Thursday, November 16, 2017

Long-Term Rentals vs Airbnb is a False Dichotomy

Toronto Council has now passed short-term rental rules that will change the face of Airbnb and similar services in Toronto. The rules will create an entirely new zoning category for short-term rentals that would allow home-owners to offer up to three short-term rental rooms or their entire home for up to 180 days per year, while also firmly establishing who is permitted to rent out their residences. A home-owner could only rent out a unit under this scheme if the room they were renting out was located in their principle residence. The city will create a registry of short-term rental landlords who would have to declare that their rental property was their principle residence and pay an annual fee.

Despite the urging of many Councillors that basement apartments and other secondary suites be part of the program, the vote which passed 27-17 included a provision that secondary suites within a home are not eligible for short-term rental.

It was just last week we learned that Toronto’s Planning and Growth Management Committee believed that keeping Airbnbs out of basement secondary units was essential in order to increase the supply of long-term rental units. This despite the recommendation by City staff that basement units be allowed to become Airbnb-eligible under the proposed changes.

The move to eliminate secondary suites was led by Councillor Ana Bailao who before the committee vote, told her fellow councillors “We have an extremely unhealthy vacancy rate in this city,”.   Mayor Tory jumped on the bandwagon at council, and was the last speaker prior to the vote, urging Councillors to pass the regulations without the secondary suites included as part of the scheme.

While it's true we have a rental housing vacancy problem, the answer is not to restrict short-term rentals.  Council's belief that by outlawing Airbnb’s in basement suites, landlords will flock to create tenancies governed by Ontario’s Residential Tenancies Act is misguided.

Becoming a residential landlord, renting out a condo, home or basement, is no longer a rational business choice.  Equating renting out short-term and renting out long term is like equating an apple with an orange.  No rational landlord would prefer short-term vs long-term, unless long-term was untenable.  It's a lot more work to rent weekly or nightly, do the laundry, clean the unit, meet renters to hand out keys etc.  But landlords are making the short-term choice because the risks are enormous for landlords in a traditional rental.

As a former adjudicator with Ontario’s Landlord Tenant Board, a paralegal for 12 years, an educator and speaker on all issues "landlord and tenant", I can say with certainty that landlords are leaving the traditional rental market in droves.  The law as it now stands makes traditional renting far too risky. Restricting Airbnbs won’t change that.  The risks of renting out your home in Ontario’s over-regulated oppressive statutory regime just doesn’t make sense.  

The basic framework of the Residential Tenancies Act and its predecessor the Tenant Protection Act is 20 years old. A lot has changed in that time.  Housing prices in Toronto have skyrocketed.  Airbnb has added a new rental class not anticipated by the legislation.  Nor was there any clue that condos would become the new rentals when the law was debated back in 1997. A complete re-think and re-writing of the Act is needed.

Very often the traditional rental paradigm results in an acrimonious marriage that landlords are stuck in forever.  Airbnb is more like a one-night stand; easy to walk away from. What’s needed is a middle ground, allowing prospective landlords and tenants to try living together for a while to see if it works.  

The current system is rife with problems. The lack of absolute fixed term tenancies in Ontario, coupled with the almost impossible eviction process, the lengthy delays in evictions, inconsistent and unpredictable adjudication at the Landlord and Tenant Board, rent control that ignores the long-term interests of both sides, have all conspired to devastate the creation of rentals by small landlords. 

In order to fix the system, the province must address issues such these, along with the absence of damage deposits, the legally permitted tactic of lease breaking parties that allow a tenant to break a lease with remaining lease term by simply acting badly, the onerous obligations under the Human Rights Code that make the landlord rather than government responsible for societal issues, and the refusal by the government to require tenants receiving Ontario Works or ODSP payments to designate that rent be paid directly to their landlords from the social agency. Only then can the rental supply problem be solved with homeowners sticking their toes into the rental waters.

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