Canada Targets Short-Term Rentals Like Airbnb to Ease Housing Crisis

Sean Fraser says he believes 'tens of thousands' of homes could be made available to Canadians by curbing the number of short-term rental units.

In a move to combat the country’s escalating housing crisis, Housing Minister Sean Fraser announced on Monday that the federal government is set to introduce a series of measures aimed at decreasing the number of short-term rental units available on platforms like Airbnb. This initiative is part of a broader strategy to increase the availability of long-term rental homes.

Fraser highlighted the urgency of addressing this issue, stating, “We believe there’s likely tens of thousands of homes that could be made available to Canadians by addressing this particular challenge.” He emphasized the importance of converting properties currently utilized for short-term rentals into homes for long-term occupancy.

These forthcoming measures are a segment of the fall economic statement, which will be presented on Tuesday. This statement is expected to detail billions in new measures to aid Canada’s acute shortage of affordable housing, including low-interest loans for housing construction.

A notable aspect of the government’s plan involves leveraging taxation powers to make owning a short-term rental property less financially attractive. The aim is to encourage owners to either sell their units or offer them as long-term rentals to locals and newcomers.

New home construction in a development in Oakville, Ont. (Nathan Denette/Canadian Press)

The Toronto Star and Radio-Canada have reported that as part of these tax changes, the government will soon restrict property owners from deducting expenses on short-term rentals in areas where such services are already limited by local regulations. This measure, effective from January 1, seeks to penalize property owners who disregard local laws.

The government is considering B.C.’s recent short-term rental market overhaul as a model, where rentals not in an operator’s principal residence will soon be outright banned, forcing thousands of units off vacation rental platforms. In B.C., individuals or companies owning multiple Airbnbs would be required to list them for long-term rentals or face hefty fines.

Figurines are seen in front of the Airbnb logo in this illustration taken February 27, 2022. REUTERS/Dado Ruvic

However, Airbnb has contested the notion that its platform significantly impacts Canada’s housing stock. Citing a report from the Conference Board of Canada, Airbnb’s policy lead in Canada, Nathan Rotman, stated, “the number of Airbnbs in Canada is too small to make a tangible dent in Canada’s low housing stock.” He warned against measures that would strip Canadians of extra income amid rising inflation and living costs.

Amidst this backdrop, Finance Minister Chrystia Freeland expressed her support for curbing the number of short-term rentals. She acknowledged that platforms like Airbnb and VRBO result in fewer available homes for rent, particularly in urban areas.

Speaking at a housing announcement alongside Toronto Mayor Olivia Chow, Canada’s Deputy Prime Minister Chrystia Freeland said the fall economic statement, which will be presented on Nov. 21, will be focused on making housing — and life in general — more affordable for Canadians.

Freeland is expected to announce further details in the fall economic statement, including a C$15 billion ($11 billion) fund in 10-year loans for new rental housing construction, a C$1-billion initiative for affordable housing, and revised mortgage regulations.

The Canada Mortgage and Housing Corporation (CMHC) has estimated that Canada needs to construct 3.5 million more housing units by 2030 to meet the soaring demand driven by population growth and record immigration. Last year, housing starts numbered about 260,000 units, indicating a need for accelerated construction to address the affordability crisis.

The government’s multifaceted approach aims to alleviate the housing shortage while ensuring that platforms like Airbnb contribute positively to Canada’s housing ecosystem.