Airbnb: Short-term rentals, short-term thinking (2023)

The idea of home sharing is a great one. Citiesthrive on density, on different people doing differentthings but in close proximity to each other. If onefamily leaves town for a week, there would be nothingbetter from the city’s perspective than to haveanother family temporarily take their place. And thisdoesn’t even account for the individual financial benefitto the family renting out their home, or to localshops that gain new, temporary, patrons. Homesharing can be a true win-win for cities and communities.In the last decade, short-term rental servicesled by Airbnb have exploded across Canada and therest of the world, offering just such a promise.

This promise has not been realized, however. Ourresearch on the short-term rental market in the Montréal,Toronto and Vancouver metropolitan areasreveals an increasingly concentrated, commodifiedlandscape in which a few large players are makinglarge amounts of money. Small-scale home sharingis a modest and shrinking piece of the market, andlong-term housing for residents is being convertedinto de facto hotels. Canadian cities should respondto these facts by severely restricting the ability ofcommercial operators to make money convertinglong-term housing into short-term rentals. Thiscould create the space for more equitable forms ofhome sharing to thrive.

Airbnb: why the concern?

In the United States, community groups, housingadvocates and academics are now sounding thealarm about the impact of short-term rentals onhousing affordability. The Los Angeles Alliance for aNew Economy, for example, estimated that shorttermrental platforms were taking 11 units off thelocal housing rental market each day, accounting fora significant portion of new housing built since 2010that was intended to slow rent increases. One recentstudy examined 100 cities across the United Statesand found that, particularly in renter-heavy neighbourhoods,more Airbnb activity translated intohigher rents for local residents.

In Canada, we know much less about how shorttermrentals are changing our cities. Last spring theToronto advocacy group Fairbnb.ca released ananalysis of Airbnb’s impact on Toronto, showing atroubling concentration of activity among a narrowsegment of hosts and laying out sensible principlesfor short-term rental regulation. But there has notbeen comparable research carried out elsewhere inthe country, nor comparative analysis which cancontextualize developments in individual cities withrespect to their peers.

In order to improve public debate around shorttermrentals, and to aid future regulatory efforts, weconducted (along with David Chaney and AndreaShillolo) a study of Airbnb’s impact on Canada’s threelargest city-regions. It relied on the most comprehensivethird-party dataset of Airbnb activity available,and new methodological techniques for spatialanalysis of big data. In all three metropolitan areas,we found a rapidly expanding short-term rental market.Across the Montréal, Toronto and Vancouverregions, 81,000 Airbnb listings have been active atsome point in the last year, and 51,000 in May 2017.Montréal had the largest number for most of theyear, but Toronto is now taking first place. Theselistings are heavily concentrated in the central citiesof the three CMAs, and they are growing rapidly; thethree cities have experienced a 50 per cent yearover-year increase. A majority of listings in all threecities are entire homes rather than private rooms.

The rich are getting richer

Listing one’s home on a short-term rental servicerelies on material privilege: while tenants can sometimesput their apartments on Airbnb without theirlandlord noticing, in many jurisdictions they riskeviction if they are discovered. Only property ownerscan reliably take advantage of the money-makingopportunities of home sharing, and of courselandlords with more (and higher-end) propertieshave more money-making opportunities. But evenwithin this privileged segment of the Canadian population,we have found an eyebrow-raising concentrationof revenue among a narrow set of commercialplayers.

Airbnb hosts in Canada’s largest three metropolitanregions earned a collective $430 million in revenuelast year, an average of $5,300 per listing and a55 per cent increase over the year before. Thisgrowth is driven by Toronto, where total revenuenearly doubled year-over-year, and where averagerevenue per listing is also growing strongly. Revenueis highly concentrated among the most successfullisters; 10% of hosts earn a substantial majorityof overall revenue. A third of all active Airbnb propertiesare “multi-listings” whose hosts administertwo or more entire homes or three or more privaterooms. The most successful of these hosts earn millionsof dollars per year running commercial shorttermrental services across dozens or even hundredsof homes, most of which are no longer able to supporta long-term resident. The “triple threat” is short-term rental listings which are full-time, entire homes,and multi-listings. Even though there are only 6,500of these listings across Montréal, Toronto and Vancouver— 8 per cent of the total active listings — theyaccount for 34 per cent of total revenue. These listingsare growing more rapidly than any other categoryof listing, and in Toronto their share of total revenueincreased by 125 per cent in a single year.

More short-term rentals means fewer long-term tenants

There are now 13,700 entire homes rented 60 daysor more per year (and available 120 days or more) onAirbnb in Montréal, Toronto and Vancouver, each ofwhich is unlikely to be rented to long-term tenants.They account for one sixth of all Airbnb listings, and amajority of nights booked on the service. Even moreworryingly, these listings are growing around 25 percent more rapidly than other categories of listings.

In some areas, particularly downtown Montréal,full-time Airbnb listings are more than two or threeper cent of the total housing stock — a number comparableto the rental vacancy rate in all three cities.

These are mainly areas with above-average rents,but there are significant economic pressures threateningfurther conversions of long-term rentals to defacto Airbnb hotels in a number of more affordableareas — particularly those lying on mass transitlines. The loss of these homes to the long-termrental market makes housing more difficult to comeby for residents, puts upward pressure on rents, andprevents incomers from moving into these neighbourhoods.In the last year, conversions to shorttermrentals have outpaced new home constructionin a number of areas in all three cities, meaning thatavailable housing is declining in absolute terms.

