Do Canadian cities with restrictions on short-term rentals actually improve housing affordability? According to a new study out of McGill University, the answer is a resounding yes, with substantial evidence pointing to a causal relationship between short-term rentals in cities without restrictions and rent increases. Lead researcher and associate professor in the School of Urban Planning David Wachsmuth said his team specifically looked at rules that make commercial short-term rentals illegal. “What we found is that cities without Airbnb restrictions, their rents are going up at a certain level. The cities that put those restrictions in place, in the year following, two years later, three years later, their rents start to go down,” Wachsmuth said in an interview. Researchers found that cities with regulations in place had a three per cent decrease in rents in 2023. “We can use that [comparison] to prove that growing short-term rentals have been leading to growing rents in Canadian cities, and the opposite is true as well. Restrictions that put housing back on the long-term market lead to rents declining or at least rising more slowly.” According to the study, in the 309 neighbourhoods subject to restrictions, monthly rents were on average $24 lower in the year after the regulations took effect. Moreover, the effects grew in subsequent years, reaching $55 per month in regulated neighbourhoods and $40 per month in neighbouring areas without regulations. In total, restrictions on short-term rentals saved Canadian renters about $192.4 million in rent payments each month in 2023, the study showed. The savings were also observed in neighbouring cities without municipal regulations. “We know that housing markets are regional. What that implies is that things that are good for Montreal’s housing market would also probably be expected to affect housing on the South Shore and Laval,” Wachsmuth said. “And that’s exactly what we find is that when one area puts short-term rental rules in place, the rents fall quite a lot in that area, but they also fall to a lesser extent in neighbouring areas.” Catherine Lussier, a spokesperson for housing advocacy group FRAPRU, said the findings demonstrate that regulations are necessary. “If you have strong regulations that are properly enforced, it prevents the loss of rental housing,” she said. “Sometimes, these are still affordable rental units that are being rented out for much more on platforms. And if they return to the market, given the lack of rent control that we have, they often come back at much higher prices than before.” “But for us, obviously, beyond regulations, given the current crisis, we would go as far as a complete ban on using platforms for short-term rentals.” Although Montreal currently does not outright ban short-term rentals like other international cities do, Wachsmuth called the rules in place “strong” and “well-designed,” but noted that there is a gap in enforcement. The City of Montreal has said it plans to ease restrictions on short-term rentals implemented by the former administration, a move Lussier called a mistake, especially in light of the new findings.
