Over 100,000 existing homes could be freed up to address the 3.5 million home gap needed to restore affordability - so why isn't Canada's leading housing agency acting on this?
A recent report from Statistics Canada found that 107,266 homes in Canada are currently being used as short-term rentals (STR), enabled by highly capitalized tech companies like Airbnb and Vrbo) — homes which have the potential to be long-term dwellings.
The STR category consists of properties listed for rent for more than 180 days a year and excludes properties that are the owner’s primary residence and vacation-type rentals such as cottages.
The popularity of STRs have grown as investors prefer to rent out their properties as short-term rather than long-term rentals because the revenue generated is often higher without the risks of traditional landlord-tenant issues and disputes that may arise with longer-term tenants, and in Ontario particularly, notoriously ineffective institutions to resolve such disputes in a timely and reasonable manner.
While an understandable move amongst investors, converting rentals to STRs, in effect, mini-hotels, reduces the number of properties that can be rented long-term, in the middle of a housing crisis that has been responsible for the high disapproval rates for our governing political party in Ottawa
Many cities have introduced regulations to curb the negative impacts of short-term rentals.
The City of Toronto only permits short-term rentals in someone’s principal residence, and the home cannot be rented for more than 180 nights in any given calendar year. However, Toronto does not have a strong track record of enforcing its own Airbnb rules compared to other jurisdictions. Las Vegas fined one illegal Airbnb operator $180,000 in January; another was recently fined $55,000 for operating an illegal Airbnb.
Given the obvious adverse side effects of using homes that are not someone’s principal residence as Airbnb rentals, it was surprising to see our federal Canada Mortgage and Housing Corporation (CMHC)’s deputy chief economist Aled ab Iorwerth was unfazed by the fact that over 100,000 short-term rentals have the potential to become long-term dwellings. In a Globe and Mail interview, he said, “The data suggest that STRs are not a pivotal factor on the long-term rental market”. In a LinkedIn post, ab Iorweth also argued against discouraging Airbnbs because it “risks undermining confidence in the desire to invest in new supply.”
Is banning these types of STRs the solution to Canada’s rental crisis?
Of course not.
For starters, if these investors cannot use these properties as STRs, they may end up selling them and converting them to owner-occupied homes rather than rentals. However, whether they are rented out to long-term tenants or sold to Canadian families, the point is that banning this type of use would result in over 100,000 additional Canadian families having long-term housing.
Given the CMHC itself has reported that Canada needs 3.5 million more homes by 2030 to restore housing affordability, why would CMHC prefer to see these 100,000 homes used as short-term rentals rather than long-term homes for families? And why would CMHC want even more of our new housing supply to be bought by investors who intended to use homes as STRS?
The answer to these questions is that CMHC’s position is motivated by our time's current economic and political ideology, which views houses as a financial asset and a means to wealth. By prioritizing housing as a financial asset, the belief is that the benefits will trickle down to Canadian households.
But the benefits are not trickling down.
Policymakers have grappled with the tension between housing being seen as a social right and a means to wealth for decades. Previous heads of CMHC have prioritized housing as a social right over a means to wealth. The former head of CMHC George Anderson talked about “jealously protecting” Canada’s affordable housing stock and argued that “only government intervention could ensure that all Canadians, regardless of where they lived, had the same rights, privileges and living standards. And that’s what my corporation is all about today: pursuit of that public policy purpose.”
As long as policymakers continue to prioritize the free market and the financial interests of investors rather than jealously protecting our stock of houses to meet the long-term housing needs of Canadians, housing in Canada will never be affordable.
John Pasalis is President of Realosophy Realty. A specialist in real estate data analysis, John’s research focuses on unlocking micro trends in the Greater Toronto Area real estate market. His research has been utilized by the Bank of Canada, the Canadian Mortgage and Housing Corporation (CMHC) and the International Monetary Fund (IMF).
Have questions about your own moves in the Toronto area as a buyer, seller, investor or renter? Book a no-obligation consult with John and his team at a Realosophy here: https://www.movesmartly.com/meetjohn