De facto hotels in residential areas change theseneighbourhoods, and not for the better. Neighboursare replaced with tourists — one condo owner inMontréal recently revealed to the CBC that he is nowthe only permanent inhabitant left in his entirebuilding. The borough mayor of Montréal’s Plateau-Mont Royal, an area with a particularly high numberof full-time Airbnb listings, said complaints aboutshort-term rentals are now the most frequent typehe receives. Without political action to constrainAirbnb and its competitors, long-term residents aregradually being pushed out of tourism-heavy neighbourhoodsfor the sake of short-term rental profits.

Encouraging home sharing

Short-term rentals often operate in legal grey zones,able to avoid existing accommodation regulationsand taxes, and are now increasingly being targetedwith specific regulations. The province of Québeclegalized and imposed constraints on short-termrentals in April 2016 (although these constraintshave so far proved ineffective) and, over summer2017, both Toronto and Vancouver proposed significantnew oversight and restrictions on short-termrentals. The city of Ottawa has a staff report onshort-term rental regulations due this fall, and theprovince of Nova Scotia launched a review of Uberand Airbnb in Spring 2016.

How should cities respond to regulatory challengesof the growing short-term rental market, so as toprotect the availability of affordable housing? Webelieve short-term rentals should be regulated inaccord with three simple principles, which togetherimply reorienting short-term rental markets to theoriginal notion of “home sharing”:

1) One host, one rental: Cities should require homesharing hosts to actually be sharing their homes —allowing residents to rent out their own homes whilethey are out of town, or to rent out a spare bedroom— while blocking large-scale commercial operatorsfrom converting multiple homes into de facto hotels.If each host is permitted to list only a single unit —their own home — short-term rentals will cease tobe at the expense of long-term housing needs.

2) No full-time, entire-home rentals: Hosts shouldnot be permitted to rent their homes for a largeamount of the year, regardless of whether that homeis a primary residence. Different cities have setdifferent thresholds for full-time cut-offs, usuallybetween 60 and 90 days per year, but some thresholdis necessary for limiting short-term rentals toactual home sharing.

3) Platforms responsible for enforcement: Even thebest-conceived regulatory principles will flounder ifthey cannot be properly enforced. And internationalevidence demonstrates that short-term-regulationswill fail to achieve their intended effect unlessAirbnb and the other platforms are required to proactivelyenforce them. For example, in the absenceof cooperation from the platforms, a city seeking toenforce an annual limit on 60 days of rentals wouldneed to conduct 61 separate inspections to identifya violator. Airbnb, on the other hand, can modify theonline platform to disallow further rentals from alisting that has reached its 60-day limit.

A wide variety of specific regulatory approachesare compatible with these principles; here we highlightan existing regulatory framework in Amsterdam,and a proposed framework in Toronto, as twoplausible examples. In Amsterdam, in January of2017 Airbnb began to automatically block the bookingof entire-home listings once 60 days of bookingshad been reached. This was the result of an agreementbetween Airbnb and the city to enforce a newregulatory regime. This limit, in concert with onlypermitting the short-term rental of one’s primaryhome, significantly reduces the potential for commercialization,bans multi-host listings, and returnshousing to the long-term rental market. A studyreleased in August 2017 found that the regulationsmight already be having a positive impact (albeit nottotal compliance). In May 2016, 13 per cent of hostshad exceeded the 60-day limit, while a year laterthat number was down to 5 per cent.

The Toronto civil society organization Fairbnb.ca— a coalition of community groups, labour unions,and accommodation providers — has proposed asimilar set of regulations as a model of best practice.Like Amsterdam, they emphasize working withshort-term rental platforms to ensure regulatorycompliance. Without working with these platforms,cities face high costs and difficulties in regulatingthousands of hosts. In their 2017 report, Fairbnb.casuggests a permit system, with platforms requiringa valid permit number to display the host’s listing;banning more than one listing for one host; placing a30-day limit on entire-home rentals; and data sharingwith the relevant jurisdiction.

The status quo of corporate short-term rentalsenriching few at the expense of many is not set instone. Cities and communities should say no to theincreasing commercialization of housing, and yes toprotecting the supply of long-term rental housing.

For more detailedinformation on thestate of Airbnb inCanada’s three largestmetropolitan areas,see “Short-term Cities:Airbnb’s Impact onCanadian HousingMarkets” at upgo.lab.mcgill.ca/airbnb.

David Wachsmuth is Canada Research Chair in UrbanGovernance and an Assistant Professor of UrbanPlanning at McGill University. His recent publicationsexamine large-scale local economic developmentpartnerships in the United States, new formsof sustainability thinking in global urban policy andthe impact of global capital flows on local housingmarkets. He is co-editor of Whose Streets? TheToronto G20 and the Challenge of Summit Protest(Between the Lines, 2011).

Danielle Kerrigan is a graduate student at McGillUniversity’s School of Urban Planning. She workedpreviously as a policy analyst and program officerfor the government of Canada. Danielle co-authoredthe report Short-Term Cities: Airbnb’s Impact onCanadian Housing Markets. Her primary researchinterests relate to issues of housing affordabilityand the public’s ability to shape housing policy.

This article appeared in the Autumn-Winter 2017 issue of Canadian Dimension (The ‘Sharing Economy’).