How technology is helping municipalities crack down on illegal short-term rentals

During what Orest Katolyk calls the “wild west” of short-term rentals — the time before regulations were put in place — bylaw officers in London, Ont., would have to rent properties listed on websites like Airbnb to check for infractions.

“We actually rented a shed several years ago that was near Western University, and it was being rented out as a kind of overnight stay for $35 a night,” said Katolyk, director of municipal compliance for the City of London.

The city had been fielding complaints from neighbours throughout the school year. Renting the property was a necessary step that allowed them to prosecute the case.

In recent years, municipal governments across Canada have strengthened regulations to limit short-term rentals. Enforcing those rules, however, can be tricky because most listings don’t include an address.

But the jobs of investigators like Katolyk are getting a lot easier thanks to new tech platforms that use artificial intelligence to help uncover illegal listings.

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Tracking compliance for governments

There are some 235,000 short-term rental listings — almost five per cent of the country’s long-term rental stock — according to a recent Desjardins report, underscoring concerns they are contributing to the housing affordability crisis and availability of longer-term units.

The technology scrapes publicly available data, such as from the rental listings on websites like Airbnb and VRBO, then matches the listings with addresses.

According to Granicus, the company behind the Host Compliance system, their platform uses artificial intelligence and machine learning to identify addresses, and determine estimated occupancy and rental revenue.

That information is then provided to municipal regulators, who can issue compliance notices to property owners if the addresses are found to be unlicensed.

“What we are trying to track for governments is compliance,” Graeme Dempster, sales director for Granicus, told CBC Radio’s Cost of Living.

“So of the number of short-term rentals that are out there in your jurisdiction, how many of them are operating legally versus where are those operators that are operating outside of your regulations?”

Airbnb told CBC in an email that all its hosts agree to follow local laws when listing a property on their service, and adds that it provides governments access to City Portal, a tool developed by the company that curates data about the platform’s listings in their area.

Airbnb also says that short-term rentals have no meaningful impact on housing prices.

A representative for Expedia Group, parent company of the short-term rental platform VRBO, told CBC in an email statement it “collaborates closely with government stakeholders across Canada in support of balanced and enforceable regulations,” adding that a “diverse” tourism sector has economic benefits for local communities.

Cheaper than renting

Illegal listings have prospered for too long in Canada because of lax regulation, said David Wachsmuth, an associate professor in the School of Urban Planning at McGill University in Montreal.

“I think there was a lot of wishful thinking in the 2010s where you saw governments pass rules about short-term rentals and kind of just expect that — like passing rules on other things — that those rules would just get followed,” he said.

“We’ve kind of learned that isn’t going to work that way.”

Many jurisdictions are now taking a more proactive approach, with some requiring property owners to apply for business licences before renting out their space online.

Both London and Burnaby, B.C., like an increasing number of Canadian jurisdictions, only allow short-term rentals in a property owner’s primary residence. That means rentals in investment properties where the owner does not live are not eligible.

London began enforcing that requirement at the beginning of 2023, and Katolyk says they had Granicus’s technology in place “right out of the gate.”

When an unregistered listing is found by the system, the property owner is given a notice — including photos and details of what was found — encouraging them to apply for a licence.

In Burnaby, which is using the Host Compliance platform, Dan Layng said they found 15 to 20 per cent of the city’s approximately 450 to 500 listings are flouting short-term rental rules.

“When we come across these properties, they’re put in one of two categories,” said Layng, chief licence inspector for the city.

“There’s properties that are eligible for a business licence because they meet all the criteria of the bylaw, or they’re ineligible because of some other reason.”

Katolyk says using technology to weed out illegal listings has been a “great return on investment,” saving both time and money.

“It’s far more cheaper than renting — having an officer rent a location, attempt to stay, collect the evidence. All that takes time,” he said.

Success in California

Host Compliance data shows jurisdictions that have implemented regulations and communicated them widely can see 60 per cent compliance within six months by using the software, Dempster said.

The approach has been successful in the California city of Irvine, about 75 kilometres southeast of Los Angeles, according to Tammy Kim, Irvine’s deputy mayor.

The municipal government began regulating short-term rentals in 2018, essentially outlawing them with new zoning rules and restrictions on advertising. But it wasn’t until they started an enforcement blitz the following year, using Host Compliance to scrape listings across dozens of platforms, that the situation began to shift.

“That was sort of the magic bullet,” Kim said in an interview with Cost of Living.

“We can’t have city staff just going to all the various platforms because there’s so many.”

In 2019, Host Compliance uncovered 1,200 illegal short-term rental listings, and the city sent out warnings to the owners. Within a year, all of the listings were gone and many units had been converted to long-term rentals, Kim said.

That helped rents fall by three per cent — nearly $115 US per month — within two years of enforcement, according to an academic research study published in May.

Cities shouldn’t need ‘detective agency’

Technology can be a useful tool for catching illegal short-term rental listings, especially in smaller jurisdictions that don’t have the same capacity for bylaw enforcement as big cities, Wachsmuth said.

It can also help fill gaps that come with on-the-ground enforcement.

“If a jurisdiction has a rule that says there’s a maximum of 60 nights you can book per year,” he said, “to prove [violations] … you kind of have to make 61 inspections.”

But Wachsmuth also said that regulations, like requiring registration with municipalities that is in turn enforced by the platforms, should be the primary approach to preventing illegal listings.

Airbnb told CBC that given the number of short-term rental platforms available, enforcement is best done by governments.

“I think it’s an unreasonable expectation that every city needs to operate a kind of detective agency basically — or outsource to some other detective agency — to just uphold the rule of law,” Wachsmuth said.

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Many Canadians are struggling to find housing, but are short-term rentals part of the problem? The National brings together landlords who have turned to Airbnb and long-term renters who feel like they’re being crushed by soaring rent prices and the shrinking availability of rental properties.

The City of Ottawa uses both technology and on-the-ground enforcement.

A platform called Harmari, owned by Toronto-based company Avenu Insights, provides bylaw enforcement teams with unregistered listings in a general area, and officers are then sent to gather more information. Avenu Insights did not respond to an interview request.

Part of the process in Ottawa involves looking at property tax information, said Tania McCumber, the city’s program manager for licensing, administration and enforcement.

“We will also speak to neighbours, follow through on complaints if there’s previous complaints on a property. We will look into those as well to see whether or not there was information previously that would perhaps allude to it being a short-term rental.”

The city has issued about 1,000 short-term rental permits, McCumber said. It estimates that there are about 300 and 400 properties not in compliance with municipal bylaws.

‘You really do need serious enforcement’

Officials in all three Canadian jurisdictions say there is anecdotal evidence to suggest that properties once listed as short-terms rentals are returning to the housing market, either as long-term rentals or simply being sold.

Wachsmuth said that Canada’s housing issues won’t be solely be resolved by regulating short-term rentals. That will require building more homes, he said.

But reducing the number of short-term rentals is a short-term solution — and enforcement is key.

“They’re low-hanging fruit,” he said. “For the time being, they still are a big contributor to housing issues.

“And … the financial incentives for hosts to break the law means that you really do need serious enforcement.”