The Case For Short Term Rentals

A couple weeks ago, the federal government announced they’re cracking down on short term rentals. Property owners will no longer be able to claim their rental expenses against the income they make, thereby making it far less lucrative to rent out properties on sites like Airbnb or VRBO.

I think this is a huge mistake. People argue that short term rentals limit the availability of inventory for long term renters, but I believe this view misses the big picture for a few reasons.

Less Restrictions = More Prosperity

Time and time again we’ve seen how government restrictions have been a big step back for society. Lockdowns and mandatory vaccines were not only ineffective – they were also downright destructive in so many ways. I say this knowing a healthy middle aged man who almost lost his life due to a terrible reaction from the vaccine.  

Same with rent control policies. I recently posted an article about how damaging these restrictions can be in the long term for both investors and renters. These are just a few examples, but I think you see where I’m going with this: more government, more problems.

Folks, the free market society works best when the government gets out of the way. Less red tape means more investment. More investment means more housing supply. More housing supply means weaker demand and lower prices. It isn’t rocket science – and yet, we continually see governments at all levels introduce idiotic rules and taxes that discourage investors.

We now have one million people coming to Canada every year and we’re going to need more housing ASAP. We need to stop handcuffing investors. Hard stop.

Consider Burlington

Eight years ago, in my own city, the current Mayor ran on a platform of harsh building restrictions. She captured the popular vote and was elected. Shortly thereafter, a one year building freeze was put in place, which was then extended one more year. This did not end well. 

The freeze had to end, and once it did, the demand was so great that prices skyrocketed. Big developers could weather the storm, but smaller investors ended up having to sell or went bust. This was a big misfire that ended up hurting a lot of good people.

Fast forward to today. Wouldn’t you know it, the Mayor seems to be of another mind now. Not only has she welcomed the intensification of building residential units; she also passed a bylaw allowing four units to be built on a single property. Seems like a big pivot, no? Turns out she passed the bylaw to hang onto a $40,000,000 housing accelerator fund from the provincial government. No joke.

Turning To Short Term Rentals

The kind of flip flopping we saw in Burlington has the potential to destroy local economies and housing markets. It’s unstable, and owners need stability. Short term rental owners are no exception. 

Example: let’s say an investor had purchased a property with the intent of renting it out for part of the year to help pay for the mortgage and property taxes. They purchased it under the pretense that it was perfectly legal to do so. Then suddenly, policies are introduced that prohibit short term rentals.

What are people in this position supposed to do? As you can see, the abrupt and dramatic introduction of restrictions like this can be seriously harmful for many people just trying to make ends meet.

The Bottom Line

The more restrictions you put on homeowners, the less appealing it becomes to own. It’s as simple as that. Allowing short term rentals widens the pool of potential buyers which we know is good for the economy. When more people own versus rent, it keeps rents down. Why wouldn’t we want to promote more home ownership?

In a country like Canada, with the smallest population relative to land mass, I believe we should be promoting owning over renting. Renting should be temporary. Owning creates a sense of community. I’ve said this before and I’ll say it again – it’s time to bring back pride in home ownership.

Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.

Steve Garganis: 416-224-0114; steve@canadamortgagenews.ca