Back in November, 2019, we wrote about the “new” Airbnb rules that were put in place back then in Toronto and three implications of the rules.
The situation has continued to change in the city and we thought it was time we did an updated article on how exactly short-term rentals (and hence Airbnb, VRBO or any other similar platform) function in Toronto.
First off, what’s short-term?
A short-term rental is classified by the City of Toronto as less than 28 days. If a homeowner is renting out for longer than a consecutive 28 day period, then none of the rules we describe below apply. If, however, there is a single rental that is less than 28 days, the city’s short-term rental rules come into play.
The City’s Stance
The City of Toronto’s official guide to short-term rentals can be found on their website here.
That is the most comprehensive site for all the details, the process, forms and so forth, but let’s review some key points here along with our take on each.
- People renting their homes or rooms within their homes for less than 28 days need to register with the City and collect and remit a 4% Municipal Accommodation Tax (MAT) on the rentals. Payments are due on a quarterly basis and if you’re using Airbnb or another rental company, they can collect it on behalf of the owner. There is HST on top of the MAT if you’re registered for an HST number, which you need to do if you think you’ll earn more than $30K per year in short-term rental income. That works out to $85 per day in rental income so if you are renting out your property in the city (or part of it) on a regular basis, it certainly seems likely you’d exceed that $30K a year number.
- You are only allowed to short-term rent your principal residence. That’s right, if you own an income property and have another property which is your principal residence, the city says no short-term rentals for you. If you own multiple properties that you want to rent out on a short-term basis, the city says that is impossible, as you can only have one principal residence, and that is the only one you can rent out.
- If it is your principal residence, you can do short-term rentals regardless of whether it’s a house, apartment or condo. That’s in the eyes of the city, but remember that many, many condo buildings in the city have their own restrictions prohibiting owners from doing short-term rentals. You could have a condo and it could be your principal residence, but you still might not be able to do short-term rentals. Make sure you check with your property management company or the condo corporation’s rules and regulations or by-laws to see what’s permitted.
- The maximum you can rent out your home (or rooms in your home) on a short-term basis is 180 nights per year. This makes sense given it has to be your principal residence, and if you are spending more than half your time living somewhere else, it doesn’t much seem like the property you’re renting out is in fact your principal residence.
- If you have a secondary suite such as a basement apartment, or a laneway suite, you can do short-term rentals, but again only as long as the suite is your principal residence. To be clear, if you live in a house, you can’t short-term rent out your basement unit or laneway suite, at least not legally in the eyes of the city. The same logic applies to bigger multi-unit homes like duplex, triplex and so forth. Owners can only short-term rent their principal residence (i.e. the unit or portion of the property they occupy) and not the other units in the building.
Given the somewhat complex nature of the rules around short-term rentals in Toronto, it’s no surprise that Airbnb has written up their own guide. You can find it here.
While most of what is said by Airbnb is just a slightly more user-friendly (or host focused) version of what the city says on their site, they do highlight a few other aspects that aren’t as clear on the city’s site.
- While the city is primarily focused on owners wishing to rent out their properties on a short-term basis, there is also the ability for tenants to do it. The same rules apply, wherein the tenant has to have the home as their principal residence, and tenants also need to make sure that they are in compliance with their lease agreement and the Residential Tenancies Act.
- The 180 nights per year maximum for short-term rentals is clarified by Airbnb to not apply if you’re not renting your entire home. If you have bedrooms in your home you’re renting (up to a maximum of three bedrooms) you can rent them out on a short-term basis for as many nights in a year as you want.
The decision to restrict short-term rentals to principal residences only is clearly an attempt to prevent the creation of a completely separate hotelling situation in the city. It is a compromise model that allows snowbirds and other homeowners who spend some (but not more than half the year) away from their home, to put their homes onto the short-term rental market.
It’s unclear how stringent the city is in their enforcement of these rules. There are some media stories about the city issuing takedown notices for short-term rental listings that exceed the 180 days per year limit, but the shadowy side of investors claiming the home is the principal residence may not yet be targeted. Operating without a short-term operator license can result in a fine of $1,000 and up to $100,000 if the operator is convicted in court, but that would only be for individuals who don’t use the Airbnb or another site who require the license to be in place.
If you’re considering buying a property in Toronto for the purposes of renting it out on either a short or long-term basis, it pays to work with agents who understand the rules. If that sounds appealing, don’t hesitate to get in touch with us so that we can help you make a wise investment.