Expedia Blames Toronto's Short-Term Rental Rules for Vrbo's Exit

On 12 January 2021, the Canadian business news site The Logic reported that Vrbo, the vacation-rental platform owned by Expedia Group, had ceased operations in Toronto because of the city's new rules on short-term rentals. Expedia confirmed the withdrawal to The Logic and put the cause on the city. “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 emailed statement.

The City of Toronto had begun enforcing those rules on 1 January 2021, The Logic reported: a host had to register with the City and could rent only a principal residence for stays of less than 28 consecutive days. Vrbo had listed more than 300 houses, condos, apartments and studios in Toronto, the local site blogTO and the trade site Short Term Rentalz reported. The Logic wrote that the bulk of Vrbo's Toronto listings were secondary residences.

None of the January reports cited here gave the day Vrbo stopped taking Toronto bookings. A City staff report dated 1 February 2021 pointed to an earlier date. Among the things short-term rental companies had told the licensing office, it recorded that Expedia ceased short-term rental operations in Toronto at the end of October 2020. Staff wrote that they were still validating what the companies had told them.

What Toronto began enforcing

The City had set out the terms in a news release on 10 December 2020. Anyone renting a home or rooms for periods of less than 28 consecutive days had to be registered with the City by 31 December 2020 to keep doing so. Operators could short-term rent only their principal residence, the home where they lived. Registration cost $50. A registered operator had to put the City-issued number on every listing.

Short-term rental companies had to make sure every listing on their platform carried a valid City registration number. After 1 January 2021, the City said, it would take enforcement action against operators who were not registered or were not following the rules, and against companies that let unregistered operators list.

Tax came with registration. From 1 January 2021 registered operators had to start collecting the Municipal Accommodation Tax and pay it quarterly, with the payment for the first quarter due by 30 April. The Globe and Mail reported on 6 January that an entire home could not be rented for more than 180 nights in a year, and that charges under the bylaw carried penalties of between $1,000 and $10,000 per infraction.

The rules were not new. A letter from Councillor Paula Fletcher to the City's Planning and Housing Committee, dated 18 January 2021, recounted that City Council approved them in December 2017 and January 2018, and that the Local Planning Appeal Tribunal dismissed appeals against the zoning changes in November 2019.

Why Vrbo left, by each side's account

Expedia blamed the regulatory environment. Minardi told The Logic that tourism would be critical to Toronto's economic recovery after the pandemic and that Expedia Group hoped to restart discussions with the city that would let it re-enter the market.

The City described a business decision. Carleton Grant, the executive director of municipal licensing and standards, told The Logic that Vrbo had chosen not to acquire a license to operate in Toronto despite many conversations about the new rules. “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.

That left one company. Grant told The Logic that Vrbo's exit meant Airbnb was the only licensed short-term rental platform in Toronto. The Globe reported on 6 January that Airbnb was giving its Toronto users until 8 January to prove they had a registration for any listing that needed one. After that date, according to company statements the Globe cited, such listings would be deactivated or blocked from booking new short stays.

How many hosts had registered

Registration ran far behind the estimates of how many rentals existed. On 4 December 2020, Global News reported that only 1,785 short-term rentals had registered. By 6 January the City had handed out 2,003 registration numbers, the Globe reported, citing the City's open data portal. Third-party analysts, the Globe added, estimated between 14,000 and 20,000 short-term rental listings in Toronto.

Grant told the Globe that before COVID he would have called 2,003 an incredibly low number, and that he would still call it low, with caveats. The City's later count was higher: as of 24 January 2021 it had received 3,263 applications and approved 2,744, according to the staff report of 1 February.

Enforcement began quietly. The Globe reported that a few inspections had been done as of 2 January and no bylaw infractions found. An official City response to The Logic said that since 1 January officers had inspected several locations and were investigating alleged violations, but that it was too soon to report the outcome. Grant told The Logic that the City did not have the right tools to track illegal short-term rental activity and needed a third party to help.

Operators, advocates and a council member

The rules closed the short-stay market to operators with many units. The Globe reported that large corporate property managers had effectively been banned. It spoke to the operator of a property management company who said he did not own any of the apartments he listed and was not registering with the City. At his peak, the Globe reported, he had listed 96 apartments in three cities. “We’re wrapping up the business, we’re going to different cities,” he said.

Thorben Wieditz, an organizer of Fairbnb, a group that had pushed for regulation, told the Globe that listings would creep back onto the platform with tricks and made-up numbers, and that fines had to be steep enough that operators could not treat them as a cost of doing business.

A member of City Council raised the same worry. In her 18 January letter, Fletcher asked the committee to have the licensing office report to the 2 February 2021 meeting of City Council on four questions, among them whether short-term rental companies would de-list every property with no valid City-issued number and how they would tell a valid registration number from a made-up one.

What it meant for hosts

A Toronto host in January 2021 needed a City registration number to rent for less than 28 consecutive days, and could get one only for the home they lived in. The deadline for anyone already hosting had been 31 December 2020. The number had to appear on every listing, and Airbnb's own deadline for its hosts to show one was 8 January.

The costs were small for a resident host and steep for a mistake. Registration was $50, the Municipal Accommodation Tax had to be collected from 1 January 2021, and the Globe put the penalties at $1,000 to $10,000 per infraction.

An owner of a second home or an investment unit had no short-stay option left in Toronto. The Logic reported that secondary residences had to be rented for a minimum of 28 straight days. For owners who had used Vrbo, the platform itself had withdrawn from the city.

Sources

1. The Logic, Vrbo exits Toronto market over city’s new short-term-rental rules (12 January 2021).
2. The Globe and Mail, Toronto embarks on short-term rental crackdown (6 January 2021).
3. blogTO, Airbnb's main competitor pulls out of Toronto over the city's new short term rental rules (12 January 2021).
4. Short Term Rentalz, Vrbo exits Toronto rental market following new crackdown (13 January 2021).
5. City of Toronto (letter from Councillor Paula Fletcher to the Planning and Housing Committee, item PH20.7), Update on Short Term Rental Regulations (18 January 2021).
6. City of Toronto (news release, read in the Internet Archive capture of 7 January 2021), Short-term rentals operators in Toronto must register by December 31 to continue hosting (10 December 2020).
7. Global News, Less than 10 per cent of Toronto short-term rentals have registered ahead of deadline (4 December 2020).
8. City of Toronto (Executive Director, Municipal Licensing and Standards), Supplementary Report - Update on Short-term Rental Regulations (1 February 2021).