With the federal government now accepting public and stakeholder feedback on their pledged incoming national crackdown on short-term rentals, major players in the market are hoping Ottawa considers the potential tourism and affordability impacts of the proposed tax changes.
In her fall fiscal update, Finance Minister Chrystia Freeland announced plans to go after income tax deductions from non-compliant owners of short-term rental properties in an effort to expand Canada’s long-term rental supply, starting Jan. 1.
Specifically, the federal government said it will be denying income tax deductions to non-compliant short-term rentals such as AirBnB and Vrbo properties in provinces and municipalities where restrictions are in place, such as Toronto, Montreal and Vancouver.
Alongside this, the Liberals earmarked $50 million over three years to help support municipal enforcement of their short-term rental restrictions.
However, the required legislative changes to implement this move were left out of a sizeable bill presented to Parliament in late 2023, with federal officials stating plans to consult on the tax measures first before passing reforms that would be in place in time for the 2024 tax filing season.
Right before the holidays, Finance Canada announced it had launched consultations on draft Income Tax Act amendments, which included a proposed formula for how the government will be calculating the “non-compliant amount” for the taxation year.
This assessment will factor in the total expenses incurred, the number of days the residential property — whether a house, apartment, condo, cottage, trailer or houseboat — was non-compliant, and the number of days the property was a short-term rental, meaning it was offered for rent for a period of less than 90 days.
Airbnb’s Canadian policy lead Nathan Rotman said the short-stay giant is “always willing to work with lawmakers to address community concerns,” but does not think that home-sharing regulations are the solution to Canada’s housing crisis.
“The reality is the majority of Airbnb Hosts in Canada share one home to supplement their income and listings represent less than one percent of the country’s housing stock,” Rotman said in a statement to CTVNews.ca. “Many Canadians earn extra income through home sharing to make ends meet at a time of increasing inflation, interest rates and cost of living.”
Airbnb has taken the position that with its listings representing less than one per cent of Canadian dwellings, reducing the number of their rentals won’t make a significant dent in Canada’s housing stock, and rather will target hosts for making income to help them continue to afford their homes.
Further, the company pointed to a Conference Board of Canada report based on Airbnb booking data from high-use or full-time Airbnb listings between 2016 and 2022 across 330 neighbourhoods in Canada that found that the level of Airbnb activity has not generated any meaningful increase to the cost of rent across the country.
Vrbo parent company Expedia Group said that while it “supports efforts to drive a high rate of compliance with provincial and municipal short-term rental regulations,” effective short-term rental policies “are only achieved through open dialogue and collaboration.”
“Short-term rentals have played a critical role in Canada’s tourist economy and its communities for generations, and travellers will continue to seek them as an option for vacations and family gatherings,” said Hunter Doubt, manager of Expedia Group’s government affairs for Canada, in a statement to CTVNews.ca.
The company looks forward to reviewing the legislation “in greater detail” and “strongly” encourages the federal government to “consider the feedback of travel and tourism experts like Expedia Group as it moves forward,” Doubt added.
At the time the federal short-term rental crack-down was revealed, the Federation of Canadian Municipalities said the incoming regulations for vacation stays was a step towards improving housing affordability, but represents a small piece of the issue.
The government has previously signalled optimism that this move, taken as part of a wider package of housing policy measures, will be successful in unlocking more housing supply in short order.
Housing Minister Sean Fraser has pointed to regulations imposed in New York as an example, where thousands of housing units were opened up for long-term rental “a little more than a month later,” though the measures taken in that instance are more comparable to municipal initiatives undertaken across Canada than the federal government’s approach of denying tax advantages.
For example, in New York City, hosts need to register with the mayor’s special enforcement office if they intend to rent out their space for fewer than 30 days. In Toronto, any operator of a unit rented out for less than 28 consecutive days has to register with the city. In both instances, there’s a registration fee and a series of requirements that need to be met to qualify.
“My view in a housing crisis is that if a municipality determines that you have an opportunity to put homes on the market for families to rent for the long term, then you should do that instead of making them available for a few days at a time,” Fraser told reporters on Nov. 28.
Those interested in the short-term rental consultations can share their feedback on what the government is proposing, by sending an email to [email protected] until Feb. 5, 2024.