Will COVID-19 bring down Airbnb?
Ever since we launched this show almost two years ago. Now we've done episodes about the housing crisis in Canada comes up often and it comes up everywhere from Pi to Nana avert to big cities like Vancouver and Toronto and Montreal. And every time we cover it we start with. Why how did this situation come to be and there are of course some different reasons in different places but one thing one thing keeps coming up again and again and you get one? Guess as to what we'll city place here in the downtown core as one of the highest concentrations of airbnb rental units in Toronto and tonight some housing advocates are saying. That is booming. Business is driving up the prices for those who are actually looking for a permanent home. That was then though and this is now on a city known for its sky high pricing when it comes to housing and rentals is seeing a bit of a shift. According to experts since the Ontario government has banned airbnb there was actually a huge influx in rental apartments being available right now. Nobody is traveling not even within Canada. And as you might imagine that has had an impact on airbnb business model and Bhai impact. I mean it has basically obliterated so what happens to the rental markets Canada's biggest cities to thousands of airbnb landlords some of whom have staked their financial future on this platform to the company itself. Does it di- Does it? Evolve and what happens to the future of development in big urban centers because in order to understand? How much could change from here? You also have to understand how much AIRBNB has done to drive the direction of cities in the past decade. So that's where we'll start. Who knows where we'LL END UP Jordan Heath Rawlings and this is the big story. Matt Elliott is a columnist who writes about municipal policy. He writes in the Toronto Star. He writes for the CBC and several other publications. I mad. Hey we're gonNA talk about Airbnb today and It's decline. I guess in Toronto and in other cities around the world. But why don't you I kind of give me an explanation? As to how AIRBNB rose to such dominance in the rental markets of big cities. I mean the short answer is money. I mean. Imagine you're a landlord and you sort of have choices with the property. You Own the traditional way where you find. A long-term tenant You know you can make some money off of that. But there's some what landlords might describe as hurdles. You know the rules around addictions raising rent or whatever Whereas AIRBNB is way simpler. A bad tenants don't really last for longer than few days in most cases and then the money. I think the money is just the big thing I mean. Imagine you could rent a place for two hundred dollars a night for fifty nights a month. You're at three thousand dollars a month in income from that. That's more than the average rent in most Indian neighborhoods and Enough to carry a mortgage worth a million dollars or so so landlords are looking those two options they were increasingly going the RBM Dui. Because I know you cover Toronto. We'll just sort of use it as a proxy for some of the biggest Global cities which have some of the same problems with AIRBNB. Can you give me a sense of the size of AIRBNB IN TORONTO? Before the pandemic began like how dominant is it was it was very dominant and increasingly so a fair. Bnb which is an anti airbnb at secret supporting a note that but they did some number crunching and looked at the data from AIRBNB and they estimated there were about seventy three hundred Units on BNB that did not comply with the regulations passed by the city of Toronto. Those regulations are not enforced when they were doing this. But those were the rules. Saying you know you can't rent out an entire house that you don't live in you can only rent out your principal residence. So seventy three hundred units that would have been on the rental market but been consumed by AIRBNB. is hugely significant in rental market as tight as Toronto or vacancy rates over. The last few years have been around one percent so you know I think one of the reasons people got pretty fired up about AIRBNB. Is this idea that you know these are. This is a rental market. That is very very challenging. Very expensive very tight and airbnb comes along and suddenly another chunk of air. Rental market is no longer in the market. And we're going to get to the pandemic I promise in in one second but How much in the hallways at City Hall was this hot button issue in the months leading up to say February or early March? When things started happening I mean housing. In general is such a huge huge issue at City Hall There's increasingly concerns that you know we're looking at a city that is just unaffordable for anybody but the top of the economy. So if you're a service worker if you're a teacher you're a nurse if you're a police officer like all of these jobs some of which pay pretty darn well when you look at what housing was renting for in Toronto. It just wasn't really doable for a lot of these people especially if they're people that are looking at you know. I want to start a family. Have a couple of kids and the only one of the people in a couple goes to work in those situations. Those that arrangement used to be doable. In a city like Toronto increasingly. It was not so when you have that sort of greater backdrop of housing counselors and bureaucrats and policymakers and advocates are looking for levers. They can pull. That might improve the situation. How many looked at AIRBNB and said okay? This is a relatively new thing. It has taken units out of the rental market This is something that we can look at it as a way. You know for whatever difference. That'll make it would make some difference to to make things better. As far as housing goes but you mentioned that they weren't yet enforcing the regulations they were not and I mean that's that's an interesting story by itself because the regulations passed by council which I mean at a high level. The major changes that they wanted to impose. Were you know you can only rent out your principal residence so if you have a condo and you want rent it for a couple of weeks on AIRBNB in the summer while you're off on vacation or whatever that's totally fine but if you buy another condo with the plan to just rent it on airbnb making income off of it that was going to become a against the rules. There was also going to be a cap on the number of nights you could rent a a unit in Toronto. One hundred and eighty nine year was going to the CAP But when they passed those Suddenly there was a challenge by a landlord turned out. Airbnb was supporting this challenge. And while that was before the a tribunal they held things up for a two years pretty much but a year and a half to two years while they waited for a ruling on whether these regulations could actually go into effect that finally resolve itself in the fall. But then all of the sudden you have this pandemic happen and you know the has stuff stuff as ended up on pause result. What'S HAPPENED TO AIRBNB IN TORONTO? And other places since the pandemic began it all kind of blew up To be honest I'm AIRBNB. The renters are primarily travelers Whether international or domestic travellers they're people come in from one place to another and in mid March Traveling shutdown just is not happening so there goes the market for airbnb in most cities So all the sudden you have a situation where you have all the supply thousands of units that were on Airbnb and that's how landlords made their income Suddenly were empty a bookings being cancelled and going forward. There's not a lot of hope for our travel to resume in the near term so it was a major shock to the system as all these units suddenly no longer had people in them at all. How bad could this get for the company if it continues? And what have they sort of gun in an attempt to respond to they've done a few things Airbnb announced a fund support landlords. Who were facing cancellations? You know for bookings that came in before the Pandemic Aso I think there is a desire on airbnb. Parts to see this Just sorta sustain the urban economy. Obviously they want to make sure there's still people with airbnb listings after all. This happens That airbnb itself is facing major. Financial Distress They have laid off. I think a quarter of their workforce They are saying they are revenue for the year is about half what it was projected to be at the start of the year. So they're facing a multi billion dollar. Hit and resorting to layoffs. And it's a really tough situation for for the company and then for landlords. I think some of them are going to be able to whether this because they're looking at the situation where they know they bought a unit listed on Airbnb they can defer either mortgage right now at a lot of banks. So maybe there's a way that they can hold on and and keep going through this but you also have situations where landlords have hugely over leveraged themselves. You know really gambled on this as a way to make a quick buck. And you know they're looking at situations where okay. This was going to be my My Nest Egg is is how was going to get rich and that is is really starting to fall apart for a lot of them. When I wrote about this for the star a few weeks ago I got a lot of emails from Landlords with immunes who were just incredibly angry about what I had written Because I was not coming down on the side of the landlords talking about you know how much of their life savings tied up in this Airbnb Model and this their despair for what's going to happen in the future. Can you give me an example of what that looks like when you get severely over leveraged investing in Airbnb Imagine a situation where you come into Toronto and you buy a house for yourself for you know everything in Toronto as close to a million dollars these days. So so you buy a million dollar hosts to live in and then you think well you know to make some extra money. I will also by Condo for a half million dollars and