Because most tourists are price-sensitive, we would likely witness a decline in “the major contribution tourism makes to the local economy”…
by Lee Friday via Mises
City Council in London, Ontario recently decided to explore their options for regulating “short-term rentals” arranged through companies such as Airbnb, HomeAway, etc. The motion was brought forward by Councillor Anna Hopkins, who is concerned about (a) complaints from residents about short-term-renters’ noisy parties, and (b) “the role those short-term rentals have on taking potential long-term housing options out of the market.” Hopkins is concerned (video 1:31:27) that non-owner-occupied residences are being “used as hotels.”
This is a strange action for Council to take because (a) the city already has a noise by-law, and (b) Council itself is guilty of prohibiting numerous long-term affordable housing options, and (c) short-term rentals include hotels, but they get a free pass.
Regarding noisy parties, Councillor Hopkins said (video 1:31:27):
“There’s no one really there to … make sure that … the concerns in the neighborhood are being met other than just calling the police …”
This reveals a complete lack of awareness on the part of Hopkins as well as her fellow Councillors who did not challenge her statement. The fact is that the city already has a sound by-law, with enforcement “split between the City of London and the London Police Service.” Therefore, the City and the police are supposed to be “the ones who are really there” to enforce a by-law which includes stiff penalties for contravention.
Instead of proposing new regulations, Hopkins and her fellow councillors should be asking why the current law is not being enforced.
The lack of a sufficient supply of affordable housing is largely due to meddlesome policies from all levels of government.
Housing is a classic example of how government policies are rarely consistent with its professed desire for economic growth. In London, as in most cities, municipal regulations (zoning, heritage designations, etc.) prevent the market from constructing enough housing to meet the demands of consumers, thereby restricting economic activity and forcing up prices. This is a basic cause and effect set of circumstances. As economist Thomas Sowell wrote: “… A century ago, virtually any economist could have explained why preventing housing from being built would lead to higher rents …”
Faced with a choice between (a) providing affordable housing through an unhampered market, or (b) providing insufficient and expensive housing through government intervention, the government chooses the latter.
In Toronto, which is also trying to limit and regulate short-term-rentals, we hear this:
“Regulating short-term rentals will increase housing affordability and accessibility, and we think with Toronto’s housing crisis, that is needed right now,” noted lawyer Monica Poremba, who is representing Fairbnb Canada [FBC], a national coalition calling for regulations around home-sharing. [emphasis added]
And Toronto City Hall says:
“… the regulations are important to maintain the accessibility and affordability of long-term rental options as the city faces an acute housing crunch.” [emphasis added]
A “housing crisis.” An “acute housing crunch.” Those words describe a dire situation. City Hall and FBC’s position is clear: The needs of tourists are a lower priority than the needs of permanent residents who lack access to affordable housing.
But if the needs of permanent residents are more important than the needs of tourists, why is the government not doing more than simply limiting the number of short-term rentals? Why not prohibit them entirely, including hotels which could be converted into condos or apartments, thus adding to the stock of long-term rental options? This is the only course of action the government can take which would be consistent with its premise that the needs of permanent residents must take priority.
But politicians are not pursuing this course of action, which means their motives are not altruistic, as they would have us believe. Instead, they arbitrarily pick the winners and losers. And it is clear that hotels – whose revenues will rise by limiting their short-term-rental competition – have far more political influence than do individual Airbnb landlords. Accordingly, for all their supposed concern about long-term housing affordability, it is worth noting that FBC “has been dubbed a hotel industry lobbying group by its critics.”
Short-term-rental regulations also conflict with the government’s tourism policy. London City Hall claims to support tourism, noting “the major contribution tourism makes to the local economy and our general well-being.” However, if City Hall gets its way, London’s short-term-rental regulations might mirror what the City of Toronto is attempting, which is to restrict “rentals to an owner’s principal residence and requiring short-term renters to register with the city and pay a four-per-cent municipal accommodation tax.”
You don’t need a degree in economics to understand that these regulations would reduce the options available to tourists, thereby raising prices and benefiting hotels. And because most tourists are price-sensitive, we would likely witness a decline in “the major contribution tourism makes to the local economy and our general well-being.” Yet another example of politicians speaking out of both sides of their mouths.