Appathy

Let’s say you buy a parking lot, hire a grumpy attendant, build a little hut for the guy, pay the property taxes, erect signage and hope to make a few bucks. Then the people living down the street sign on with the Rover app, rent out their unused driveways during the day for half your hourly rate and suck off your traffic.

They can undercut you because, to them, it’s free money. No overhead. No surly, needy ticket-puncher. No taxes. No insurance. Nada. Just a steady trickle of cash into their account. How can you compete? Nope, you can’t.

Just be happy you didn’t buy a taxi license for $200,000 five years ago because – thanks to Uber – it’s now worth 80% less. Or it could be worse. You might own a small hotel or motel with an investment in the millions, only to see your neighbours go Airbnb, taking in overnight guests, collecting the revenues, yet paying no income tax, hotel tax, HST, employee costs, suppliers or commercial property tax.

Welcome to the online, sharing economy. Shifting wealth. Shuttering businesses. The creative destruction of capital.

A top destroyer is Airbnb, which may go public later in 2019 in a blockbuster IPO (don’t buy it). What started as a rinky-dink platform for people to rent out bedrooms is now the nemesis of the global hotel biz and a social force spreading as much evil as it does money. Governments have been slow to respond, with politicians unable to grasp the social implications.

So today literally thousands of condo units in Toronto (and Vancouver) have been bought by investors, registered with Airbnb and are rented out as virtual hotel rooms. This means they’re commercial properties, yet pay low residential taxes. They’re usually in contravention of condo bylaws, almost undetectable. The owners collect cash flows they may not report as taxable income. And all these units are neither primary residences nor on the rental market. As a result the overall housing stock is diminished, forcing prices and rents higher.

In small places, the consequences can be even more insidious. Investors buy houses for Airbnb seasonal tourist rentals, pocket the cash for four or five months of the year, then leave them dark through the fall and winter. Long-term renters are shut out. Streets are dark at night. The local drug and hardware stores wither and die. Tourist towns turn into museums. Communities decay.

In the big places, this phenom is collapsing the vacancy rate and jacking up rents. The evidence of this is overwhelming, yet governments take idiotic moves to ‘calm’ housing markets like slapping 20% levies on scant foreign buyers when it’s greedy locals causing most of the problem. Yet another report has proven the point. Airbnb, says McGill University, has removed as many as 31,000 units from the rental market in Canada – enough to double the vacancy rate from where it would otherwise rest. And the lower that rate, of course, the higher rents become.

This 31,000 number is for entire houses or units that are frequently rented online (of the 280,000 Airbnb listings in Canada), which means they’re removed from the rental pool. Of those, 1,700 were in Vancouver alone – enough to more than double that city’s total existing vacancy rate. In Toronto there were 4,200 units, and in Montreal, 4,100.

Thus far politicians have totally misunderstood the impact. In Vancouver, while Airbnbers are supposed to obtain a license and only rent space in principal residences, enforcement is lacklustre. Compare that to the draconian blanketing of the entire city with official notices to ferret out ‘rich’ people who may own a condo they don’t occupy full-time – who are then subject to a massive, endless ‘empty houses’ tax.

In Toronto it’s a complete gong show and Airbnb free-for-all as zoning bylaw amendments to curtail short-term rentals get appealed in a languishing process. If they ever pass owners will have to register, pay an accommodation tax and only use principal residences. That would remove about 8,300 listings, 65% of which are for full houses. But so far, nothing, as the average rent for a one-bedder soars past $2,100.

So far only in Quebec is the hammer coming down. Starting this autumn Airbnb hosts will have to register with the province, inform Revenu Quebec of their income (and claim it), plus collect federal and provincial sales taxes along with a lodging tax. But the rental vacancy rate in Montreal is already twice what it is in Toronto and Vancouver, plus leases cost far less in a city where renting is no stigma. This move should make things even more affordable.

So, kids, if you want lower rents, more choice and cheaper real estate, start here. Oh, and stop inventing this crap, okay?