Registering Short-Term Rentals Will Not Solve Our Housing Crisis

The government of Newfoundland and Labrador introduced legislation this week requiring short-term rentals, such as AirBnBs, to register with the Province. This is the long-promised solution to what many have pointed to as a driver in the rental housing crisis facing the province. While the existence of some legislation fills a regulatory void, it represents a very tentative step in the direction of regulating STRs in the province. Notwithstanding, regulating STRs is far from the most important issue when contending with the housing crisis. This was never going to be the silver bullet, regardless of the content of the legislation. Let’s talk about why.

The legislation requires that individual STR properties register with the province and comply with applicable provincial and municipal regulations. A lot depends on how municipalities choose to interpret where an STR falls in the development regulations: is it rental housing? A hotel? A bed and breakfast? Any of these arguments could be made, and all of them could mean different things. There may be taxation implications depending on these definitions, as well as questions about zoning and what, if any, municipal approval processes would be required. Since the registration process itself is free, that alone is unlikely to serve as a disincentive for most STR operators. People like me, who love data, will at a minimum be happy to finally have a fairly complete picture of what the short-term rental market looks like without having to spend enormous amounts of time clicking around the map on AirBnB.

A couple of things I was hoping to see in the legislation which didn’t materialize were limitations on whole home listings and limits on the number of days properties can be rented as STRs. In my estimation, among the suite of policy options available, these have the greatest potential to release units back into the rental market from the short-term market in a way that keeps both the tourism and rental housing sectors healthy. Limiting whole-home listings allows people to generate some income from renting out a room or subsidiary apartment without taking a whole house off the rental market. Limiting the number of days that a listing can be rented as an STR leaves the property available for longer-term renting by a tenant otherwise. Many jurisdictions limit STR operations to half the year, meaning that a six-month lease is an option for the remainder.

St. John’s had a 2.9 percent rental vacancy rate in October of 2022, according to the most recent data from the Canada Mortgage and Housing Corporation. This puts us in the upper quartile of vacancy rates in the country, which means that, nationally speaking, this isn’t terrible news. However, this represents a dramatic change since pre-pandemic, when rates sat around 7 percent. The rental market has shifted dramatically over the last three years, as a seemingly endless stream of anecdotes about people struggling to find housing that they can afford would seem to indicate. 

With those anecdotes in mind, and an observation of the number of listings on short-term rental websites, it’s easy to think that STRs are the cause of this change and the obvious solution is to regulate them out of existence. Consider, though, that in terms of affordability, researchers at McGill have noted a modest correlation between AirBnB and increased rent, with the number coming in below 1 percent. The impacts are asymmetrical: they note that STRs tend to be concentrated in higher-rent neighbourhoods with access to more services, so this phenomenon further gentrifies those amenity-rich areas. In our local context, close to a third of the AirBnBs available on the northeast Avalon on any given night are located in downtown St. John’s. 

While smart, evidence-based regulations on STRs are a great policy initiative, it’s important to consider what that would mean: if all of the whole-home listings available on AirBnB in the St. John’s area today were released back into the rental market, it would trigger more than a sevenfold increase in our vacancy rate to 14.3 percent. These are the kind of vacancy numbers that drastically disincentivize the construction of new rental housing at a time when we desperately need it. While it’s tempting to point at eliminating STRs as the catch-all solution, the fact is that we would still have significant gaps, and a rental construction sector less motivated to fill them, if they were simply no longer allowed to exist.

The causes of the housing crisis are numerous and complex: decades of insufficient government funding for the building and maintenance of affordable housing, no regulation of rental rate increases, stagnating wages and social assistance rates, and more. Ultimately, the solution to our housing crisis is to appropriately fund, build, manage, and regulate an adequate supply of affordable rental housing in a way that meets the needs of the population. Focusing narrowly on STRs as the solution to the housing crisis lets all of the government actors responsible for failing to do so, and for setting the stage for the conditions that created the housing crisis to begin with, off the hook. While putting certain well-thought-out regulations in place has the potential to have a positive impact on the availability of housing, we would be wise to demand solutions that are broader, deeper, and more meaningful than this.