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Vrbo exits Toronto market over city’s new short-term-rental rules

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Vrbo, the vacation-rental platform owned by online travel giant Expedia Group, has ceased operations in Toronto due to the city’s new rules governing short-term rentals, The Logic has learned. 

“After years of ongoing discussions, Expedia Group is saddened that the regulatory environment in Toronto has caused us to withdraw from the short-term vacation-rental market,” Philip Minardi, Expedia’s director of policy communications, said in an e-mailed statement.

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Talking Point

Vacation-rental platform Vrbo has exited the Toronto market because of new rules governing short-term rentals that ban operators from renting out a secondary residence for fewer than 28 days. The platform, owned by Expedia Group, confirmed to The Logic that the “regulatory environment” in Toronto forced the company to withdraw from the short-term-rental market. Meanwhile, four private companies are in contention for a contract from the City of Toronto that will help city officials to enforce the new rules.

On January 1, the City of Toronto began enforcing new rules requiring short-term rental (STR) owners to register with the city, and allowing them to rent only their principal residences for terms less than 28 consecutive days. STR operators have to obtain licences to operate, and secondary residences must be rented for a minimum of 28 straight days. Because Vrbo specializes in vacation rentals, the bulk of its Toronto listings consisted of secondary residences, operated by both STR companies and individuals. 

“Tourism will be critical to Toronto’s economic recovery post-pandemic, and Expedia Group is hopeful that we can restart discussions with the city that would allow us to re-enter the market and contribute to its recovery,” Minardi said. 

Toronto is the only market in Canada from which Vrbo has withdrawn, Minardi confirmed. 

In an interview with The Logic, Carleton Grant, the executive director of municipal licensing and standards at the City of Toronto, said that Vrbo chose not acquire a licence to operate in Toronto despite many conversations with the company about the development of the city’s new STR regulations. “It was a good working relationship … but they ultimately made a business decision not to operate in Toronto. Their model could not meet the requirements of our rules,” Grant said. 

Vrbo’s exit from Toronto means Airbnb is now the only licensed short-term-rental platform in Toronto, Grant said. That company has agreed to work with the city to crack down on illegal listings on its platform, he said.

“When places like Vancouver, San Francisco and Japan have implemented short-term-rental rules similar to Toronto’s, Airbnb’s community has benefited from the regulatory certainty and been able to grow as we moved forward—and we expect Toronto to be no different,” said Airbnb spokesperson Sam Randall in an email to The Logic

STR platforms like Vrbo and Airbnb had engaged in numerous discussions with city officials for over three years, beginning in late 2017, when city council was first considering the new regulations. Data from Toronto’s lobbying registry shows that registered Airbnb lobbyists, for example, participated in hundreds of phone calls and emails to council members and city employees between early 2018 and late 2020 regarding “policies related to the regulation of home sharing.” 

Although city council technically approved the STR rules in December 2017, to take effect June 2018, a group of Airbnb landlords had filed an appeal to the Local Planning Appeal Tribunal contesting the new rules, and delaying their implementation. An adjudicator rejected the appeal in November 2019, saying the city’s rules had the potential to return up to 5,000 of more than 21,000 Airbnbs in Toronto to the long-term-rental market. 

STR operators and platforms were subsequently given until the end of 2020 to register with the city, a deliberate delay city officials hoped would encourage them to participate in its licensing regime. 

“Anything that delayed the implementation of the rules was to the company’s advantage,” said a source with knowledge of Airbnb’s lobbying activities in Toronto, who spoke to The Logic on the condition they not be named. “Coming off the heels of Vancouver’s short-term-rental crackdown, there were lots of conversations with Toronto on what rules would look like…. The company was unhappy that secondary suites were being added on by politicians and believed that it would be largely unenforceable,” the source said. Airbnb did not directly address the claim, in its statement to The Logic.

In late 2020, the City issued a request for proposals (RFP) for private intelligence and data companies that could help identify STR listings that were non-compliant, and received five submissions. While the city declined to identify the bidders, one was Harmari Short Term Rental Compliance, a Toronto-based startup that works mostly with condo boards. The company recently identified illegal STR activity in the Ice Condos, twin residential buildings in downtown Toronto with a disproportionately high number of short-term rentals. The city said it is in the process of reviewing the submissions and hopes to award the contract in the first quarter of the year.

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“It is really critical for us to have that next level of expertise to train City staff on what to look for. The City does not have the right tools to do the tracking [of illegal STR activity] right now…. We need a third party to assist us,” Grant said. An official response from the City states that since January 1, “officers have inspected several locations and are actively investigating alleged short-term-rental violations,” but that it is “too soon” to report the outcome of those investigations. 

According to Grant, Toronto worked closely with Vancouver to understand how it had implemented and enforced its rules on STR activity; in August 2018, that city started enforcing rules that require all STR operators to obtain a business licence, and that prohibits them from renting secondary residences for fewer than 30 consecutive days. Data from Host Compliance, a U.S. software and intelligence firm and the City of Vancouver shows that as of January 7, in Vancouver there were 1,788 licences flagged for investigation of suspected illegal STR activity, and 1,398 violation tickets issued. For context, there are currently 3,123 active registered STR listings in the city.