Planning Tribunal Upholds Toronto’s Short-Term Rental by-Laws

Housing affordability has become a policy priority for Canadians. For the first time, Statistics Canada has measured wait-lists for social and affordable housing, in an attempt to determine the extent of the crisis.

The results of the Canadian Housing Survey, 2018, were released this week providing the first set of results,

The place we call home, whether it be a small high-rise flat downtown or a large house on the edge of town, is one of the defining features of our lives.

The housing landscape in Canada has changed markedly over the past decade. There has been a shift in housing stock, with the construction of multi-family dwellings growing at a much faster pace than that of single family homes.

Housing prices in Vancouver and Toronto have risen for most of the decade, followed by a pause in the wake of government legislation. Subsequently, prices in Toronto have started to trend back up.

In Calgary and Edmonton, housing prices have fallen following the drop in oil prices in 2014. Housing prices in Montréal have trended upward in recent months.

The survey concluded that 283,800 Canadian households, nearly 2% across Canada, have a member on a wait-list for social and affordable housing. Almost 750,000 households reported living in unsuitable dwelling, with inadequate room for all their occupants.

The highest percentage of Canadians living in this type of housing were found in Toronto, where nearly 11% of households had inadequate room.

Many blame short-term rentals for the crisis, because space across Toronto would otherwise be made available for housing.

A Jan. 9, 2019 report by an advocacy group Fairbnb, Adressing Toronto’s Housing Crisis?, suggested that 6,500 homes could be added to the Toronto housing market, if home sharing platforms like Airbnb simply complied with the city’s existing rules on short-term rentals. This concern specifically with Airbnb has been shared by cities around the world, and the report estimates that Airbnb alone is responsible for 38% of all listings.

Toronto City Council introduced regulations in 2017 to regulate short-term rentals, known as Zoning By-law Amendments (“ZBAs”), but they were quickly appealed by several hosts to the Local Planning Appeal Tribunal (LPAT). The Tribunal released its decision this week in Hodgart et al. v Toronto (City), upholding the short-term rental regulations.

The two regulations involved are Zoning By-law No. 1452-2017, and Zoning By-law Amendment No.1453-2017.

The first permits and defines short-term rentals, pursuant to Section 34 of the Planning Act, which allows municipalities to restrict the use of land for specific purposes. The second amends the city-wide Zoning By-law No. 569-2013 and other various former municipality by-laws, to permit short-term rentals.

The amendments add a new section under s. 150.13, to require compliance with By-law 1452-2017, and to permit short-term rentals in certain zones in the city. The effect of amalgamation is never so evident as this, when the city is required to make numerous changes to zoning by-laws that carry over from previous municipalities that no longer exist, for over 30 pages.

Any decisions made under the Planning Act must still comply with the public policy considerations under s. 2, which list a number of provincial interests, specifically in the following areas,

2 The Minister, the council of a municipality, a local board, a planning board and the Tribunal, in carrying out their responsibilities under this Act, shall have regard to, among other matters, matters of provincial interest such as,

…

(h) the orderly development of safe and healthy communities;

(i) the adequate provision and distribution of educational, health, social, cultural and recreational facilities;

…

(j) the adequate provision of a full range of housing, including affordable housing;

…

(p) the appropriate location of growth and development;

The Act itself defines residential units in s. 1(1), and is referred to in s. 16(3) as one an explicit area of policy consideration.

The Act also incorporates a number of other provincial policy documents under s. 3(5), namely “A Place to Grow: The Growth Plan for the Greater Golden Horseshoe“, and the 2014 “Provincial Policy Statement Under the Planning Act.” Any ZBAs must also comply with the City of Toronto Official Plan, under s. 24(1) of the Act.

It’s obviously much simpler to purchase the use of an Airbnb unit in Toronto, than it is to regulate it.

