More than a year after Oakville, Ont. imposed North America’s steepest fees on short-term rental companies, The Logic has learned that industry giant Airbnb has continued to operate illegally in the Greater Toronto Area town—and Oakville is now revising its bylaw.
The standoff has come even as the company faces pressure to cooperate with regional lawmakers worldwide on issues of safety and housing affordability ahead of its planned IPO this year.
Airbnb has been operating illegally in Oakville, Ont. since the Greater Toronto Area town implemented some of North America’s strictest regulations. Airbnb’s competitors, Expedia and Vrbo, have left the city, calling the laws—which charge platforms $44,500 per year to operate there—unreasonable. After a prolonged standoff, the town is now revising its bylaw, with amendments expected this spring.
A bylaw Oakville’s town council enacted in November 2018 requires that platforms like Airbnb pay annual licensing fees of $44,500 to operate within the town limits; individual hosts are required to pay $237 annually. The town imposed the bylaw to preserve the “livability” of its communities and hold short-term-rental companies accountable; those companies have called the move unreasonable, and have refused to pay.
“Unfortunately, the policies passed in Oakville have made it too prohibitive for us to operate in the community,” said Expedia spokesperson Talita Ferreira in an email to The Logic. Expedia, along with Vrbo, are among the companies that have removed all Oakville rental listings rather than pay for a license.
Airbnb, however, has continued to operate in Oakville, and currently has about 300 active listings in the town. The company did not respond to The Logic’s questions about its business there.
A town of nearly 200,000 people about 30 kilometres from downtown Toronto, Oakville was among the first jurisdictions in Canada to implement restrictions on how platform-based home-rental companies can operate, enacting its laws months after Vancouver’s in September 2018. Others have followed suit. In November 2019, the provincial Local Planning Appeal Tribunal (LPAT) ruled that Toronto could move forward on implementing a bylaw it approved two years prior, which short-term-rental operators, backed by Airbnb, had challenged. Cities including Burlington, Ont., Ottawa and Charlottetown are also crafting laws to crack down on short-term-rental platforms.
“It’s a big effort for anyone to come in and attempt to regulate an industry like this,” said Jim Barry, acting commissioner of community development for Oakville. “So far, it’s going slow.”
Though the bylaw has been on its books for over a year, Oakville has never enforced its licensing requirements, either with companies or with individual hosts. Barry said the town has several active investigations, including one into Airbnb. “We’ve contacted people and asked them to get licences, but we haven’t had to go to enforcement,” he said. “We are moving in the very short term to a more active enforcement phase.”
Barry said Oakville policymakers are in communication with Airbnb and that the town will likely amend its short-term-rental regulations this spring. “Conceptually, it’s not going to change,” he said. “We’re going to license the individual homes, we’ll license the businesses and we’re going to provide that all-around type of safety and regulation to the industry. But we are going to look at exactly how we’re doing that, and how we’re going to bring the different forms of the business onboard.”
The push for regulations in Canada and abroad follows years of criticism from housing and hotel advocates, arguing that Airbnb and competing platforms have eroded housing affordability while benefiting from an unfair advantage over traditional hotel companies that are subject to taxes and licensing requirements.
The opposition has created a patchwork of global regulations with broad variation in licensing fees and taxes, the number of consecutive nights for which hosts can rent their space and the type of residence that qualifies as a short-term rental.
Oakville has taken a distinctly prohibitive approach to regulating the platforms, for example, by charging companies nearly nine times more than what Toronto has proposed for an operating licence. Hosts can only rent out units in their primary residence, and the regulations—which also apply to traditional B&Bs, but not hotels—place responsibility on the platforms for host violations.
Airbnb could face a $50,000 fine for its first bylaw violation in the town, plus $100,000 for any subsequent offence.
“The Town focuses on progressive enforcement and [hopes] to achieve compliance with our regulations without moving to charges,” said Mayor Burton in an email to The Logic. “Although we have not moved to charges at this time, that is always an eventuality should compliance not be achieved.”
The city set the $44,500 licensing fee based on the projected cost of enforcing the bylaw, according to Barry. But without having gleaned any licensing income from companies, the town has few resources to enforce it; fees from host licences amount to only about $6,000.
Kellen Zale, an associate professor of property law at the University of Houston, said she’s unaware of any jurisdiction with licensing fees as high as Oakville’s. “Generally, platforms have resisted all those different cities’ attempts at regulation like the one in Oakville. It adds expense and extra work on the part of the platforms,” said Zale.
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Companies have pushed back against cities with particularly strict short-term-rental laws. Chicago, which charges companies a US$10,000 annual licensing fee, has struggled to get platforms other than Airbnb to purchase a licence. Meanwhile, Airbnb hasn’t shied away from big court battles to thwart regulations in key markets. Last year, a court in Paris dismissed a case against Airbnb after lawmakers in the city sued the company last February for €12.5 million, alleging illegal advertising. A spokesperson for the company told Bloomberg at the time that those regulations were too prohibitive. In Santa Monica, Calif., Airbnb was among the short-term-rental companies that lost a landmark case in March 2019, substantially restricting the rentals, settling on new regulations in December. Like Oakville’s, they deem the platform liable for any regulatory violations by the host.
Zale noted that Oakville’s law is unusual, given that it’s a mid-sized suburban city, and not a major market for Airbnb. “You usually hear about cities having these regulatory discussions when there are big influxes of tourists potentially disrupting the community and you’re losing a lot of the long-term rental housing because it’s being converted to short-term,” she said.
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