Airbnb likely removed 31,000 homes from Canada’s rental market, study finds

Short-term rental sites are ‘having rather large impacts on our housing markets,’ McGill researchers say in groundbreaking paper

More than 31,000 homes across the country were rented out so often on Airbnb in 2018 that they were likely removed from the long-term rental supply, according to a groundbreaking study by McGill University researchers.

Put another way, that’s more than enough homes for everyone in North Vancouver.

As the popularity of short-term rentals has soared, the effect on rental supply in Canada’s cities, towns and rural areas has grown, according to the study. Shared exclusively with The Globe and Mail, the report is the most comprehensive analysis of Airbnb’s impact to date, and reveals the extent of the global rental service’s footprint, even as local officials implement rules that target the short-term rental industry.

Those 31,000 homes are equal to about 1.5 per cent of residences across the country that have been built for the rental market.

Airbnb and similar platforms are among several factors, including a lack of rental construction and high barriers to home ownership, that have affected rental markets. Housing advocates say not enough rental housing is being built in Canada’s largest cities to accommodate population growth.

In 2018, the platform had a daily average of 128,000 active listings in Canada, which includes everything from a basement suite to a lakefront cottage, an increase of 25 per cent from 2017, according to the report. And for hosts, it’s been a profitable time: They brought in $1.8-billion in revenue last year, up 40 per cent from 2017.

“Many people believe that they interact with these services mainly as guests,” said David Wachsmuth, a McGill professor and one of the report’s co-authors. “What my research has been showing is that, actually, we interact with short-term rentals every day of our lives in a different way – they’re having rather large impacts on our housing markets.”

In the past, Prof. Wachsmuth has done consulting work and produced reports for governments, and civic and business groups, including a hotel-industry association. This study, which has been peer reviewed, was funded solely by the federal government, however.

Over the past decade, short-term rentals have become increasingly popular. Sites such as Airbnb, HomeAway and VRBO have developed into global platforms, allowing people to rent out spare rooms or entire homes to travellers, with a cut going to the company.

“When you offer your place as a short-term rental, you have more control over it, you can use it for yourself whenever you want, [and] it makes more money” than renting to long-term tenants, said Dany Papineau, who operates four listings at two properties he co-owns, one in Montreal and another in the Eastern Townships, about 90 minutes east of the city. “Personally, I’m not interested in doing long-term rentals at all,” he said.

As short-term rental activity has grown globally, regulators in many of the world’s tourist hubs – Barcelona, New York, Amsterdam, Los Angeles – are cracking down on short-term rentals, citing concerns over distortions to the local housing supply and lost tax revenue, along with a host of other issues.

In New York, for instance, Airbnb directly accounted for a US$380 increase in median annual rent costs, according to a separate report from Prof. Wachsmuth last year that was funded, in part, by a hotel-industry organization. “The more Airbnb activity you see in a city, the higher housing prices and the higher rents are going to get,” he said. “There’s no question that [Canadian] cities are now past that point.”

Within Canada, short-term rental activity is highly concentrated in a few cities. The Montreal, Toronto and Vancouver areas accounted for close to half of Canada’s average daily listings in 2018, and hosts there brought in $710-million, up 27 per cent from 2017. They’re also where the most rental supply is under threat: Forty per cent of the roughly 31,000 homes that were frequently rented last year were found in those cities, amounting to more than 12,000 “lost” housing units. Hosts of those units brought in $374-million, up 30 per cent from 2017.

“It’s a relatively significant number,” said Graham Haines, research manager at the Ryerson City Building Institute, of the total number of frequently rented homes. Between the Montreal, Toronto and Vancouver areas, “that’s almost enough housing to add a whole percentage point back onto our vacancy rates,” he added.

Vacancy rates for purpose-built apartments in the Montreal, Toronto and Vancouver areas were 1.9 per cent, 1.1 per cent and 1 per cent, respectively, in 2018, according to the Canada Mortgage and Housing Corp. – all below historical norms. Over the past five years, Toronto has added 18 times more condominium units (80,000) than purpose-built rentals (4,500 units), according to a city report from January.

When asked about the study’s findings, Airbnb said it takes housing affordability seriously. “In Canadian cities such as Toronto and Vancouver, there’s no question they’re facing real housing challenges,” said Alex Dagg, director of public policy at Airbnb Canada.

Ms. Dagg contested the McGill team’s findings, saying they are based only on publicly accessible information collected from Airbnb’s website. For instance, she said that when an Airbnb unit is unavailable for bookings, researchers would be unable to fully ascertain whether it is occupied by its owner rather than a guest.