In 2018, LPAT added several parties to the proceeding, on the basis that “this city-wide ZBA is an important matter of current public policy.” On the same basis, Fairbnb was successful in being added in 2019, having been subsequently incorporated,

[10] …the Tribunal finds that the ZBA is already under appeal and those appeals have precipitated Fairbnb’s request to support the ZBA passed by the City. On this important matter of public policy, the perspective of an organization representing community and industry groups is anticipated to be relevant and useful for the issues to be adjudicated. No prejudice is found to the Appellants given that no new issues are raised and Fairbnb must comply with the exchange dates for materials set out in the [Procedural Order]. Supported by its articles of incorporation, research and participation in this ZBA and in similar issues elsewhere in Canada, Fairbnb has a clear interest in the regulation of short term rentals of dwelling units. No Party raised substantive arguments regarding avoiding a multiplicity of proceedings, although the Tribunal finds that Fairbnb’s interests are best expressed in connection with the land use merits of the ZBA under appeal, as opposed to some other forum…

The Tribunal struggled with 32 issues presented by the parties, and witnesses and counsel providing a complex and confusing array of submissions, “owing to the inherent complexity and subtlety of the connections between issues.”

Instead of attempting to answer every issue raised by the parties, the Tribunal consolidated and focused on what the ZBAs permitted, because the previous by-laws were not intended to regulate the time a unit was rented. Complicating it further is the fact that the City has never prosecuted a short-term rental operator for any non-compliance.

What the ZBAs allow are dedicated units for 28 days or longer, entire dwellings offered by residents, or a room while a resident was present. This restriction was justified from a public policy perspective,

[149] These opportunities represent a reasonable balancing of several policy objectives. They assist in ensuring that housing is provided for residents, that a full range of housing is available including STRs, and that the business and tourism economies are supported.

This conclusion was drawn on several bases, in that it was consistent with the history of LPAT’s predecessor, the Ontario Municipal Board, that it met the statutory tests for provincial interest and conformed with the policy documents connected to the Act, as well as the consideration City Council had for the public interest.

The Ontario Municipal Board had previously considered whether short-term rental units should be treated differently, as a commercial entity. The Tribunal noted a spectrum of use for these units, from people who periodically share their homes, to others who rent out their entire dwelling year round to short-term rentals.

The question was at what point do these rentals become a commercial use of land. Dedicated units exhibit the characteristics of commercial land use, similar to a hotel, which would take them out of the policy tests for residential land use in the city,

[90] Residential areas are designed and intended to be non-commercial areas where people reside, with some exceptions for in-home activities such as a home occupation as-of-right, and small-scale services and retail uses by rezoning. Commercial areas are designed and intended as locations for business where commerce is practiced. Zoning by-laws routinely separate uses into classes and subclasses to prevent one type of use from infiltrating another. The differences between the use of a house as a place of permanent residence and the dedicated use of that same house for daily paying guests is sufficient to warrant differentiation under s. 34(1) and (2) of the Act. A dedicated STR is an identifiable and distinguishable use of land.

The Tribunal justified this distinction by referring to a number of B.C. cases, Mailloux v Tofino (District) at para 111, and Whistler (Resort Municipality) v. Wright et al. at paras 51, 54.

A 2011 Ontario Municipal Board decision was upheld by the Divisional Court in Rosen v. Corporation of the Town of Blue Mountains, where the court concluded that the promotion of tourism and economic development could not be examined without also considering other legitimate goals, such as the preservation of residential nature for specific neighbourhoods.

Although the Tribunal did not accept the evidence of the City and Fairbnb that nuisance factors are exacerbated by the operation of dedicated or commercial short-term rentals, they did concede that the commercial characteristics of these units could have an affect on the nighbourhood character,

[125] The Tribunal finds that the intensity of use arising from a successful, dedicated STR, with its business intention of regular turnover of STR customers, even if just one dwelling, operates as and exhibits a commercial use of land that changes the character of a neighbourhood. The short, temporary stay of the occupants, repeated day after day year-round results in a land use that is not residential as intended by the policy framework. Zoning provisions to constrain STR uses to levels compatible with the planned function of residential areas are considered appropriate.

Relevant provisions in the Public Policy Statement included wording in s. 1.1.1 that promote healthy, liveable and safe communities through an appropriate range and mix of residential, commercial and other uses. Planning for economic development should provide for a diversified economic base, and an appropriate range and mix of housing to meet projected requirements.

