In a bid to strengthen municipal regulations, the federal government has introduced new measures aimed at regulating short-term rentals, garnering praise from economists and concerns from real estate professionals. According to the fall economic statement released this week, starting January 1, the government plans to disallow income tax deductions for operators of short-term rental units not in compliance with municipal regulations.
As part of its commitment to empowering local governments, the federal government has earmarked $50 million over three years to aid municipalities in enforcing restrictions against short-term rentals, with funding set to commence in the fiscal year 2024-25. The overarching goal of these regulations is to increase the availability of rental units, especially in major cities like Toronto, Vancouver, and Montreal, where an estimated 18,900 homes are currently being used as short-term rental properties.
Robert Hogue, Assistant Chief Economist at RBC Economics, sees the federal government's move as a strategic effort to "crack down on short-term rentals." In an interview with BNN Bloomberg, Hogue described it as a "crafty way for the federal government to lend support to municipalities."
Nicki Skinner, a realtor at Bosley Real Estate, views the new federal short-term rental rules as an "added layer" designed to remove incentives for short-term rental units. She suggests that this policy could potentially lead to an unintended consequence if investors decide to sell their units instead of placing them on the rental market.
Skinner acknowledges that flooding the market with units for sale could benefit prospective buyers, but she raises concerns about the nature of these units, often small and not suitable for long-term living. This raises questions about the impact on the housing market dynamics and whether the influx of properties will genuinely address the shortage of affordable, long-term rental options.
Nathan Rotman, Airbnb Canada Policy Lead, expressed the company's perspective on the new regulations. Rotman stated in a Thursday interview with BNN Bloomberg that the regulations will affect only a small segment of Airbnb users, emphasizing that the company represents less than one percent of the overall housing stock in the country and major cities. He reiterated that Airbnb is already restricted to operating in a host's primary residence.
While Rotman expressed support for compliance and cooperation with the government, he voiced concerns about the government's framing of the issue. He cautioned against vilifying short-term rentals as a major problem in Canada's housing market and emphasized the need for a nuanced approach to address the challenges without negatively impacting legitimate short-term rental operators.
As the federal government takes steps to regulate short-term rentals, the intricate interplay between housing market dynamics, investor behavior, and municipal policies will continue to unfold, prompting stakeholders to closely monitor the outcomes of these measures.
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