Changes are Coming for Toronto’s Airbnb Hosts – Are you Ready?

June 29, 2018

No doubt you’ve heard the name – Airbnb. Seemingly overnight, the American-based online marketplace and hospitality service created for users to lease or rent short-term lodging, including holiday homes/cottages, apartments, hostel beds or in some cases, hotel rooms, exploded in popularity worldwide.

This was particularly true in the GTA, where homeowners, often in financial distress due to the ever-increasing costs of home ownership, came to depend on Airbnb for much-needed additional income. By renting out rooms to short-term lodgers or basement apartments as separate residences, they were able to generate significant revenue to offset their own high monthly mortgages and associated property taxes.

However. it wasn’t long before unscrupulous real-estate investors and property owners began exploiting the service constantly, buying up available housing and then initiating bidding wars, taking advantage of housing shortage that in some cities, Toronto being one of them, was approaching almost epidemic levels.

In addition to these issues, the hospitality industry raised legitimate concerns over Airbnb’s impact on their revenues, noting that Airbnb was essentially providing an alternative to existing hotels and hospitality establishments while avoiding having to pay onerous regulatory fees such as liquor licenses, insurance coverage, etc.

For many cities such as Toronto and Vancouver who rely on the revenues generated by the hospitality and tourism industry, this presented a significant complication to the existing status quo. These cities tax and regulate the hospitality and tourism industry as a way of generating much needed dollars that can then be re-invested into planned improvements and innovations to city infrastructure/development projects – particularly the creation of affordable/sustainable long-term housing for its citizens.

While some cities used existing restrictions or quickly introduced amendments to their current regulations as a way of negating these issues, in Canadian provinces and cities, the lack of strong regulatory measures created an almost ideal situation for the abuse of short-term housing services being provided by companies such as Airbnb.

Supporters of Airbnb argued that it was nothing more than healthy competition that would inevitably benefit consumers and in time, the cities as well, but for the hospitality and tourism industry, it was seen as nothing less than an outright attack that needed to be dealt with swiftly and forcefully.

However, Canadian provinces and cities have finally stepped up their efforts to toughen regulations. In 2017 the city of Toronto, led by mayor John Tory, adopted newer, stricter regulations for the short-term rental industry, primarily as a method for protecting the long-term rental market which had plummeted to levels city-wide of barely above zero availability. These new regulations included a provision that Airbnb hosts could now only provide accommodations at their principal residence – which in effect means that prospective Airbnb hosts are now restricted to renting out rooms ONLY where they live, and unable to buy up or rent additional residences solely with the intention of using them to generate income. In addition, Airbnb hosts would now also be required to obtain a paid license or permit for $50, which could potentially include acquisition and maintenance fees, along with a registration number which would have to be displayed when listing any prospective residence or space for rent.

Unsurprisingly, the new regulations were heavily criticized by Airbnb hosts and their supporters, who have come to rely on the income generated through residences being offered as short-term rentals. In addition, many in the hospitality and tourism industry have criticized the proposed regulatory measures as being “half-hearted” and not tough enough to discourage current and prospective Airbnb hosts from continuing to operate and adversely impact their revenues.

In the end, it may be some time before these new regulatory measures are able to be fully implemented, and possibly even longer before they make any sort of meaningful change to the way Airbnb and its hosts currently do business. But it seems that for better or worse, some measure of change is in the works, and for anyone considering Airbnb as an option for generating income, it would be smart to do your homework before making any decisions, and keep as informed and up-to-date on this situation as possible, as it seems this issue could take some time to effectively resolve – at least to the satisfaction of all parties involved.

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