This is how the federal government will tackle illegal short-term rentals

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The federal government is throwing its weight around to help address illegal short-term rental properties listed on platforms such as Airbnb and Vrbo and their impact on housing affordability and supply, particularly for the rental housing market.

After media reports earlier this week that suggested such a move was forthcoming, Deputy Prime Minister and Finance Minister Chrystia Freeland outlined the strategy today in her fall economic statement.

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The federal policies centre on supporting the initiatives and strategies set forth by individual municipal and provincial governments.

Moving forward, the federal government will deny income-tax deductions for expenses incurred on short-term rental income, including interest expenses, within provinces and municipalities that have banned short-term rentals.

Furthermore, income-tax deductions will be denied when short-term rental operators are not compliant with the applicable provincial or municipal licensing, permitting, or registration requirements.

These measures impacting income-tax deductions will cover expenses incurred starting on January 1, 2024.

Additionally, the federal government will provide $50 million over three years, starting in the 2024-25 fiscal year, to support municipal governments in their enforcement of short-term rental regulations.

The recent attention on curbing short-term rentals is driven by the desire to return more homes to the long-term rental market for people who live, work, and study in their communities.

To date, the provincial government of Quebec and the municipal government of Montreal have enacted policies that largely wipe out short-term rentals.

The City of Vancouver is looking to hike short-term rental license fees exponentially and increase enforcement, while the British Columbia government is rolling out various new measures, including increasing fines, limiting the type of properties that can host, and targeting operators of illegal mini-hotels.

“We will be cracking down on short-term rentals – listed on sites like Airbnb and VRBO –which are keeping far too many homes off the market in communities and cities right across the country,” Freeland said in her address today.

The federal government will also explore options to collect data on short-term rentals.

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