Everything About Toronto's New Airbnb Rules

From the start of this year, 2024, things get harder for people in Toronto who rent their homes short term, because of new rules the federal government passed for Airbnb. If you already short term rent your place or are thinking about it, this is for you. I am Moe Asgarian, a senior real estate broker in Toronto, and on my channel I cover the important real estate topics.

What the new tax rule changes

In November 2023, Canada's finance minister announced the new tax plan on short term rentals. These homes are listed in Toronto on sites like Airbnb or Vrbo, and from January 1 this year, the tax treatment changes. Before, you put your home on Airbnb, earned income, then reported your expenses to the tax office, things like upkeep or improvements made for the rental. Those expenses were deducted from the income, so you paid less tax. Now, hosts can no longer deduct their expenses against Airbnb income. This does not apply to all of Canada, but in Toronto, which has been declared to have a rental shortage, the rule applies. They also set aside a 50 million dollar budget so the city can enforce it.

The existing limits you should know

Beyond the tax change, the government and cities have been adding restrictions for a few years. You can no longer easily get a second residential unit and Airbnb it. The unit you rent must be part of the home you declared as your principal residence, the place you live, where your bills come, and which you registered with the tax office. On top of that, Toronto residents must register the home on the city portal and get an Airbnb licence. Licensing will reach other cities sooner or later. There are also time limits: if you want to Airbnb your whole home or apartment, you can do it for only 180 days, six months, a year.

Will it actually help the rental market

The Trudeau government believes this can slow the growth of homes going to short term rental and push more homes into the long term rental market, where more supply can ease rents. But how successful will it really be? A few points. First, short term renting is often renting part of a home where the person already lives, just renting a room for extra income. The new limit may pull that room off Airbnb, but the whole home probably will not enter the long term market, because the owner still lives there. Second, once Toronto tightened its Airbnb rules, many people gave up short term renting, so there are not enough Airbnb units left for restricting them to move the rental market much. There is also no guarantee the plan pushes people to offer long term rentals.

What other countries show

Third, critics say the Trudeau cabinet should solve the housing problem at the root, but instead found an imaginary culprit in Airbnb, and the problem is bigger than that. Fourth is the experience of other countries with similar laws. Australia recently brought in restrictions, and in Florence, Italy, no new home can enter the short term market. But there it does not seem these plans had much effect on rents, and many worry the move hurts tourism. Something similar in the US and Europe pushed a share of travellers to skip those cities or shorten their stays.

Switching from short term to long term

When a home is rented short term, the tax office sees it as a commercial lodging. When it becomes a long term rental, it becomes residential. This is important, and I strongly recommend you talk to your accountant about it. My team and I at Team Asgarian advise on investing in Toronto's rental market, so if you plan to invest or need guidance on the right Airbnb services, I can help. If you'd like a straight answer for your own situation, fill out the form below and book a free consultation. Stay well and take care.