Canadian Underwriter

Toronto considering zoning, licensing and taxation rules for short-term rental platforms

June 13, 2017   by Canadian Underwriter

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The City of Toronto will soon consider recommendations to adopt new rules for short-term rental platforms such as Airbnb – which are unregulated – to address concerns ranging from noise to safety and taxation, notes a municipal backgrounder.

The Report from the Executive Director, Municipal Licensing and Standards, and the Chief Planner and Executive Director, City Planning, submitted to city council’s Executive Committee last week, recommends the city adopt new regulations.

The regulations – meant to address zoning, licensing and taxation issues – will include fees for both companies that facilitate short-term rentals and residents who operate their homes as short-term rentals, notes Backgrounder: Toronto’s Short-term Rental Review, dated June 12, 2017.

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Beyond paying a licensing fee, short-term rental companies would be required to report quarterly to the city with anonymized data about short-term rental activities, share details about certain listings upon request by the city and remove problem listings, notes a Tracking Status report on the issue.

As for operators, they would be permitted to register their principal residence only, one registration number would apply to all listings associated with the address and they would be required to provide appropriate emergency and safety information to guests.

“Residents and property owners are renting out rooms or entire units for short periods in growing numbers across Toronto, facilitated by the rise of these online platforms,” notes Backgrounder: Toronto’s Short-term Rental Review, adding that these rentals “are not currently regulated by the city.”

Short-term rental platforms include Vacation Rental By Owner and Airbnb, by far the most popular such platform operating in Toronto.

Data from Airbnb indicates the platform listed about 10,800 properties in Toronto last year, which has trebled since 2014. Condominiums, apartments and lofts accounted for the lion’s share of listings – 72% – in the city and 53% of listings are downtown.

The city estimates that, based on Airbnb figures, the proposed rules would permit about 7,600 properties rented on the platform last year to continue to operate as they likely occurred in a principal residence, while about 3,200 properties would likely not be able to be registered as they likely did not occur in a principal residence.

To answer concerns about noise, safety, housing affordability, impact on tourism and taxation, Municipal Licensing and Standards and City Planning was directed by city council to submit a final report in 2017 on regulating temporary accommodation rentals.

In mid-February, council endorsed creation of a hotel and short-term rental tax in the city for implementation as soon as practical in 2017. Subject to receiving the necessary legislative authority from the province, the rates would be 4% of hotel accommodation revenues, and as much as 10% of short-term rental revenues.

“An extensive jurisdictional scan, comprehensive research and consultation were conducted as part of developing the proposed regulations,” the backgrounder states.

This included two public meetings with facilitated group discussions, an Ipsos survey involving feedback from focus groups or industry stakeholders, an online survey of the general population and five targeted stakeholder meetings.

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Recommendations in the staff report to the Executive Committee call for, among other things, allowing people to rent their homes for short periods; minimizing negative impacts on housing affordability and availability; minimizing nuisances; and creating regulations and taxation systems that both are fair and easy to follow for both people and companies.

Specifically, it adds, those recommendations around short-term rentals include the following:

  • Zoning: amend the Zoning Bylaw to create a new land use called “short-term rental” permitted city-wide, only in principal residences, and limit the number of rooms in a dwelling used for short-term rentals to a maximum of three;
  • Licensing and registration: license companies that facilitate short-term rental activity (associated fee of between $5,000 and $20,000, plus fee per night booked), create registry for residents who operate their homes as short-term rentals (associated fee of $40 to $150 per home), prohibit short-term rentals that are not in principal residence (these would be considered “commercial”), and require companies to use only registered operators/hosts; and
  • Taxation: implement a hotel and short-term rental tax in conjunction with the proposed licensing and registration framework, subject to provincial approval (regulation anticipated later this year) and city council approval.

“The proposed zoning framework would permit short-term rentals across the city in the principal residence of any owner or tenant in residential and mixed use zones and in all residential building types,” states the tracking report.

“Within their principal residences, people could rent: up to three rooms within a unit, separately; the entire dwelling unit; and lawful secondary suites,” it points out.

“A short-term rental would not be permitted in a dwelling unit that is not a principal residence. This restriction limits long-term housing from being converted to accommodation for tourists,” the tracking report explains.

In addition, “the proposed licensing and registration system would require that all short-term rental operators register with the city and post their registration number in all advertisements,” it states.

“These regulations strengthen the above zoning amendments and minimize the impacts of short-term rentals on neighbourhoods,” the report contends.

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The item will be considered by the Executive Committee on June 19 and by city council on July 4, subject to the actions of the committee.

Following review of all applicable bylaws, development of amendments and related public meetings and consultations, final zoning amendments and final licensing and registration requirements are to be reported in the fourth quarter of 2017.

Recommendations for a tax on hotel and short-term rental are expected to come forward later this year.

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