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Mar 03, 2017

What to do about Airbnb? Four things Ontario should consider in the move to regulate home-sharing

March 3, 2017

The rapid growth of the sharing economy has quickly changed the face of several industries, including accommodation. Home-sharing – which enables residents to share rooms or provide access to entire homes on a short-term basis – has grown significantly over the past five years. Earlier this week, Statistics Canada estimated that Canadians spent $1.1 billion on home-sharing services across the country and abroad between November 2015 and October 2016. The most well-known and highly-utilized platform, Airbnb, is valued at $30 billion and is active in nearly 200 countries.

These services clearly have benefits, as they promise to make tourism more affordable for visitors and provide new income streams to residents. However, there are also concerns associated with home-sharing, such as its potentially detrimental impacts on the availability of rental options for residents and on noise in residential neighbourhoods.

Policymakers have begun to respond to these potential opportunities and pitfalls. The City of Toronto released a report in October outlining a plan to regulate home-sharing. The provincial government is also working with Airbnb to educate providers about their responsibilities and consumers about their rights when engaging with home-sharing services. Additionally, Ontario’s Ministry of Finance has created an advisory committee on the sharing economy that has conducted consultations on this topic.

In the meantime, challenges and concerns related to the rise of home-sharing continue to emerge across the province. For instance, a December court ruling by the Ontario Superior Court determined that condo owners renting out apartments on Airbnb were in violation of condo rules by operating businesses out of their units. As policymakers take steps to introduce regulations in this emerging space, they should take into account four key issues.

Home-sharing rules ought to be designed in a manner that takes into account not just today’s landscape but also anticipates the evolution of this new model of accommodation that blurs the boundaries between residential and commercial.

  • The difference between casual and commercial residences

    There are essentially two main types of hosts on home-sharing platforms – casual and commercial hosts. Casual hosts generally rent out their homes, or rooms within them, occasionally as a form of supplemental income. In contrast, commercial hosts often list one or more properties where they do not live and, in effect, operate as a landlord.

    Research has indicated that commercial hosts play a major role in home-sharing platforms. For instance, a UBC paper found that 53 per cent of units listed in Vancouver in December 2015 were by commercial hosts. Additionally, a Canadian Centre for Policy Alternatives study found that a small group of hosts listing more than one residence in Toronto had rented out 37 per cent of listings on Airbnb and produced an estimated 46 per cent of revenues through the platform.

    Some jurisdictions are in the process of developing regulations to address this trend, typically by curbing or prohibiting short-term rentals for secondary residences and by limiting the number of days that homes can be shared through such platforms. For instance, proposed regulations in Portland would not allow short-term rentals in secondary residences. These approaches push commercial operators under the umbrella of existing rules for landlords, while allowing the flexibility for supplemental income for actual “hosts” who live in their homes most of the time.

  • The impact on housing capacity

    While home-sharing has grown in recent years, rental markets have also become very tight in major cities – including Toronto. The extent to which home-sharing is a contributing factor to this broader trend needs to be explored further, but early indications suggest there may be a connection.

    The Canadian Centre for Policy Alternatives raised concerns that thousands of units have been removed from Toronto’s rental market in key parts of the city and used instead for home-sharing purposes. It indicated that, as of July 2016, there were 10,156 Airbnb listings in Toronto, which represents growth of 288 per cent since December 2013. Meanwhile, Airbnb recently released a study which concluded home-sharing impacts less than two per cent of housing units in Toronto and is a “relatively small phenomenon as it pertains to the city’s housing units.”

  • The need to share data

    Reliable data is needed to effectively regulate home-sharing platforms. While platforms such as Airbnb have indicated that they support the concept of data-sharing, in practice concerns have emerged about their compliance and transparency. Indeed, reviews of some data released by Airbnb suggest that the firm has tinkered with publicly-released data to support its contention that the majority of hosts on its site are not commercial in nature. This type of behaviour makes it much harder for regulators to trust data the company is sharing.

    Some efforts at home-sharing regulation, such as in Los Angeles, made data-sharing a planned requirement. However, concerns about data reliability have already started to have an impact. For instance, Seattle ended up altering its planned regulatory approach – from one that would have allowed for secondary residences, with restrictions, to an outright ban. Part of the rationale was based on concerns that platforms wouldn’t cooperate in sharing the data needed to enforce the initial planned approach.

  • The ability to enforce policies

    While some jurisdictions have required or intend to require fines and penalties associated with non-compliance of regulations related to home-sharing, there have so far been several examples of limited compliance. For instance, part of Quebec’s regulatory approach has called for those offering short-term rentals through home-sharing platforms to obtain permits. However, as of September 2016, fewer than 500 permits were reported to have been issued across the province, which is a fraction of the accommodations listed in Quebec via various home-sharing platforms.

For its part, Airbnb has in recent months started to recognize the need to address some of the policy-related challenges that have emerged. For instance, it has introduced an effort known as “One Host, One Home” in San Francisco and New York City, which is designed to ensure that hosts list only one residence on the platform. It has also developed a “policy tool chest” and a “community compact” – both of which aim to set out principles such as commitments regarding fair taxation, transparency and privacy.

As regulators develop home-sharing rules, they should consider these four issues carefully. Home-sharing rules ought to be designed in a manner that takes into account not just today’s landscape but also anticipates the evolution of this new model of accommodation that blurs the boundaries between residential and commercial.

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Sara Ditta

Release Date

Mar 3, 2017

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