Toronto embarks on short-term rental crackdown

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A new year can be a time of renewal and resolution to change, and for 2021 Toronto is ringing in its long-awaited enforcement of regulations on short-term rental sites such as Airbnb.

The city passed its by-law to bring order to the unregulated free-for-all of short-stay accommodations in 2018, spent a year fighting off court challenges and saw its planned implementation for early 2020 delayed by the global pandemic. But if you’re looking for a dramatic dragnet-style bust to kick off an enforcement blitz from a city known for plonking cement blocks in front of by-law violating cannabis dispensaries or high-profile barbecue blockades you may be disappointed.

“We’re going to use the data we have and be out there sending out notices and following up … nothing is immediate. There’s a process to be followed,” said Carleton Grant, executive director of City of Toronto municipal licensing & standards (MLS). The city confirms that a few inspections were done as of Jan. 2, though no by-law infractions were found. “The majority of people do want to follow the rules. That 1 [per cent] to 5 per cent that don’t … that’s where we’re going to put our efforts,” Mr. Grant said.

Thorben Wieditz, an organizer of Fairbnb, a group that has pushed hard to see short-term operators regulated, says that other cities have found it can be a constantly evolving cat-and-mouse game with unscrupulous hosts.

“Once properties creep back up onto the platform with all kinds of tricks and made-up numbers, that’s where the city needs to engage a third-party firm to identify those who are the worst perpetrators,” Mr. Wieditz said. “And make sure the fines are steep enough to discourage those who may view it as the cost of doing business.”

For its part, Airbnb – the largest short-stay platform in the world – is giving its Toronto users until Jan. 8 to prove they have obtained a short-term-rental registration for any listings that need one. After that date, any listings that need a registration will be deactivated or blocked from booking new short stays, according to statements from the company. Airbnb said that, after that, its main role will be to share data with the city.

According to its open data portal, the city has so far handed out only 2,003 registration numbers and is processing a backlog of more than 700 applications that came at the end of 2020.

“Before COVID I would say that was an incredibly low number,” Mr. Grant said. “With everything that’s happening right now, I would still say it’s low, with a whole bunch of asterisks around it.”

Airbnb doesn’t release data on how many hosts or how many listings it has in Toronto, although according to paperwork the company filed with the U.S. Securities and Exchange Commission as part of its recent initial public offering of stock, the city is one of its 10 largest markets out of the 100,000 cities it operates in globally. Elsewhere in its filings, the company was blunt about the risks of civic crackdowns on home-sharing: “If laws, regulations, rules, or agreements significantly restrict or discourage hosts in certain jurisdictions from sharing their properties, it would have a material adverse effect on our business, results of operations, and financial condition.”

Third-party analysts have estimated there are anywhere between 14,000 and 20,000 short-term rental listings in Toronto. One company bidding to become one of the city’s data partners for enforcement is Harmari Tools, which has estimated that, in a normal year, short-term rentals in Toronto generate close to $250-million in revenue. But they say that by the end of 2020 listings had fallen almost 50 per cent from the more than 25,000 it identified in December, 2019. Still, the vast majority of the listings were “entire home” apartments, which under the city’s rules must be a short-term landlord’s principal residence, and cannot be rented for more than 180 nights in a year.

Experts such as McGill University’s David Wachsmuth, the Canada Research Chair in Urban Governance, have estimated short-term rental platforms have taken thousands of apartments out of Toronto’s long-term housing system. He also says that, in major cities Airbnb’s highest volume listings are controlled by large corporate property managers, or so-called “ghost hotel” operators. Such operators have effectively been banned under Toronto’s new rules.

One such operator is Suman Sarkar, who operates the property management company Sarkar Suites. That company shares a number of its apartments with a host identified only as “Sam,” who has 22 listings on Airbnb. Mr. Sarkar says he doesn’t own any of the apartments and isn’t registering with the city. “We’re wrapping up the business, we’re going to different cities,” he said. “You can’t work against the government.” At his peak, he listed 96 apartments in three cities on short-term stay sites such as Airbnb, VRBO and Booking.com, before the pandemic wiped out most of his tourist business. “We built this business for the last six years, we expanded in Montreal and we are still in Mississauga. It started with a grey area, like any new business … like when Uber started it was grey, we didn’t know was it right or wrong.” He said that any listings currently left on Airbnb are a clerical error, citing cuts to his staffing.

On message boards dedicated to Airbnb hosting there remains confusion by some operators, such as those who hold themselves out as property managers or a minority who are using Airbnb to find long-term tenants. But Mr. Grant cautions anybody hoping to plead ignorance to charges that carry penalties between $1,000 and $10,000 per infraction.

“People are going to be playing the naïve card, people play it all the time,” Mr. Grant said. “We may have a whole file on them already. … We may have been on you for three years and the naïve card is not going to work.”

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