NO MORE AIRBNB FOR CONDO INVESTORS IN TORONTOBy CondoWong Friday, December 6, 2019
As a condo investor, you used to have 2 options to handle your rental:
1. The stable long term option, which typically means a 1-year lease.
2. The more aggressive short term option, such as Airbnb. A short term rental means each rental period is less than 28 consecutive days.
You can potentially double your rental income by doing short term rentals over long term.
It’s very tempting, right?
That’s why it has become increasingly popular in the condo investor community.
But I’m afraid that I have some bad news for you.
If you are running a full-time Airbnb business with your condo unit, you will be going out of business because of the new short-term rental regulation in Toronto.
Let me share with you, the key points of the new regulation.
#1 Which housing type is permitted for short-term rentals?
All residential units are permitted for short-term rentals.
However, the unit must be your principal residence, it cannot be an investment unit.
Under normal circumstances, you can only designate one home as your family’s principal residence each year.
#2 Which part of the home can you rent?
When are you living at home, you can rent up to 3 bedrooms.
If you are away from home, such as travelling on a vacation, you can rent the entire home.
#3 How many days can you use your home for short-term rental?
If you are renting your entire home, you can only rent it out for a maximum of 180 days per year.
If you are renting part of your home, you can rent year-round. When your rental term is less than 28 days, it will be considered short-term rental.
#4 Do you need a licence to run short-term rental?
Yes, if you rent your home out for short term, you must register with the City and pay $50.
Companies such as Airbnb must pay a one-time licence application fee of $5,000 plus $1 for each night booked through the company.
#5 Do you have to pay extra taxes?
Yes, you will have to pay an extra 4% Municipal Accomodation Tax (MAT) on your short term rental.
If you rent through Airbnb, they may collect this 4% from you and remit to the CRA on your behalf.
#6 When will the new rules be effective?
The new regulation has been fully approved and the City will have more information in December 2019 about implementation, timelines, and how the licensing, registration and 4% tax will work.
So what would be the impact of this new regulation?
All the investor-owned short term rental units will have to cease to operate as short term.
It is estimated that around 5,000 units will return to Toronto’s long term rental market.
These units will provide some relief to Toronto’s rental crisis.
According to a recent RBC report, Toronto had a deficit of 9,100 rental units a year ago.
In order to restore equilibrium over the next 2 years, Toronto needs an average of 26,800 rental units per year.
We will have to wait and see the actual impact of the new regulation, depending on how the operators would respond.
Regardless, it is a small step towards solving our housing crisis.
I will provide updates as the new rules come into effect.
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