Airbnb regulations: Are small rental properties used as a scapegoat for Canada’s housing crisis?

Written by: James Tarrant

The word regulation often casts a negative shadow on the people most affected. Some people see it as an infringement on their freedom. Others consider the economic costs, such as a business that needs to comply with new rules that impact its profitability. 

Some of the new regulations for Airbnb in Newfoundland and throughout Canada are a topic of concern, especially for hosts with multiple small rental properties. 

Ryan Doody, CEO and owner of Home Base NL, a St. John‘s-based property management company whose support services assist Airbnb and BNBs across the island, said the feeling for Airbnb hosts is still being determined. 

“I think a lot of Airbnb hosts don't know what's going to happen. Newfoundland and Labrador Tourism and the government haven’t said much about why they are regulating it. You know, just register with Newfoundland Tourism so they can track it. Things like that,” said Doody. “ We know that further regulations are coming. We still get questions from our clients that are hard to answer. There haven’t been any updates other than the deadline being pushed back.”

It is estimated that there are 800 Airbnbs on the Northeast Avalon alone and 500 in St. John’s and the surrounding area, but Andrew Taylor, President of Home Base NL, said that number is much higher. 

“I did an Airbnb search not long ago in St.John’s alone and found about 1000 to 1100 Airbnbs alone. That number is probably higher across the island,” said Taylor.

Regulation is familiar to the Airbnb landscape. The Federal Government and provinces such as British Columbia and Quebec have provincial regulations. Cities such as Halifax, Toronto, and Vancouver have municipal bylaw restrictions on Airbnb. 

The big question is why Airbnbs are on the regulation radar of municipal, provincial, and federal governments. The easy answer is Canada’s housing crisis. 

History of Canada’s Housing Crisis

Canada’s housing crisis gained significant attention shortly after the 2008 recession. However, some would say its roots began in the 1990s when the county experienced an expansion in mortgage debt and house prices due to stable low inflation and interest rates. In 2010, a housing bubble affecting its six largest residential real estate markets, representing 40 percent of all real estate sales in the country, raised concern. In cities like Toronto and Vancouver, housing prices more than doubled, but wage growth did not keep pace with the rising cost of living, making it difficult for Canadians to own homes. The troublesome situation led to a call to action to seek resolutions to remedy the problem. 

Solutions to Remedy the Housing Crisis

A multifaceted approach by experts and stakeholders came up with these resolutions: 

Expanding the construction sector’s labour pool: Prioritize immigrant skills, recognize credentials from other jurisdictions, and set ambitious targets for trade enrollments. 

Innovative Designs and Building Techniques: To increase activity, adopt prefabricated housing and pre-approved building designs.

Speed up Housing Project Approvals: By Reducing regulatory requirements, harmonizing building codes, and prioritizing projects with faster turnaround times. 

Ease Zoning Restrictions: Allow more city density and diversify the types of houses built to use the land better. 

Lower the cost of building: Use more cost-effective materials and modulate government charges. 

Change the Housing Supply Mix: Waive development charges and use publicly owned land to incentivize the construction of purpose-built apartments.

Expand Housing Stock From Within: Reclaim units from short-term rental businesses, make it easier to build secondary suites and convert non-residential buildings. 

Increase the supply of affordable housing: Provide funding and incentives to build more affordable housing units. 

Protect and Support Renters and Homeowners: Implement policies that protect renters and assist Canadians in owning their first home. 

Government and industry collaboration: Foster a great partnership to achieve progress toward rebalancing supply and demand. 

Doody said it's easier to understand the housing crisis in Canada if you are not involved in the industry. 

“I worked in real estate and construction companies for years. I know anyone trying to build a new subdivision for a multifamily dwelling or something else. There is a tonne of red tape from getting the permits in place or the city approvals for zoning that doesn't get talked about at all in the media,” said Doody.  “The builders certainly talk about it. Ordinary people not involved in the construction or real estate industry know about it. It is not a headline that people grab onto, but loosening restrictions for builders and developers is enormous. That would greatly help affordable housing prices, but it doesn’t get the same attention.”

The Airbnb Excuse 

Why do experts and stakeholders think reclaiming short-term Airbnb units will make a difference in the housing market?

One common reason is supply and demand, and short-term rentals are being blamed for driving up the cost of long-term rentals. 

Some experts say that long-term rentals on Airbnb websites are listed as short-term, which limits the rental supply and could lead to increased competition and higher prices for the remaining properties. 

Other experts believe that short-term rentals contribute to the financialization of the housing market, where homes are treated as investment opportunities rather than places to live, which can also drive up prices. 

Doody said, Airbnb has many success stories in Newfoundland, Canada, and worldwide. He said people need to see what other locations with Airbnbs worldwide are doing to put things in perspective.

