TorontoRealtyBlog

This was only a matter of time, was it not?

Ever since “Chair Girl” gave people the utmost reason to despise AirBnB, it ceased to be “if” the City of Toronto would look to license and regulate all short-term rentals, but rather “when.”

The when isn’t that far off.  In fact, many of you have September 10th, 2020, circled in your calendars, not because that’s the day after the NFL regular season opener and thus you’ll be calling in sick from work, but rather because it’s when the City of Toronto’s registration system for short-term rental facilitators and operators will be launched.

The City of Toronto’s website is a wealth of knowledge on this, so I’m going to copy-and-paste much of that here today.  But eventually, I want to discuss whether or not this system is necessary and whether or not it’s going to work.

From the website:

A short-term rental is all or part of a dwelling unit rented out for less than 28 consecutive days in exchange for payment. This includes bed and breakfasts (B&Bs) but excludes hotels and motels. It also excludes other accommodations where there is no payment.

A short-term rental company is any company facilitating or brokering short-term rental reservations online and receiving payment for this service (for example, Airbnb, Expedia, Booking.com). All short-term rental companies will be required to obtain a licence to operate in the City of Toronto.

Short-term rental operators are people renting their homes or rooms on a short-term basis, for a period of less than 28 consecutive days. These operators need to be registered with the City of Toronto. The registration system for short-term rental operators will launch on September 10, 2020. Please return to this page to register short-term rentals in Toronto.

Residents can contact 311 to report issues related to short-term rentals, such as noise, waste and concerns that people are renting homes that are not their principal residence.

If you’re like me, you read “it also excludes other accommodations where there is no payment,” and sarcastically said, “THANK YOU!”  Good to know that when my buddy crashes at my place overnight, the City of Toronto doesn’t expect me to register myself as a short-term operator.  But what if he buys us groceries the next morning and cooks us all a meal?  Hmmm.  Thankfully, you can narc on us by calling 311…

The city’s website says that after registering, you will be contacted within five days.  Given the pandemic, and dare I say, the regular level of service and response from government which we’ve grown accustomed to, I wonder how in the world they’re going to pull this off.

Now, what are the regulations?

Mainly, these…

You are only allowed to short-term rent your principal residence.

• This is the residence where you live and the address you use for bills, identification, taxes and insurance.
• You can only have one principal residence at a time, therefore you cannot legally run more than one short-term rental.

You can be a homeowner or a renter in any housing type, for example house, apartment or condominium, etc.

• You should ensure that you are allowed, by your condominium or landlord, to short-term rent your residence.

You can rent up to three bedrooms in your principal residence for an unlimited number of nights per year or the entire home for a maximum of 180 nights per year.

Your home must be in a residential area in the city.

• If you are a Bed and Breakfast (B&B) operator, you can continue to operate under existing zoning permissions for “tourist homes”.

You can host a short-term rental in a secondary suite or laneway suite, as long as the suite is your principal residence.

• A secondary suite is separate living accommodation with its own kitchen and washroom, located within a larger house (for example, a basement apartment).
• A laneway suite is a self-contained residential unit located on the same lot as a larger house, and generally located in the rear yard.  A laneway suite must be next to a public laneway.
• If you reside in the main portion of house, you are not permitted to separately short-term rent the secondary suite or laneway suite.

Oh, restrictions, restrictions, restrictions!

As somebody who doesn’t believe in big government, the words “You can’t” strike a chord with me each and every time I see them.  Again, I don’t want to sound like our cousins south of the border who feel that “You can’t…” should never be followed by “….bring an assault rifle to the Astros game,” but there’s just so much “you can’t” and “you can” in all of this, that I can’t help but wonder: when were we asked about this?

Topic for another day, I know.  The role of government to represent people rather than dictate to them in all areas of life.  But this legislation is going to have major implications in our lives, our finances, and in the real estate market, which is the economic engine that has kept the city going for the last decade.  I don’t remember being consulted, as a Torontonian or a real estate broker, which makes sense, since absolutely nobody was.

