TORONTO (Reuters) – Canada introduced tax measures on Tuesday to ease a severe rental housing shortage by limiting income tax deductions on short-term rentals on services such as Airbnb Inc and VRBO, joining many countries that are enacting similar laws.
The new rules apply as of Jan. 1 in provinces and municipalities that bar short-term rentals, and affect deductions such as interest expenses, the federal government said in its fall economic statement.
In Montréal, Toronto and Vancouver alone, an estimated 18,900 homes were being used as short-term rental properties in 2020, the report added, noting that the number “has almost surely increased in recent years.”
Similar legal restrictions, including in Australia and Italy, could further hurt the profits of companies such as Airbnb as they face a backlash from hotels.
“Home-sharing regulations are not the solution to Canada’s housing crisis. The reality is the majority of Airbnb Hosts in Canada share one home to supplement their income and listings represent less than 1% of the country’s housing stock,” said Nathan Rotman, Airbnb’s policy lead for Canada, by email.
“Many Canadians earn extra income through home sharing to make ends meet at a time of increasing inflation, interest rates and cost of living.”
Starting in 2024, 5he government will spend C$50 million ($36 million) over three years to enable municipal enforcement of restrictions on short-term rentals.
Housing supply has failed to keep up with Canada’s immigration-fueled population growth, and housing prices soared during the COVID pandemic as low mortgage rates encouraged higher offers from buyers working from home.
Canadian homebuilders cannot keep up with the demand, while U.S. cities are adopting regulations including requiring hosts to obtain licenses and pay registration fees.
Florence, Italy, has banned new short-term home rentals, while Australian tourist destination Byron Bay will limit the availability of some properties for short-term holiday stays.
British Columbia already requires hosts to register with the province, increased fines for breaking local rules, and restricted rentals to only a portion of the principal residence.
($1 = 1.3718 Canadian dollars)
(Reporting by Nivedita Balu in Toronto; Editing by Richard Chang)
