Canada Reopens its Borders to Tourists After Over a Year or Restrictions. How Will it Continue to Regulate Short-Term Rentals?

By Lindsey Gergel

Starting August 9, 2021, Canada began welcoming international travelers from America on vacation once again after a 16-month border closure due to the COVID-19 pandemic.[1] The Canadian government also plans to allow all fully vaccinated international travelers entry in September of 2021.[2] Tourism rates in Canada from international travelers are up 9.1 percent in the first quarter of 2021.[3] As the Canadian border continues opening, it will have to once again address the problems that arise with increasing demand for short-term rentals.[4]

In the last decade and a half, Airbnb took the world by storm, going from 1,400 guests on New Year’s Eve in 2009 to now having upwards of 900 million total guests in its 14 year history.[5] The platform also has multiple alternatives that also allows users to rent out their properties as short-term rentals, such as VRBO, Turnkey, and Booking.com.[6] The popularity rise in short-term renting is not without controversy, however.[7]

The increase in popularity has its fair share of positive effects on communities.[8] Proponents of short-term renting argue that short-term renting helps accommodate guests in cities where hotels cannot alone accommodate tourists for large events.[9] Furthermore, short-term rentals bring spending from tourism to places in cities outside central business districts.[10] Short-term rentals also can bring spending from tourism directly to the community, rather than to hotels.[11]

 The effects short-term rentals have on communities has not been all positive.[12] The rise of short-term rentals has had numerous effects on cities and towns, but perhaps the most concerning is its effects on the availability of long-term rentals.[13] Generally, long-term rentals are considered to be rentals that are longer than 30 days, such as in a typical lease agreement.[14] The rise of Airbnb and short-term rentals in general has led to a smaller supply of long-term rentals.[15] It is not difficult to see why owners are rushing to change their long-term rental properties into short-term rental properties.[16] For example, in Toronto, the average price of renting an entire home or apartment on Airbnb is $182 per night.[17] Comparatively, the average rent in Toronto is $1,800 per month.[18] This indicates that a property owner would need to rent out her property only ten days out of the month to earn more than she would earn with a long-term rental where the tenant is living in the property all 30 days.[19] Comparatively, in New Brunswick, the average Airbnb is $150 to rent out an entire home or apartment, while the average rent is $892.[20] Therefore a landlord would need to rent out his property only six days out of the month in order to earn as much as he would in a month with a long-term rental.[21]

 Other problems with short-term rentals affect permanent residents in ways that are not directly economic in nature.[22] For instance, a house that is being used as a short-term rental in Vernon, Canada has caused numerous issues for neighbors due to loud gatherings.[23] The owners have received numerous violations for unlawful land use, noise complaints, and nuisance.[24] The issues with this short-term rental house has led the City of Vernon to pursue legal action.[25] Those who oppose short-term rentals also argue that they cause change to the character of neighborhoods.[26]

 There are many ways a municipality can regulate short-term rentals.[27] Certain jurisdictions have outright banned short-term rentals.[28] Many other jurisdictions take less drastic approaches.[29] Furthermore, there have been different approaches across Canada.[30] Some common regulation types include zoning, registration with the municipality, taxing, and limitations on operation through non-zoning laws.[31]

 In response to the rise in popularity for short-term rentals, Toronto created three levels of regulation.[32] Within its zoning laws, Toronto has defined what types of short-term rentals are permitted uses.[33] Toronto considers permitted uses to have no more than three bedrooms, and the residence can only be rented out for 180 days out of the year.[34] Most notably, Toronto has used zoning by-laws to prohibit people from buying property only to rent it out as a short-term rental.[35] Rather, the by-laws allow short-term renting only of the owner’s primary residence.[36]  Under the second layer of regulation, those looking to rent out their properties on the short-term rental market must first register with the city and obtain a license.[37] Finally, Toronto has placed a 4 percent tax on short-term rentals.[38]

