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How Airbnb is squeezing Toronto’s housing market

In the midst of a mounting rental crisis, the city is still unable to enforce rules that would limit ghost hotels.

by Anne Gaviola
Feb 8 2019, 5:26pm

Lu-Anne Brezina has never used Airbnb, but she says it made her life “a living hell.”

Brezina says the online home-sharing platform allowed a single host to run several “ghost hotels” that ruined her street and forced her and her young family to move out of their dream home because living there turned into a nightmare.

Three years ago, she and her husband Kevin and their four-year-old daughter called a four-storey townhouse in downtown Toronto’s Cabbagetown neighbourhood “home.” During that time, Brezina (pictured above with her family) said someone bought up a number of homes around her and began listing them all on Airbnb and another service called FlipKey rentals—with her family sandwiched between them. She recalls her residential street being overrun by temporary guests––more often than not, “people from the 905 coming into town to party” along with “charter buses [pictured below] pulling up and emptying everyone” onto neighbouring properties.

She says places that used to house two to four residents were suddenly temporary rentals for up to 12 people at a time. Brezina claims they had little regard for the people who lived there. “There were instances of guests not understanding our community. We have neighbours who are LGBTQ and [visitors] were making comments about their gender in front of their children that were not appropriate,” Brezina told VICE News. Most of the time, when they were hanging out in their shared outdoor space, she says the short-term guests were loud, rowdy and drunk or stoned.

Eventually, the Airbnb “superhost” who was gobbling up neighbouring properties ended up owning several of the 12 rowhouses on her street. (A search of the Ontario Land Registry shows that two individuals bought three properties near Brezina, and then another pair of individuals with similar names bought another two houses on the street.)

Brezina says they had no choice but to sell their place and move out in 2016, when they “had no fight left” in them. Not only was it intensely stressful, but she says they moved at the height of the city’s buying frenzy and could only afford a significantly smaller home––a home that she now says isn’t suitable for their family of four people and three cats.

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This kind of situation is in stark contrast to the stylized image that Airbnb cultivates––of the great opportunity that the sharing economy presents. The San Francisco tech giant launched in 2008, with the enticing proposal of connecting travelers with more affordable, authentic alternatives to a staid hotel experience, and homeowners with a nice little side hustle. Its growth has been exponential. It’s now valued at $41 billion worldwide, operating in more than 81,000 cities, and in many markets has become a go-to destination for accommodation. With popularity outpacing regulations, there have been local consequences.

As Airbnb has expanded in the city of Toronto, so too have the number of commercial hosts using its technology, and the amount of money they’re making. Commercial hosts buy up properties that could otherwise be used to house people who live and work in the city, and offer them to tourists for short stays, on the premise that it’s more lucrative for the landlord. In a city like Toronto, one of the most competitive rental markets in the country, where housing affordability is a growing problem, and where about half of the people looking to rent make less than $40,000 a year, politicians have been trying to rein in this trend.

Based on input from people like Brezina, and other neighbours who also complained about Airbnb changing the character of their street, the City of Toronto crafted a set of rules targeting commercial hosts, who run so-called “ghost hotels”––with no front desk or staff, just a “ghostly” online check-in process. That framework, which was approved by City Council last year, limits Airbnb hosts to renting out their primary residence—the place where they live full-time.

Some short-term rental operators objected to the rules, sending them to a provincial tribunal for review later this summer. Which means that, for now, there are no enforceable rules limiting the reach of Airbnb and other home-sharing services in Toronto.

Toronto City Council took the unprecedented step last week of asking Airbnb to voluntarily abide by the municipal rules. Airbnb has declined.

“We think it’s really important for us as a company, and the City to respect this democratic process and not sidestep it just because the hotel industry would like to see that happen,” Christopher Nulty, Airbnb’s Public Affairs Lead for the Americas, told VICE.

“It should never be the case that Airbnb is impacting the availability of housing in a supply-constrained housing market.”

In Toronto, with a primary rental vacancy rate of 1.1 percent, a recent report by Fairbnb, which is a lobby group made up of housing activists and the hospitality industry, suggests that an estimated 6,500 homes have been taken off the housing market and offered up instead on Airbnb. (Data is based on analysis by a third party called Inside Airbnb which compiles daily information from Airbnb’s site. The New York-based company states that it is not associated with any of the home-sharing platform’s competitors)

Fairbnb was initially funded by a hotel workers’ union. The company declined to disclose its complete list of current funding sources, but researcher Thorben Wieditz said one of its coalition members contributed $2,500 this month to its operations.

A look at the secondary rental market, where condo units (arguably the most popular offering on Airbnb) are used as rentals, the vacancy rate is even lower, at 0.7 percent. Rentals are more scarce than they’ve been, on average, for the last decade in Toronto.

To be clear, Airbnb and other home-sharing services didn’t create this problem. Rising interest rates, tighter federal mortgage qualification rules have forced many would-be buyers into renting for longer. A population boom fueled by immigration and a tech boom that rivals U.S. hubs like San Francisco, have created the tightest rental market Toronto has seen in years. But experts say home-sharing services exacerbate it, which in turn creates other related problems, and right now, there’s nothing stopping this from getting worse.

According to urban law and governance expert Mariana Valverde, Airbnb incentivizes people to not only use their property for short-term tourist rentals, but even buy properties with that goal in mind, because its technology makes it so easy for commercial hosts to book visitors. She says she saw this play out in her native Barcelona, which is a mecca for tourists.

