governments to address community concerns, strict home-sharing regulations have not alleviated the housing crisis in Canada, including those that are already in place in the communities the Deputy Prime Minister mentioned – Toronto, Vancouver and Montreal,” Airbnb Canada policy lead Nathan Rotman said in a statement to Global News on Thursday, citing the Conference Board report.

Rotman pointed to the benefits of Airbnb for its hosts earning money on the platform and for travellers boosting the economy of local B.C. markets.

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Click to play video: 'Will B.C.’s short-term rental restrictions mean less travel opportunities?'
Will B.C.’s short-term rental restrictions mean less travel opportunities?

“We hope lawmakers will pursue more sensible regulation and listen to the many residents – hosts, travellers and businesses – that will be impacted by proposed rules,” he said.

The rising temperature around short-term rentals comes as the federal government attempts to address an affordability crisis by rapidly increasing the number of homes available for renters, including proposals to waive GST on new purpose-built rental apartments.

Also paying attention to the federal government’s movements in the space is Expedia Group, the owner of the Vrbo short-term rental platform. Public lobbying records show the company’s reps have regularly been meeting with government finance officials over the last year to discuss taxation and other economic concerns.

Expedia Canada’s manager of government of affairs for Canada, Hunter Doubt, met with government officials more than a dozen times in the past year and twice in the month of October. Global News reached out to Expedia to ask about the company’s lobbying goals and recent comments by Freeland about possible federal action in the space.

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Doubt expressed “significant concern” about the approach taken in B.C. of restricting listings and warned that implementing a “one-size-fits-all policy” for all provinces and territories could have “unintended consequences.”

“We are hopeful the federal government will ensure that short-term rental platforms, such as Vrbo, are included in the conversation over the coming weeks and before any action is taken,” Doubt said in a statement.

He reiterated concerns about the economic prospects for British Columbians and said the company would continue to work with the province and municipalities going forward on any new policies.

Bonen says it’s understandable why short-term rental platforms have come under fire as discussions about housing affordability issues heat up. Airbnb and the like are relatively new players in the housing space, for one, and the available data and understanding about their impact is limited.

He also says these platforms have come with social issues such as worries about party houses and other safety concerns popping up in neighbourhoods. Regulations can be effective at addressing these problems, he notes, but they can also be conflated with efforts to tackle housing affordability woes.

Bonen says he hopes the Conference Board report will add “nuance” to the policy debate on short-term rentals going forward, and where regulations are appropriate or not to address issues.

“When we’re thinking about affordability and rental prices per se, I think we really need to focus our attention on where we’ll get the most bang for our buck,” Bonen says.

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Click to play video: 'Calgary rental rate hikes reach record levels in September'
Calgary rental rate hikes reach record levels in September

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