 Ottawa’s zoning laws regarding short-term rentals are currently up for appeal, and it therefore it has issued regulations that are not categorized as zoning, registration, or taxation.[39] For instance, the new law restricts the number of overnight guests in each room, it restricts the number of rooms in a unit, and it restricts the number of overnight guests total.[40] Furthermore, this new law only permits people to rent out their permanent residences in urban areas (with the exception areas where bed and breakfasts have been zoned out) and in rural villages.[41] Unlike Toronto’s law allowing citizens to rent out only their primary residence, those with properties in Ottawa may rent out some non-primary residences such as a vacation home in non-village rural areas.[42]

 Slowly but surely, Canada is opening its borders to the world and international tourism is increasing.[43] The Canadian Government plans to open its borders to all fully vaccinated international travelers as soon as September 2021.[44] As Canada reopens to the world, however, the same problems with short-term rentals will likely reappear.[45]

[1] Government of Canada, Find Out if You Can Enter Canada, Government of Canada (July 23, 2021), https://travel.gc.ca/travel-covid/travel-restrictions/wizard-start (stating requirements for American residents and citizens); see also Liat Weinstein, After 16 Months, Reopening of U.S.-Canada Border May Come Too Late for Hundreds of Businesses, NBC News (July 14, 2021), https://www.nbcnews.com/business/business-news/after-16-months-reopening-u-s-canada-border-may-come-n1273850.

[2] News Release, Public Health Agency of Canada, Government of Canada Announces Easing of Border Measures for Fully Vaccinated Travelers (July 19, 2021) [hereinafter Canadian News Release].

[3] Statistics Canada, Travel and Tourism Statistics, Statistics Canada (May 26, 2021), https://www.statcan.gc.ca/eng/subjects-start/travel_and_tourism.

[4] See Daniel Guttentag, What Airbnb Really Does to a Neighborhood, BBC (Aug 30, 2018), https://www.bbc.com/news/business-45083954 (discussing the fear that short-term rentals change communities and discussing studies indicating large growth of the short-term rental market in Barcelona).

[5] Catherine Clifford, How Airbnb Went from 1,400 Guests on New Year’s Eve 2009, to More Than 3 Million, CNBC Make It (Jan 2, 2018), https://www.cnbc.com/2018/01/02/airbnb-from-1400-guests-on-new-years-eve-2009-to-over-3-million.html (stating that Airbnb had 1,400 guests in 2009); Airbnb News, About Us, Airbnb News, https://news.airbnb.com/about-us/ (stating that Airbnb was founded in 2007 and now has had more than 900 million total guests).

[6] Aly J. Yale, Airbnb Alternatives: Where to Make More Money Off Your Short-Term Rental or Vacation Home, Million Acres (Dec. 16, 2019), https://www.millionacres.com/real-estate-investing/rental-properties/airbnb-alternatives-where-make-more-money-your-short-term-rental-or-vacation-home/.

[7] See Gary Barker, The Airbnb Effect on Housing and Rent, Forbes (Feb 21, 2020), https://www.forbes.com/sites/garybarker/2020/02/21/the-airbnb-effect-on-housing-and-rent/?sh=5cd172182226 (stating “[t]he influence of the so-called ‘Airbnb effect’ on local housing markets has grown into a significant cause for concern, particularly when looking at its impacts on housing stock, prices and communities”).

[8] Melissa Way, The Growth of Airbnb, Sonder, and Other Short-Term Rentals Offers 3 Key Benefits for Destinations, According to the CEO of a Company That Tracks 10 Million Listings Around the World, Business Insider (Dec. 10, 2019), https://www.businessinsider.com/short-term-rentals-contributing-to-solving-overtourism-2019-12.

[9] Id.

[10] Id.

[11] Id.

[12] See Jon Henley, Ten Cities Ask EU For Help to Fight Airbnb Expansion, The Guardian (June 20, 2019), https://www.theguardian.com/cities/2019/jun/20/ten-cities-ask-eu-for-help-to-fight-airbnb-expansion (outlining ten cities’ arguments that short-term rentals cause harm).

[13] Id. (quoting ten cities’ letter to the European Union stating that short-term rentals lead to lower availability of long-term rentals).