Barcelona is often held up as an example of a municipality that was successful in working with Airbnb to limit its impact on the rental market. The city’s appeal to tourists has been called a “poisoned chalice” because it resulted in a shrinking of the number of affordable long-term rentals, disproportionately harming young locals. Barcelona crafted rules to tax visitors, require licences for short-term stays and, perhaps most importantly, struck a data-sharing deal with Airbnb.

Barcelona, along with other European tourist hubs like Paris and Berlin, have over the years increased room taxes for visitors, which applies to overnight stays in hotels and through home-sharing platforms alike. It’s a growing trend. In fact, today, Scotland’s capital city Edinburgh announced that it is set to become the first UK municipality to introduce a “tourist tax.”

Nulty says the company takes the impact of its platform very seriously and says the majority of its hosts are not commercial hosts. VICE News made multiple requests for information regarding commercial or “superhosts” operating in Toronto, but Airbnb did not provide that data. Nulty did affirm the company’s commitment to work within a municipal regulatory framework, once it has been properly greenlighted. He adds that “it should never be the case that Airbnb is impacting the availability of housing in a supply-constrained housing market.” And yet, according to experts VICE News spoke with, it is.

Ghost hotels

Stories like Lu-Anne Brezina’s aren’t typical but it isn’t difficult to find other instances where residents have been put out by Airbnb. Thirty-two-year-old Jessica Pisarek told VICE News that two-and-a-half years ago, her landlord was looking to turn the five-bedroom house she was renting with roommates in Toronto’s sought-after Kensington Market neighbourhood, into an Airbnb. The story was first reported on by the Toronto Star in June, 2017, which verified that Pisarek’s former rental was turned into an Airbnb listing after she moved out.

She was a nursing student at the time and she recalls the intense stress she experienced after her landlord and property manager “harassed” her and her housemates until they moved out. Pisarek says it got so bad that they called police on the man. She says this happened to people she knew who were living in neighbouring houses for the same reason––to turn their long-term rentals into Airbnb listings. This was also verified by the Toronto Star’s reporting.

Nulty, the Airbnb spokesperson, points out that although the company doesn’t track the number of ghost hotels, the vast majority of hosts don’t run large-scale operations. He cites the fact that the “typical” Airbnb host makes $9,500 annually and is sharing a place 87 nights per year, which obviously isn’t enough for a commercial host to break even.

Most Airbnb hosts are like 45-year-old Lourdes Goldstein, who has only ever rented out the place where she lives. She describes herself as an occasional Airbnb host, allowing visitors to make use of her one-bedroom apartment in downtown Toronto.

“Adding even a fraction of these 6,500 entire homes back to Toronto’s rental market would have a huge impact in mitigating Toronto’s housing crisis.”

Goldstein says Airbnb has been a lifesaver because she’s precariously employed, going from one contract job to another. She has used the service to supplement her income during periods when she didn’t have a job (during which she stayed with friends). Goldstein told VICE News Airbnb allowed her to subsidize her travel costs when she used it to rent her place while she was away, most recently, on a trip to Amsterdam.

According to Fairbnb, although commercial hosts make up less than a third of Airbnb hosts, they generate an outsized 73 percent of total revenue in Toronto. Wieditz says “whatever way you’d slice it, adding even a fraction of these 6,500 entire homes back to Toronto’s rental market would have a huge impact in mitigating Toronto’s housing crisis.”

Nulty says the company is committed to working with cities “to crack down on bad actors,” and he cites Airbnb’s track record of successfully working with local regulators in markets such as Chicago, New York, and San Francisco. More than a year ago, Airbnb reached a settlement with the latter city, which resulted in the removal of thousands of listings that didn’t meet new registration requirements.

He does point out that when Airbnb removes listings or hosts to comply with local rules, they typically show up on a rival platform. Nulty says this is evidence that policing this activity isn’t straightforward. It’s like a game of whack-a-mole.

There are recent examples of the company proactively joining forces with a municipality in Canada to target illicit hosts as well. Last year, Airbnb came to an agreement with the City of Vancouver to only allow hosts who displayed a business licence on their site and app. However, there is an easy way to get around these regulations: Hosts can type anything in that field and continue to reach visitors and book them. This, despite the fact that Airbnb’s fleet of tech experts could come up with a better solution to suss out whether or not a valid business licence number is being used (a source with a good understanding of the set-up and what’s needed, told VICE News that this would come at a significant cost to Airbnb and requires a great deal of interaction with the City of Vancouver’s own tech infrastructure).

Because Airbnb’s agreement with the City of Vancouver is a memorandum of understanding, there are no legal repercussions if it doesn’t keep up its end of the bargain, or incentive for it to develop an actual fix. The City of Toronto is proposing something that is legally-binding, with the hopes of holding Airbnb more accountable.

Regulating a corporate giant

Figuring out how to keep up with––let alone regulate––global corporate entities like Airbnb has been a tricky task for various levels of government around the world. In Toronto’s case, Valverde, would like to see it moved to the provincial level, which has more resources and policy muscle than a municipality.

Some question whether the province is the right body for telling people what to do in their private homes, and whether the Conservative government has the desire to play hardball with Airbnb in the first place. For now, it’s set to be carried out by the City of Toronto, if the provincial tribunal says it’s OK.

In the motion passed by City Council last month, asking Airbnb to voluntarily comply with the rules it has been unable to enforce, it suggests Toronto’s housing affordability issues have reached a “critical point.”

Occasional Airbnb host Goldstein says it’s a catch-22. On one hand, she’s glad to be able to make some cash from renting out the place that she herself rents. But on the other hand, she doesn’t feel like she has much choice. “The reason I rent out my place is because the cost of living is so expensive in this city,” she says.

Cover image of the Brezina family. Courtesy of Lu-Anne Brezina.

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