Airbnb Faces Latest Hurdle as Toronto Considers Regulation

Updated on
  • Airbnb listings doubled in 2015 from prior year, report shows
  • City may consider licensing system, zoning, tax requirements

Canada’s largest city, facing low apartment vacancies and soaring real estate prices, is considering regulating short-term home rentals amid concern that companies such as Airbnb Inc. are removing much-needed supply.

The City of Toronto released a report Wednesday that showed Airbnb rentals doubled in the city and lays out potential regulations including a licensing system, updated zoning bylaws and additional tax requirements. The report, which will be considered by policy makers next week, recommended consultations with the public and stakeholders early next year to help decide whether regulation is needed.

“Toronto residents have raised questions and concerns about whether short-term rentals are permitted in the city and whether short-term rentals should be subject to further regulation," according to the report, submitted by the city’s planning and licensing departments. “Cities around the world are facing similar issues and are in various stages of researching and regulating short-term rentals."

Cities are grappling with how to handle home-sharing services and their effect on neighborhoods, housing affordability, tourism and taxes. The Toronto report comes a month after Vancouver, another Canadian city with a tight housing market, announced it would begin steps this fall to regulate short-term rentals, which that city estimates is withholding 5,000 properties from the market. San Francisco enacted a rule this year barring platforms like Airbnb from collecting fees from hosts who haven’t registered units with the city, and New York is considering a state bill to regulate the service.

Rental Squeeze

There were 9,460 Airbnb listings rented in Toronto last year, up from 4,780 a year earlier, according to company data cited in the report. Of the 2015 listings, 6,440 were entire condominium units or homes. The City of Toronto has about 228,000 condos, according to data provider Urbanation Inc.

Airbnb is growing in popularity at a time when rising home prices are squeezing housing availability. The apartment vacancy rate in Toronto was 1.6 percent as of October 2015, and in Vancouver it was almost zero, according to the most recent data from Canada Mortgage & Housing Corp., the national housing agency.

Regulation Costly?

“There is a general issue of affordability in Toronto, but we don’t know what is causing that beyond market forces," Toronto Mayor John Tory said by phone last month in a wide-ranging conversation about the city’s housing market. “We are looking at first trying to determine what’s causing the challenge of affordability in this market and then saying, “all right, now that we understand what’s causing it, what do we do about it?’"

Airbnb is reviewing the city’s report, Alexandra Dagg, a spokeswoman for Airbnb, said in an e-mail statement. The company looks “forward to participating in the process, and to continuing to share data and information about our community with city staff, Mayor John Tory and all of Toronto city council."

More than 80 percent of Toronto hosts list their primary residence about four to five nights per month with some renting out the space to afford their homes, she said.

Canadian cities may find it costly to regulate the service. Airbnb has sued San Francisco and Santa Monica, California, and is threatening to sue New York. Anaheim, California, dropped its effort to regulate the service after the world’s fourth-most valuable startup pursued legal action.

— With assistance by Joel Rosenblatt

(Updates with Airbnb comment in seventh paragraph.)
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