Now as for eligibility, much of this is common sense, and yet there’s a big discussion point to be had at the end of this:

You can short-term rent in any housing type, for example house, apartment or condominium, as long as it is your principal residence.

Apartment

• Apartment units are usually rented by individuals and are in a multi-unit residential building or a mixed-use building. The buildings are usually operated by property management companies.
• You should be aware of your responsibilities under the Residential Tenancies Act and your lease agreement with your property management company.

Duplex, triplex or fourplex

• A duplex, triplex or fourplex is a house with two, three or four self-contained units over multiple floors. They may share walls or outdoor areas with other houses.
• If you reside in one of the units of a duplex, triplex or fourplex, then you are permitted to only short-term the portion of the house that is your principal residence. You are not permitted to short-term rent the other units.

Secondary suite

• A secondary suite is separate living accommodation with its own kitchen and washroom, located within a larger house (for example, a basement apartment).
• You can short-term rent a secondary suite only if you are the principal resident of the suite.
• Your secondary suite must be permitted by zoning bylaws and comply with Building Code and Fire Code requirements. For more information, contact Toronto Buildings.

Laneway suite

• A laneway suite is a self-contained residential unit located on the same lot as a larger house, and generally located in the rear yard.  A laneway suite must be next to a public laneway.
• You can short-term rent a laneway suite only if you are the principal resident of the suite.

Condominium

• If you live in a condominium, you can short-term your home as long as it is your principal residence.
• Note that some condominium corporations have their own bylaws regarding short-term rentals, including prohibiting short-term rentals. It is your responsibility to understand and follow the rules set out by your condominium.

Bed and Breakfast (B&B)

• Bed and Breakfasts (B&Bs) continue to operate under existing zoning permissions for Tourist Homes.
• B&Bs will be subject to the rules for short-term rentals and must register with the City.

Investment property

• Only your principal residence can be rented out short-term.
• Secondary or investment properties can be rented out long-term.

This is where things get very interesting.

Note that these regulations effectively ban people from buying condominiums and renting them out short-term.  This is made clear via two points:
1) Under the “Condominium” section, short-term rentals are only permitted if the property is a primary residence.
2) The “Investment Property” section, it’s reiterated that “only your principal residence can be rented out short-term.”

I’m not necessarily disagreeing with the ability of a property-owner to rent out his or her property as he or she sees fit, ie. short-term, but I do think that the effective “ban” on renting condos on a short-term basis was done so very swiftly and in an extremely authoritarian manner.  This wasn’t really ever up for discussion, and while I recognize that the government doesn’t consult its constituents on every single decision and policy matter, this is a really, really big one.

Ultimately, it seems that the government believes by eliminating short-term rentals in condominiums, more long-term rentals would be freed-up, and this would help address the housing shortage in our city.

One of the most insightful comments I’ve read on my blog in the last little while, which I can’t seem to find, made note of government policies that shift the burden and cost from the public sector to the private sector.

Can we not agree that this policy decision, to ban short-term rentals in condominiums, is exactly that?

Money isn’t free (except at the federal level…), and the city of Toronto has a housing shortage on its hands, which, at times, has been labelled a “crisis.”  It seems to reason that shifting at least part of the burden from the public sector to the shoulders of individual property owners is win for the government, no?

The irony in all of this is – as we discuss and debate, we find ourselves in one of the poorest rental markets I’ve seen in the last decade.  Rental listings are taking longer to lease, they’re getting lower prices, and it’s not uncommon to see six or seven similar units for lease in the same building at the same time.

As I’ve often mused with the ban on foreign buyers, if and when the resale market turns, some sellers might wish they’d be able to sell to foreign buyers.  Hey, it’s a double-edged sword!  So with a ban on short-term rentals in condos, in an extreme lessee’s market, we might lament the inability to find alternate ways of filling vacancies.