[14] Joseph L. Kauffman & Harrison D. Hooper, An Economic Analysis of the Short-Term Rental Market: Local Regulatory Decisions 7 (2020).

[15] Id.

[16] Compare Inside Airbnb, Toronto, Inside Airbnb (Jan. 07, 2020), http://insideairbnb.com/toronto/ (stating the average price of renting an entire unit is $182 per night); with Zumper, Toronto, ON Rent Prices, Zumper (Aug. 29, 2020), https://www.zumper.com/rent-research/toronto-on (stating the average monthly rent in Toronto is $1,800).

[17] Inside Airbnb, Toronto, Inside Airbnb (Jan. 07, 2020), http://insideairbnb.com/toronto/.

[18] Zumper, Toronto, ON Rent Prices, Zumper (Aug. 29, 2020), https://www.zumper.com/rent-research/toronto-on.

[19] See id.; see also Inside Airbnb, Toronto, Inside Airbnb (Jan. 07, 2020), http://insideairbnb.com/toronto/.

[20] Inside Airbnb, New Brunswick, Inside Airbnb (Aug. 31, 2019), http://insideairbnb.com/new-brunswick/; see also Robert Jones, Rent in N.B. Still Among the Cheapest in Canada, But It’s Going Up, CBC News (2021); see also Nicholas Kindel et al., Short Term Rental Study 9 (2016) (estimating how many nights a short-term rental would need to be rented out in order to be as profitable as a long-term rental).

[21] See Inside Airbnb, New Brunswick, Inside Airbnb (Aug. 31, 2019) http://insideairbnb.com/new-brunswick/; see also Jones, supra note 20; see also Kindel, supra note 20, at 9 (using the same metric).

[22] See Doyle Potenteau, City of Vernon Files Civil Suit Against Owners of ‘Nuisance Rental Party House,’ Global News (July 23, 2021), https://globalnews.ca/news/8055859/vernon-lawsuit-short-term-rental-party-house/ (discussing a “party house” causing problems with neighbors).

[23] Id.

[24] Id.

[25] Id.

[26] See Guttentag, supra note 4 (stating the “heritage watchdog” is concerned about the changing character of a neighborhood).

[27] See e.g., Ottawa, Rental Accommodations Study, City of Ottawa, https://ottawa.ca/en/city-hall/public-engagement/projects/rental-accommodations-study [hereinafter Ottawa Laws]; see also Natasha Lomas, Court Overturns Amsterdam’s Three-District Ban on Airbnb Rentals, Tech Crunch (Mar. 15, 2021), https://techcrunch.com/ (discussing Amsterdam bans on short-term rentals).

[28] Lomas, supra note 27 (discussing short-term rental bans in Amsterdam).

[29] See e.g., Ottawa Laws, supra note 27 (discussing different regulations Ottawa has placed on short-term rentals).

[30] Compare id. with Joseph Hoffman & Francy Kussner, Canada: What you Need to Know About Toronto’s New Short-Term Rental By-Laws, Montaq, (2019) https://www.mondaq.com/canada/landlord-tenant--leases/868290/what-you-need-to-know-about-toronto39s-new-short-term-rental-by-laws.

[31] See Hoffman & Kussner, supra note 30 (discussing three levels of regulation: zoning, licensing and registration, and taxation); see also Ottawa Laws, supra note 27 (discussing limits on guest numbers and other limitations).

[32] Hoffman & Kussner, supra note 30.

[33] Id.

[34] Id.

[35] Id.

[36] Id.

[37] Id.

[38] Id.

[39] See Ottawa Laws, supra note 27.

[40] Id.

[41] Id.

[42] Id.; Hoffman & Kussner, supra note 30.

[43] Canadian News Release, supra note 2; Statistics Canada, supra note 2.

[44] Id.

[45] See id.; see also Kauffman & Hooper, supra note 14 (discussing the decrease in availability of long-term rentals due to short-term rentals); see also Potenteau, supra note 22 (discussing nuisance issues with short-term rentals).