“I know that everyone does it differently. Even in the US, like Nashville. I went there this year. It’s a massive city that is growing at an unbelievable rate. The population growth and the number of people coming to the city to see concerts and other events is unbelievable,” said Doody. “Airbnbs are allowed there, and there are hotels and other tourism outlets, and Airbnb is a big part of that. Cities all across Canada and the US are experiencing housing shortages now. Their rent growth is much higher than it is here.” 

Study on Short-Term Rentals

A recent study by the Conference Board of Canada, titled “Airbnb Activity and Rental Markets in Canada,” suggests that the crackdown on small-term rentals may be unfounded, proving there is no evidence to back up claims that Airbnb short-term rentals are driving up housing costs. The study released on October 11th, 2023, tested for a causal link between Airbnb activity and rental increases between 2016 and 2022 across 330 neighbourhoods in 19 Canadian cities. The study found that the 30 percent rent increase during this period, less than 1 percent or $10, was due to increased Airbnb activity. Even when testing different combinations of the data, it rationalized that the share of dwellings used for Airbnb in these neighbourhoods is too small. On average, less than 0.5 percent would have had a meaningful impact. 

Nfld’s Airbnb Regulations to Date

On the Rock, the push to regulate Airbnb started several years ago when stakeholders, tourism, and hospitality industry experts advocated for changes to ensure that unregulated Airbnb hosts followed the same rules as regulated members. 

Their demands led to the New Tourist Accommodations Act, which replaced the former Tourism Establishments Act and was approved in 2020. The government of Newfoundland and Labrador later announced that all short-term accommodations, including Airbnbs, must be registered with the province by April 2024. 

All Airbnbs in the province must have a registration number issued for 30 days or less of stay. However, there is a primary residence exception if a host uses its residence as an Airbnb. Hosts must always follow municipal regulations, zoning by-laws, and other contract regulations established by tenant organizations and comply with laws set forth by municipal, provincial and federal governments, such as necessary licences and permits to operate a tourist accommodation in the province. Lastly, operators must remit the 5 percent Accommodation Tax on all short-term rental bookings. 

Fines for Noncompliance 

What are the penalties for hosts who decide not to comply with the requirement to register their Airbnb? Offences carry a minimum penalty of $250 and a maximum of $2,000. 

The Department of Tourism, Culture, Arts and Recreation can work with other provincial departments and municipalities to support enforcing the act and regulations. The province will also work with online marketing platforms to ensure unlicensed accommodations cannot be advertised. 

Doody said he feels most Airbnb hosts will register, but some are pretty vocal on social media about how restrictions on running their Airbnb “their way” affect them.

“We have seen people who have raised their opinion through social media that they are not interested in doing Airbnb anymore and will plan to convert their short-term to a long-term rental or not host at all. They don't want to be continually told how to host guests. They have been doing it for a while, and then next month, have people come out and say, well, you have to do it differently now. It has turned people away from wanting to host an Airbnb property,” said Doody.

The Limbo Game

Despite studies proving that short-term rentals are not the problem with Canada’s housing shortages, the question remains whether municipal, provincial, and federal governments will still implement stricter regulations in Newfoundland. This is compared to provinces such as Quebec, which is fining Airbnb hosts $100k for failure to register, and British Columbia, which restricts short-term rentals to principal residences in many communities. There are also discussions at the federal level about doing the same. 

Taylor thinks Newfoundland tourism would be shooting itself in the foot if it took back short-term rental properties from hosts. He doesn’t think it would be that drastic in this province.  

“I don’t think it will be that bad here because Newfoundland and Labrador’s bread and butter is tourism. We notice during the winter that everything shuts down and nothing moves, but things come back to life in May,” said Taylor. “The government makes a lot of money off tourism from short-term rentals. If they shut things down, they would shoot themselves in the foot. We don't have many hotels, and in rural parts of the island, Airbnb’s are popping up everywhere, helping tourism all over the island.”

Recent data from Destination St.John’s suggests that guests booked 68,000 room nights with unlicensed Airbnb operators on the northeastern Avalon Peninsula alone, which generated approximately $14 million in revenue in 2023.

Doody said turning the tide about Airbnb in the media might take some time. People need to do their research to find the correct answers.

“When you look online. The narrative around Airbnb is all negative, so it's hard to tell from an outsider's perspective, especially someone not in the industry. In truth, things like the small businesses downtown, our annual pedestrian mall event, and the cruise ships that come into our ports in the summer all benefit from people staying at Airbnbs,” said Doody. “You don't hear that in the media very often. You don't hear positive stories about people coming and staying at our Airbnbs. I agree with having regulations. You want people who have Airbnbs to be serious. People who are good hosts offer a great space and do not take advantage of people. We agree 100 percent with that. We don't feel Airbnbs should be shut down because of the housing shortage.”

Sometimes, he said, you just have to take regulation with a grain of salt as something that will make things better and not harmful. 

“You have to look at the bigger picture. Yes, Nfld is growing fast, and there are housing shortages. If we can figure out a way to get new development, long-term rentals, and other stuff built, it is a good problem to have.”