Airheads

Belinda owns two one-bedder investment condos in DT Toronto, near the entertainment district. Between them, almost a million in mortgages outstanding, plus some of the highest condo fees and property taxes in the core. Naturally, she’s a realtor.

Given the fact rents there average about two grand a month, I asked why. “They’re gold mines,” she says. “I’m clearing $30,000 a year on each one doing short-term rentals.” Turns out, that’s true – at least for now. Airbnb keeps the units full of young hipsters flying in from exotic places like Sarnia and Moncton to get wasted in the Big Smoke.

Of course, the rentals are illegal. The building occupied is a registered condo with bylaws strictly prohibiting short-term rentals and requiring owners who rent out their units to have leases in place for at least a year. But, you know, in a big tower in a big city people come and go at all hours, never know their neighbours, and the condo board has no cops or investigators. Nobody stops Belinda.

Nor is the city cracking down – yet. Regs against Airbnb’s destructive impact were passed more than a year ago, but have been tied up in legalities since. Once in force, they’d restrict short-term rentals to the principal residences of homeowners taking out a license. No investment condos. No buying houses just to lease them out by the night, in whole or part. No listing of multiple properties online.

But until then, it’s a gong show. Two-thirds of all Toronto Airbnb listings are for complete homes. Over 8,000 are for properties (like Belinda’s) that won’t be allowed under the new rules. Critics cry for action, given a 1% vacancy rate, escalating rents and the inflated real estate values that Airbnb helps create.

Ditto in Vancouver, where anti-Airbnb measures came into effect four months ago. They let homeowners rent out parts of their homes for up to 30 days, if they register, but make it illegal to lease an entire property, or one that’s not a principal residence. Once the regulations took effect, Airbnb was forced to remove over 2,000 listings, or a third of those in YVR. But the city says more than a thousand remain which are not compliant, and each one represents an apartment which could be leased out to a needy moister.

Well, Airbnb’s been fighting back, of course. The company slams what it calls “the hotel lobby, seeking to villainize families who are making a little extra income by sharing their homes.”

Right. And Uber’s just a bunch of helpful guys sharing their cars, not a taxi service.

This week a report says reigning in the rental web site would add 6,500 apartments to TO’s housing stock – a huge number. Of course, shuttering Belinda’s two-unit empire would immediately make owning those condos nonsensical, creating negative cash flow, maybe prompting her to sell. If the next investor could only rent residentially for $2,000 a month, instead of $150 a night, prices might deflate.

This is not just a big-city woe. Airbnb (and its wannabe competitors) are helping destroy the fabric of life in small communities, too. When I visit my favorite little NS town of Lunenburg, it’s easy to see how the short-rental craze and its easy profits have led to DHS – dark house syndrome. So many people have bought houses just to Airbnb them during the lucrative summer months that they stay dark and shuttered through the off season.

So what?

So families looking for stable, long-term rental digs can’t find them. The vacancy rate falls to about zero. The local population base thins. Suddenly it’s a tough go for the corner pharmacy and hardware store to stay open all year. Shops close. Business taxes vanish. The long-standing hotel or licensed inn takes a hit. People lose jobs. All so a remote property owner can suck income from tourists and then, likely, not declare it as taxable income.

So the battle rages.

On one side are those who believe they have the right to rent out an asset as they see fit to visitors hungry for cheap accommodation. On the other side are condo owners who see their buildings turned into hotels, low vacancy rates and high rents, hollowed-out towns, struggling hotels, job losses and tax evasion. In the middle are governments bewildered and rudderless in this so-called shared economy.

So I told Belinda she should sell and pocket the capital gains before the rules change. She laughed.