The Growth Plan mirrors many of these policy objectives, including increasing the amount and variety of available housing, and ensuring there is sufficient housing supply that reflects market demand. The Plan projects a population forecast of nearly 3.2 million by 2031, which requires housing policies under s. 2.2.6 to develop a diverse range and mix of affordable housing options.

The City’s Official Plan emphasizes the role of the City under s. 2.1 to address growth for a full range of affordable housing types, especially rental housing. In s. 3.2.1 of the Official Plan, condominium apartments are described in abundant supply, but this supply isn’t necessarily available to residents when they are used for short-term rentals instead.

All of these policy documents do make reference to tourism and the economy, but they also emphasize the need for liveable communities through an appropriate range and mix of residential units. The Tribunal upheld the ZBAs based on the clear message provided by these policies, which are themselves connected to the Act,

[99] The above policies, read in their entire context and ordinary meaning, mandate the City to plan and organize for the housing of residents.

…for the purposes of housing, the policies are clear that housing in residential areas is for residents. No policies expressly direct that accommodations for the travelling public must be accommodated in residential areas. Regulations for STRs that uphold the protection of residential areas for residents are supported by the policies.

Although the parties representing short-term rental owners claimed that these units would not have a significant effect on the housing market, as they would reflect a one-time injection of 5,000 units that would be quickly absorbed, the Tribunal did not accept this argument,

[103] To the Tribunal, the question is not whether the return of units to the rental market will have a measurable effect on the availability and affordability of housing, but rather whether the ZBAs support or detract from the policy objectives noted above. The ZBAs are found to implement the policies, first by protecting the housing supply as permanent domiciles for residents, and second, by responding to the availability and affordability issues, if not by returning units to the rental market, at least by preventing further conversions of dwelling units into dedicated STRs.

Other cities have also struggled with regulating Airbnb. Earlier this year, the New Yorker described the “touristification” of Barcelona due to Airbnb,

Nearly half the Airbnb properties in Barcelona are entire houses or apartments. The conceit of friendly locals renting out spare rooms has been supplanted by a more mercenary model, in which centuries-old apartment buildings are hollowed out with ersatz hotel rooms. Many properties have been bought specifically as short-term-rental investments, managed by agencies that have dozens of such properties. Especially in coveted areas, Airbnb can drive up rents, as longtime residents sell their apartments to people eager to use them as profit engines. In some places, the transformation has been extreme: in the Gothic Quarter, the resident population has declined by forty-five per cent in the past dozen years.

Despite an attempt at a complete ban, followed by ineffective uses of fines, Barcelona has been unable to prevent entire neighbourhoods from turning into “tourist ghettos.”

Berlin also passed a law in 2016 that banned Airbnb, but this remained ineffective, so the city attempted to regulate and fine in 2018 instead. A taxation approach has been more effective in cities like Amsterdam and London.

New York followed a similar trajectory, from ban in 2010 to regulation in 2018, but then encountered a different obstacle. Earlier this year, U.S. District Judge Paul Engelmayer provided a preliminary ruling in Airbnb Inc. v. City of New York, against a by-law requiring short-term rental providers to disclose user information.

The claim that the by-law unconstitutionally violated unreasonable search and seizure by the government was supported by the court,

…the Court’s present assessment is that it is likely that the Ordinance’s categorical demand that all booking services make sweeping monthly data productions would be held unreasonable under the Fourth Amendment.

Whether Toronto’s short-term rental by-laws, now upheld by LPAT, will themselves have any significant effect on affordable housing is unlikely, given what we have seen in other major cities.

For this reason, the Federal Government also released on Nov. 22, 2019, National Housing Day, a National Housing Strategy, a 10-year plan involving over $55 billion. Although focusing on high risk populations, the strategy itself does not appear able to affect the market availability of affordable housing, only to assist certain populations in making existing housing more affordable.

What may be needed is an even greater commitment at the municipal level. Although several plans for the creation of new affordable housing have been announced, collectively they fail to meet all of the long-term strategies in the policies connected to the Act.

Eventually, those who would otherwise complain about affordability in the city would no longer be able to – because they’re forced to move elsewhere.