Either way, the ban on short-term rentals in condominiums is significant, and the outright mention of “Investment Properties” above is a shot across the bow to people who want to use real estate as an investment.  All the points were covered in the previous sections, and the inclusion of “Investment Properties” at the bottom was redundant.  But maybe it was by design?

Also of interest from the “eligibility” section above pertains to multi-unit dwellings.

The theme here seems to be that only a primary residence may be rented out short-term, but how is that applied to multi-unit dwellings?  Say, a four-plex, for example?

The guidelines prohibit renting out a unit in a fourplex on a short-term basis, even if the owner resides in one of the other units.  So an owner of four-plex, living in one unit, renting out two units long term, is not permitted to rent the fourth unit short-term.

Really?  Why not?

He or she is already prohibited from renting out two of those units short-term, so why not compromise and allow one to be short-term?  No?  Screw that?  Down with capitalist pigs?  Gotcha.

Now as it pertains to “secondary suites,” ie. basement apartments, I’m shocked by this:

• You can short-term rent a secondary suite only if you are the principal resident of the suite.

First of all, grey area.  Hello?

What’s to stop somebody from saying that they are the “principal resident” of the 3-bed, 1-bath “suite” on the main and second levels of a house, but that they are also using the 1-bed, 1-bath basement apartment?  This is confusing, even as I write this.

What’s the intent here?

Is the intent from the regulations to prohibit the short-term renting of a basement apartment, or am I reading this incorrectly?

Second of all, if the above is correct, then why?

Imagine owning a 3-bed, 2-bath, semi-detached house that happens to have a basement apartment.  Now imagine you really don’t want to lease it out for one year, for a myriad of logical and acceptable reasons, not limited to, of course, the overwhelming amount of rights that tenants have, and the impossibility of removing a problem tenant in Ontario in 2020.  So imagine you simply want to allow somebody to live in your home, which is your primary residence for three weeks?

Gasp!

I understand the spirit of this legislation, but it’s a massive over-reach, and one that I don’t think the public asked for.

As a result, I don’t know how well these regulations will be followed, but that’s not unlike driving 103 KM/H or higher on the 400-series highways, which everybody does, all the time.

I’ll spare you the lengthy list, but “Penalties for Operators” can be read HERE.

Now how much does this cost?

Yeah, really.  Let’s find out why the government is actually implementing this.

For facilitators/companies, it’s a $5,000 fee.

For operators, it’s a mere $50 per year.

However, and this is a big however, don’t forget the Municipal Accommodation Tax:

As a registered short-term rental operator, you will be required to start collecting and remitting the four per cent Municipal Accommodation Tax (MAT) on a quarterly basis from January 1, 2021. You must submit your payment within 30 days of the end of the previous quarter.

If your short-term rental is booked on a short-term rental company platform, the company may remit the MAT on your behalf. It is your responsibility to ensure that you, or the company platform(s) you use, have remitted the proper amount of MAT for your short-term rental activity. The City will revoke your registration if you fail to remit the MAT.

Interest and penalties apply on any overdue payment at a monthly rate of 1.25 per cent from the first day after the payment is due. After that interest will apply each month on the principal amount that remains due at a rate of 15 per cent per year.

I love how the government charges a monthly interest rate of 1.25%.  Compounded, right?

Now if you really want to immerse yourself in short-term rentals in Toronto, here’s a solid read:

TORONTO MUNICIPAL CODE 547, LICENSING & REGISTRATION OF SHORT TERM RENTALS

A girthy fifteen pages which you can download in PDF format and read to your heart’s content.

I sure did!

For those of you who want the Coles Notes:

City of Toronto: Short-Term Rentals

Personally, I’m looking forward to the announcement of 300-400 “enforcement officers,” all paid handsomely and with benefits, each one driving a new Prius.  Say what you want about these folks, they won’t be stuck with nothing to do.  Because a LOT of people in this city are going to skate past September 10th, 2020, like nothing ever happened…

The post Toronto’s Short-Term Rental Registry appeared first on Toronto Realty Blog.