Thousands of Toronto’s short-term rental investors may call it quits. An Ipsos Survey, commissioned by the Toronto Regional Real Estate Board (TRREB), shows how investors plan to navigate the city’s new short-term rental rules. Only a third feel their investment won’t be impacted by the new rules. The remainder either plan on selling, or finding long-term tenants for their units. This could mean a lot of new housing supply will hit the market over the next year.
Toronto’s Short-Term Rental Rules
The City’s new short-term rental rules are similar to what other major cities have been doing for years. Units will have to be registered, and will be limited to principal residences. Rental operators will also have to register, and collect a 4% accommodation tax. There’s a few other rules, but those are the most important details. The biggest change is the requirement for units to be primary residences. This should eliminate units bought specifically for AirBNB, and ghost hotels – a collection of units run by a single property manager.
Most Investors Plan On Selling Or Renting To Long-Term Tenants
The survey found only a third of short-term rental investors feel the rules impact them. Just under a third (32%) of investors felt they won’t be impacted by the plans this year. Not sure how a short-term rental investor isn’t impacted, but let’s gloss over it for today. The rest will be exiting the short-term rental game. The biggest group said they would sell the property over the next year, coming in at 40% of respondents. A much smaller, but still substantial, 26% of investors said they’ll look for long-term tenants. This can add a lot of supply to the market without any additional building.
Toronto Short-term Rental Investor PlansHow short-term rental owners plan to respond to Toronto’s new short-term rental regulations. Source: TRREB, Better Dwelling.
This Could Add Almost A Year’s Worth of Housing Supply
There’s no official numbers on short-term rentals, so it’s hard to peg exactly how much supply this means. Analysts like FairBnB estimate between 14,000 and 20,000 short-term rentals in Toronto. Using the survey to estimate, that could mean between 5,600 and 8,000 units would go to market. Another 3,640 to 5,200 units may go to rental. This can add almost a year of housing supply, in just a few months. It also does it without placing any more pressure on labor and land costs, which have soared due to short supply.
One important note is this particular type of sale is a net benefit to supply. When investors sell, they aren’t likely to buy another place immediately, unlike homeowners. Toronto isn’t just expecting investors to sell short-term rentals either. The same survey found a significant number of general investors plan to sell over the next year. For the first time in a very long-time, Toronto’s real estate market may be well supplied.
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