As much as 1.4% of Canada's entire housing stock is listed in short-term rental platforms, report says
A major contributor to the housing affordability crisis in Canada and other developed economies is the profusion of short-term rentals in major markets, according to a new report from Desjardins.
The study said that platforms like Airbnb and Vrbo have spurred a steady deterioration of housing affordability, as short-term renting cuts down on the number of residential assets available for resales and long-term rentals.
Together, the two short-term rental platforms carry more than 235,800 unique active listings, representing as much as 1.4% of Canada’s entire housing stock.
Amid persistent economic volatility and rising costs, investors tend towards short-term rentals as these are more likely to provide greater returns at a much quicker pace, Desjardins said.
“From the perspective of the landlord, at a time of high and rising inflation, short-term rentals may offer them an opportunity to offset some of the rising costs because they can increase the rent more quickly than they could in the long-term rental market,” said Randall Bartlett, senior director of Canadian economics at Desjardins.
Data from Rentals.ca and Urbanation showed that rentals continue to be major money-makers for landlords, with the average monthly rate for a rental unit in Canada growing by 9.9% annually to reach $2,178 in October.
This was reflected in the consistent demand for the asset class. Desjardins said that the national rental vacancy rate settled at just 1.9% in 2022
Finance Minister Chrystia Freeland is set to announce tax changes aimed at restricting the use of Airbnb and other short-term rental services in regions of Canada with existing restrictions.— Canadian Mortgage Professional Magazine (@CMPmagazine) November 21, 2023
Read more: https://t.co/RlgJD3KkPz#mortgageindustry #airbnb
Municipalities should consider more effective steps to address the crisis
Bartlett noted that municipal governments are now scrambling to address the dearth of supply brought about by the proliferation of short-term rentals.
“We’re seeing this in real-time, an experiment going on in Canada, where different jurisdictions are bringing in different regulations of various stringencies,” he said.
Bartlett said that based on the greatest successes in the world’s most advanced economies, restricting the use of second or third properties for short-term rentals appears to be an effective step that Canadian municipalities should consider.
“At the end of the day, we need to increase supply dramatically and there are a lot of policies to do that,” he said. “Ultimately, the measures that are being brought in to increase supply – not just by limiting short-term rentals but also cutting the GST on purpose-built rentals and reducing exclusionary zoning – will all help in the long run to bring more supply but not going to help materially in 2024.”