Short-term rentals provide a great way for people with residential or vacation properties to earn passive income during times their property would otherwise sit unused. We have previously written about the liability issues short-term rentals can create for property owners if a renter or their guest were to be injured on the property. However, the exploding short-term rental market in both major cities like Toronto and cottage country destinations have also created headaches for other residents, municipalities, and even traditional hospitality providers. The short-term rental market can create a variety of conflicts, including neighbour disputes, a lack of affordable housing, and a negative impact on more traditional short-term accommodation providers such as hotels and resorts.
Recently, the City of North Bay conducted a review of the local short-term rental market and drafted a report containing recommendations for regulating the industry, which it provided to the city council for review. In response, the city is now considering the recommendations set out in the report and plans to hold a public consultation on the matter.
How is “Short-Term Rental” Defined?
Short-term rentals, or short-term accommodations, are nothing new. For decades, people have offered cottages or cabins, houses, and even bedrooms for rent on a short-term basis through newspaper ads or word-of-mouth. However, the creation of online rental agencies such as Airbnb or VRBO (Vacation Rental by Owner) have made the process of finding and renting these accommodations much simpler. In many cases, the property owner and the renter never even have to meet in person. This has resulted in a dramatic increase in the number of properties listed for rent in any given city and has even created an increase in investment properties purchased specifically to capitalize on this market.
According to the City of North Bay’s report, a short-term rental is defined as the rental of a full or partial residential dwelling unit for 30 days or less. A short-term rental could apply to various types of residential properties, including:
- An entire home
- A room in a home
- A condominium
- A cabin or cottage
- An apartment
Short-term rentals are further subdivided into two categories:
- Principal dwelling unit, which is when the owner rents out all or a portion of their primary place of residence, and
- Non-principal-dwelling unit, which is when the owner rents out a property which is not their primary place of residence.
Report Identifies Three Primary Concerns Respecting Short-Term Rentals
The authors of the report assessed the local short-term rental market and identified several potential benefits, such as:
- Income generation for property owners
- Increased tourism
- An increase in property values
- Greater choice for consumers
However, there were three primary drawbacks identified that the city hopes to address through regulation.
Loss of Affordable Housing
The report stresses the importance of gauging the impact of short-term rentals on housing availability in North Bay:
“The impact of short-term rentals on housing deserves special attention, given the crisis-level housing pressures being felt in many communities and the status of adequate housing as a fundamental human right.”
The loss of housing, and particularly affordable housing, is most commonly associated with non-principal dwelling unit rentals. When a person is renting out all or a portion of their actual home, they are limited to renting it out only when they are away, or they are sharing their home with renters who are paying to occupy a portion of the dwelling, such as a bedroom. There is no loss of home associated with this type of rental because the property would be occupied either way.
This is not the case when it comes to non-principal dwelling unit rentals. Situations involving non-principal dwelling unit rentals are more akin to a commercial property rental because the property would otherwise sit empty.
While the report is unable to draw a conclusion on whether short-term rentals have reduced the amount of affordable housing in the city to date, it does say that the number of available homes has been reduced, particularly with respect to commercial, or non-principal dwelling rentals. Investors are purchasing properties and then occupying them full-time with short-term renters, reducing the number of properties available to purchase or rent as a principal dwelling.
Disparity Among Hospitality Providers
Another issue identified in the report is an unfair advantage to short-term rental owners over other commercial accommodations, such as hotels and resorts, in the form of the Municipal Accommodation Tax. Some municipalities including Mississauga, Ottawa, and Sudbury, have made agreements with companies such as Airbnb and VRBO to have the online rental companies collect and remit these taxes to the affected municipality. However, to date, North Bay has no such agreement in place.
Not only does this result in a loss of income to the city itself, but it creates a disadvantage for traditional commercial accommodation providers, including hotels and resorts, which are required to charge the tax to guests. If a guest can rent a cabin from its owner without paying the “hotel tax”, as it is known, they may be more likely to choose that option than a traditional vacation rental.
There have been numerous accounts of community disruption stemming from the short-term rental market, ranging from renters causing excessive noise and property damage to more serious incidents. In 2020, three men were killed at a party in a rental condominium in Toronto. Since this incident, Airbnb has restricted “entire home” rentals in Canada to those aged 25 and older, in an attempt to limit the occurrence of unauthorized parties at accommodations where the owner is not present.
Report Recommendations for Short-Term Rental Regulation in North Bay
The report recommended two potential plans of action to regulate the short-term rental market in North Bay:
- Define short-term rentals and amend the city’s Official Plan and Zoning Bylaw to restrict rentals to certain zones. If the requirements are not met, property owners would be required to obtain a change to the regulation by applying under the Planning Act; o
- As above, create a definition of short-term rental and amend the Official Plan and Zoning Bylaw to restrict rentals to certain zones. In addition, create a licencing scheme for property owners who wish to rent properties on a short-term basis. This option would also include a public consultation.
Councillors are examining the potential regulations and will engage in a public consultation process as they decide how to move forward with the recommendations. Councillors will also be looking at specific regulations implemented by other Ontario municipalities, such as restricting short-term rentals to primary residences only, and collecting a municipal accommodation tax on all rentals going forward.
Contact Tierney Stauffer LLP in North Bay and Eastern Ontario for Experienced Representation with Residential Real Estate Disputes and Transactions
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