TIME TO ELIMINATE AIRBNBS?.. (No, I don’t think so)

TIME TO GO AFTER AIRBNBS?.. (No, I don’t think so)

Canada wants to eliminate all Short Term Rentals (STR). And they are going to punish anyone that has rented out their properties for short term stays. 

The federal gov’t has already changed tax laws that disallow expensing interest costs on STRs in major urban centers. Effectively making it more costly to own a short term rental property.

Changes to short-term rental rules – link to article

And here’s another tax.  Have you seen this?

Now, Revenue Canada is going to add 13% HST to the sale of your property. 

Canadian homeowners who frequently rent properties on Airbnb could face 13% tax when selling it. Here’s what you need to know – link to article

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Can you imagine selling your rental property, paying a capital gains tax, and then being hit with a 13% HST tax on the entire sale price?   A $1 million property sale could cost you $130,000 in additional tax.  Outrageous!

SETTING THE RECORD STRAIGHT ON STRS.

There seems to be a movement to get rid of these, mainly because there is a claim floating around that STRs are taking away from the much needed long term housing needs. We’ve seen municipal, provincial and federal govts bring in rules, fines, and tax disincentives to rent a property for the short term. 

Here’s what I’m hearing and reading…. “STRs take away from the housing supply.”  People are being made to feel ashamed to rent a house, condo or cottage for any short term purpose. “There’s a housing crisis and this will help to resolve it”.   Or, “STRs are illegal” as some have posted. Right?  Sound familiar?

In my opinion this is utter nonsense. It’s inaccurate and I’ll prove it very easily.. In fact, I’ll do it with the help of the federal government’s own research that just came out this past July 2024. (how’s that for irony?) 

Here’s a link to the full report.. 

Short-term rentals in the Canadian housing market – link to Gov’t site

This should have put an end to the idea that STRs or Airbnbs are taking away potential permanent homes.  Why isn’t this study being talked about? 

JUST THE STATS.

Canada Mortgage and Housing Corporation put out a report saying we need an additional 3.5million housing units beyond what is already planned and projected to be built, to reach an adequate level of affordability. In other words, if we cannot build housing units (condos, townhouses, detached homes) fast enough we will not meet the immediate housing needs… We are way behind.

Housing shortages in Canada – CMHC – link to article

So, why all the focus on Airbnb and Short Term Rentals?  

In a word, POLITICS. Put another way, it looks great to the general public and, hey, another excuse for a new tax… so, why not? The government’s own math debunks the myth. STRs are not contributing to any housing shortage. Hard stop.

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I’m going to change the subject.. Apparently, talking politics will get me in trouble (I don’t really care) but I do want to give some advice that you may find helpful.  

HOW TO GET AHEAD IN THIS WORLD

We’re all different but we all have some common goals. Get an education, get a good job or start a business.. work hard.  Start a family. Save for retirement .. invest wisely, enjoy life, take an annual vacation or two when we can afford it. 

Part of the retirement strategy could include adding an investment property or two.  In years past, this would be a long-term rental property with long-term tenants. But sometimes it could be a seasonal property.. a cottage, a ski chalet, a hunting or fishing lodge, a student rental, etc..  There are many different needs and options.

I can share some inside knowledge with you. Many of my more successful clients have incorporated owning a second or third property as part of their investment strategy.. perhaps buying  a home to house their child for university and keeping it after they graduate to rent out.  Maybe a family cottage they can use and pass on to their children.

Owning real estate has always been a part a sound investment plan for many.  

But something changed during covid.  An ugly attitude emerged.  ‘Don’t pay your rent’ if you can’t afford to.. remember that?   ‘Landlords are rich and can afford it’.  This was the message put out by our provincial governments.. federal too.   Well, unfortunately, this is very far from the truth. 

Most landlords are like you and I.  Working class folk.  They just decided to save enough for a down payment and purchase a rental property… and they took all the risks associated with buying a second property.   Over time, hopefully, the property would appreciate in value, the mortgage balance would get reduced and eventually be paid out, providing the buyers and risk takers with a good return over time.. nothing exciting. It’s not sexy or flashy… just safe and steady.

But since 2020, and during the Covid lockdowns, it’s become a little riskier to buy a long term rental property.  This new sense of entitlement attitude has spread as quickly as covid.   Landlords have been portrayed as greedy, selfish, uncaring rich people that live in mansions and spend all day counting money.  But unlike covid, it hasn’t gone away.  It’s infected the masses. 

We have seen a huge increase in tenants not paying their rent.  And when asked to leave, they fight eviction. In many cases, either not paying a dime for 6 to 12 months leaving the landlord out of pocket.  Or they ask for an envelope full of money to vacate.. I’ve seen $5k, $10k, $30k being asked for by tenants.. just to vacate the home they don’t own !   This is outrageous.  No shame.. No honour.

Personal note…  this makes me think of my dad and my late mom.  

My dad was always a hard worker. He taught me hard work pays. This is still true today, by the way.  I want to share this with everyone.. One year, when I was about 7 or 8, I noticed him being home more often than usual. I asked if something was wrong. He reluctantly told me he lost his job.  He made sure I understood that I was not to tell anyone about this!  It was a matter of pride for him.  He didn’t want empathy.  In his mind, there was a stigma attached to not working. It was a matter of honor. He was almost embarrassed.

My dad would do whatever it took to make ends meet.  He would never not pay his bills. I remember him working many odd jobs.  Cleaning offices or movie theatres at night (I was there to help). Washing cars. There was no way he was going to default on any of his financial obligations.  He passed those values down to me. And, hopefully, I’ve passed them down to my son.  

For these reasons and more, I think short term rentals are a more viable investment opportunity today. This approach isn’t taking away places for people to live and causing rents and home prices to skyrocket. We’ve proven that.  

To our various levels of government….Bring back some tougher tenant laws and help out the landlord.. the vast majority are mom and pop.. Joe and Susie average person.  Working class folk.

And to the federal government… Remove these unfair tax rules. Get out of the way. Let people build, rent, earn a profit without being made to feel guilty.  

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.