“We don’t agree with the validity of that number,” Ms. Dagg said of the report’s finding that 31,000 homes were frequently rented. She also disagreed that Airbnb was having an impact on rental housing. “[They have] no way of knowing those houses or those units would ever be on the long-term rental market,” she said.

To calculate lost housing numbers, the McGill team looked for entire-home listings available for rent at least half the year, and actually rented at least 90 nights. According to the study, any home that’s listed for a majority of the year likely doesn’t house a long-term resident.

Percentage of homes frequently rented on Airbnb

THE GLOBE AND MAIL, SOURCE: MCGILL UNIVERSITY SCHOOL OF URBAN PLANNING

“There are people who are being evicted from their apartment buildings to convert those units into Airbnbs,” Prof. Wachsmuth said. “That’s a fact right now.”

The McGill authors note that frequently rented homes “are still a small fraction of total housing” in any Canadian city. However, listings can be highly concentrated in some neighbourhoods. In parts of Montreal, for instance, one in five homes were listed on Airbnb.

As short-term rental platforms continue to grow, policy-makers have started to respond.

In 2016, Quebec became the first major Canadian jurisdiction to regulate the short-term rental industry, requiring some hosts to obtain permits. Vancouver’s rules went into effect last year, and only allow short-term rentals in a host’s principal residence. Toronto has passed its own regime, although zoning amendments are tied up in appeals proceedings, with a hearing set for August.

Enforcement has proved tricky, however. In the early days of Quebec’s regulations, virtually no hosts were complying, Prof. Wachsmuth said. The province later shifted enforcement to its revenue department, giving it expanded powers to target wrongdoers. Still, just two weeks ago, Quebec overhauled its rules again.

“We’ll find them, and we’ll fine them,” Tourism Minister Caroline Proulx said of rule-breaking hosts.

Despite provincial regulations, Airbnb has continued rapidly growing in Montreal, fuelled by the outsize impact of another nationwide trend: the rise of hyperactive, professional hosts who manage several listings.

Nearly half of all Canadian Airbnb revenue in 2018 was generated by commercial operators, or those who manage multiple listings, the McGill report said. Their share of sales increased from 2017 in nearly all metro areas. Among this group, there are some hosts that vastly eclipse the competition: Fifteen managed at least 100 active listings apiece in the past year, the report said, and nearly 60 hosts earned more than $1-million in 2018.

“Canadian cities really stand out when you look around the world, for having their short-term rental market dominated by commercial operators,” said Prof. Wachsmuth, whose team has established itself as world leaders in measuring the global impact of Airbnb. “Montreal in particular is the worst in the whole world.”

It vastly differs from how Airbnb often pitches itself: as a personal platform through which residents, either out of town or looking to put a second bedroom to good use, will occasionally rent out their spaces.

Often, the largest “hosts” are in fact businesses that manage vacation rentals on behalf of homeowners. That’s the case for Maryrose Coleman and Ross Halloran, who together run Muskoka District Rentals, a cottage-rental service. They conduct roughly a third of their business on Airbnb.

In Muskoka, Ont., a cottage can easily sell for upward of $2-million, even though it may only be occupied for a few weeks out of the year. These days, if you have a cottage, Mr. Halloran said, “it’s good business to rent it out – mitigate the costs, if you can, when you’re not using it.”

Data from the McGill team suggest Muskoka District Rentals is among the largest Airbnb hosts by revenue. As of mid-June, it had 76 listings on the platform.

Back in Montreal, more than 30 per cent of the city’s Airbnb revenue was generated by 1 per cent of hosts in 2018, and many link the rise of commercialization to lost housing supply.

City councillor Richard Ryan estimates that “a couple of thousand units” in the city’s central areas were lost to commercial operators. He was a driving force behind new bylaws in the Plateau-Mont-Royal and Ville-Marie boroughs, where listings can be restricted to particular streets.

Beyond questions over supply, short-term rentals are roiling communities in other ways. “These issues are significantly affecting the quality of life in the neighbourhood: noise, parties at any time of day or night, safety concerns, garbage strewn out on the street, a lack of respect for neighbours and so on,” Mr. Ryan said via e-mail.

Even with new regulations in place, there remain broad swaths of the country – from big cities such as Calgary, to small communities in Ontario’s cottage country – where short-term rentals are subject to few restrictions, if any at all. As such, Prof. Wachsmuth expects Airbnb to continue growing, given that Canada is less of a mature market than the United States.

Even then, he is near certain his research is still underestimating the size of the short-term rental market in Canada. But, he notes that the Canadian market has hit a turning point.

“Airbnb, HomeAway and other companies in the sector enjoyed a period of several years where policy-makers weren’t really paying attention,” he said. “I think that period is over now.”