Friday, September 23, 2016

The Airbnb Problem is Connected to Our Awful Tenancy Laws

I read a story in the Toronto Star yesterday about the problem of Airbnb cutting into traditional rentals.  The problem isn’t simple and cuts across complex issues starting with our low interest rates, booming real estate market, and the emergence of the new sharing economy.  But before we start blaming Airbnb for cannibalizing the traditional rental market, we should look at the elephant in the room that is causing many investors to go the Airbnb route.  The problem is that the traditional rental model, governed in Ontario by the Residential Tenancies Act, is broken.  Renting your unit short-term as an Airbnb is exempt from provincial landlord and tenant legislation, as are rentals in hotels, cottages or bed and breakfasts.

Why would a condo owner choose the more active, complicated and time-consuming world of multiple short-term rentals to traditional rentals?  Having to show up every weekend to turn over keys, do cleaning between rentals, exchange emails and arrange payment on a weekly basis is a lot of work.  How does an Airbnb landlord ever go away for a weekend, and what happens in the winter months when the tourists are not descending on Toronto?  It's true, you “might” make more money using Airbnb, but there are a lot of empty nights on the calendar compared with the traditional rental where you are guaranteed a monthly rental income.

I think the reason many property owners go the Airbnb route is that successive governments, the Conservatives with their Tenant Protection Act in 1998 and Liberals since 2007 with the Residential Tenancies Act have made renting out a basement or a condo a very high-risk venture.  I know the system well, I’m a former adjudicator at the Landlord and Tenant Board, a paralegal dealing with landlord and tenant issues, and I teach landlord and tenant law to aspiring paralegals in the college system.

Evictions, either for rent arrears, tenants committing illegal acts or endangering occupants safety, usually take months, and in many cases are impossible to achieve based on the evidentiary burden placed on landlords.  The 2009 policy guideline for residential tenancies under the Ontario Human Rights Code turns landlords into social workers, requiring them to accommodate behaviour resulting from Code inclusion (usually disability) to the point of undue hardship.  After evictions, the unpaid rent or damage claims are rarely recovered. 

The irony is that at the same time as governments refuse to address the perverse complexity and unfairness of the Residential Tenancies Act, they are looking for ways to open up the basement, second-suite rental market to house low-income tenants.  The Liberals are talking about inclusionary zoning, making noises about changes to the Residential Tenancies Act, and to their credit, passed the Strong Communities Through Affordable Housing Act in 2011, attempting to force municipalities to allow secondary units in their homes.  But it hasn’t worked. 

The government can’t have it both ways.  They either have to turn the business of residential rentals back into a business where parties can freely contract, instead of the current tenant-centred over-regulation, otherwise small landlords will continue to look at alternatives that are exempt from the current regulatory scheme.

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