In brief
- A study conducted across 309 Canadian neighbourhoods by McGill University demonstrates the effectiveness of rental regulation in stabilising the residential market.
- Strict oversight allows for an average rent reduction ranging from $24 to $55 per month, offering concrete financial relief to tenant households.
- The research highlights the importance of public intervention to counter the conversion of permanent homes into tourist units.
- The city of Montréal currently has the most rigorous regulations in Canada, serving as a model for other North American metropolises.
- The opacity of digital data remains one of the main obstacles for municipal authorities seeking to identify infractions in real time.
- Maintaining the balance between tourist appeal and the protection of the residential housing stock constitutes the major challenge of the coming decades.
To improve access to housing, particularly in a context of rampant rent increases in Montréal and other cities, the regulation of short-term rentals like Airbnb has proven its worth, argue researchers from McGill University. In a period marked by inflationary pressures and a growing scarcity of units available for permanent residents, this study sheds necessary light on the policy levers available to municipalities. By examining no fewer than 309 neighbourhoods across Canada over a six-year period (2017-2022), the two authors of the work published in Regional Studies, David Wachsmuth and Cloé St-Hilaire, found that rents were relatively lower in municipalities that regulated short-term rentals of primary residences.
This comprehensive analysis provides a better understanding of how sharing platforms, initially perceived as tools of the collaborative economy, have gradually altered the structure of urban real estate markets. By examining longitudinal data, the researchers were able to isolate the specific effect of local regulations compared to other global economic factors. The Canadian geographical context, characterised by vast disparities between dense urban centres and peripheral areas, offers a privileged observation ground to measure the impact of the massive presence of tourists in the heart of traditional residential neighbourhoods.
Downward pressure on urban prices
The study demonstrates that the mere existence of a coercive legislative framework is enough to change the behaviour of owners and investors. When rules limit the commercial exploitation of housing, real estate speculation tends to slow down, which mechanically stabilises the prices demanded of local tenants. This downward pressure is not just theoretical; it translates into increased availability of housing for those who work and live in the city. Neighbourhood dynamics are thus preserved, avoiding the phenomenon of city centre desertification in favour of transient populations.
The essence of the Canadian study
The results of this study prove beyond any doubt that the regulation of short-term rentals exerts downward pressure on rents. David Wachsmuth, lead researcher and associate professor at the School of Urban Planning at McGill University, points out that housing unaffordability is multifactorial, but that regulation offers a simple solution to contain costs without requiring heavy infrastructure investments. This research is part of a broader desire to understand the mutations of modern urbanism in the face of the digitisation of services and the flexibilisation of housing.
The work reveals that in the 309 neighbourhoods where short-term rentals were subject to restrictions, monthly rents were $24 lower on average than they would have been in the absence of regulations. This figure, although modest at first glance, represents a substantial saving over the course of a year for a family. The gap widened over the years to reach $55 per month in regulated sectors and $40 per month in neighbouring non-regulated areas, illustrating a lasting benefit for tenants. This positive contagion effect shows that regulating an urban core can ease rental tensions in a perimeter wider than the zone strictly covered by the law.
The methodology employed by the McGill School of Urban Planning relies on a rigorous comparison between zones subject to strict rules (such as the primary residence requirement) and zones left to the free market. By filtering economic variables such as average household income or vacancy rates, the researchers were able to confirm that the regulation of digital platforms is an effective public policy tool. This study thus validates the concerns of tenant associations which, for several years, have been warning about the erosion of the affordable housing stock in major Canadian metropolises.
Reclaiming the traditional rental stock
Originally designed for occasional sharing, digital platforms have seen a proliferation of entire apartment rentals, thereby removing thousands of homes from the residential rental market. This diversion has reduced the volume of housing available for local populations, mechanically causing a price increase on the remaining inventory. What is sometimes referred to as the “professionalisation of short-term accommodation” has transformed entire neighbourhoods into open-air hotels, where permanent residents become a minority in the face of the incessant flow of tourists.
The process of reclamation through regulation aims to put these units back on the long-term rental market. When a regulation prohibits renting a secondary residence year-round on Airbnb, the owner is faced with a choice: sell the property or rent it to a resident tenant. This return of supply to circulation is crucial to ease the market, particularly in central neighbourhoods where the construction of new housing is limited by urban density and heritage protections. The McGill research highlights that this reintroduction of supply is one of the main drivers of the price moderation observed.
The role of digital platforms in the mutation of metropolises
The rise of digital giants has redefined the economic geography of Canadian cities. While the traditional hotel sector is concentrated in specific commercial zones, short-term rental platforms have infiltrated the deepest residential fabrics. This infiltration has direct consequences on the social cohesion and economic viability of neighbourhoods. The study highlights that without intervention, the superior profitability of tourist rentals ends up displacing residential uses, creating a form of accelerated gentrification driven by algorithms and global financial flows.
The dynamics of the sector show a rapid evolution towards centralised management by multi-site operators. The latter sometimes manage dozens of apartments, functioning like hotel businesses without being subject to their regulatory or fiscal constraints. This imbalance creates unfair competition not only for traditional hotels, but above all for citizens seeking housing. By documenting the impact of regulation, McGill researchers provide solid arguments for public decision-makers to restore equity between the different uses of urban land.
Montréal, a laboratory for regulation
In Montréal, where the strictest regulation in the country is found, this policy has generated a positive ripple effect. The Québec metropolis, recognised for its social mix and historic rental stock, has taken bold measures to protect its urban identity. Price moderation has extended to the main suburbs, notably in Laval and Longueuil, demonstrating that the regulation of a dense urban centre can stabilise peripheral markets. This phenomenon of influence shows that housing markets are interconnected within the same metropolitan region.
The Montréal example is particularly telling because it combines geographical restrictions (zones where renting is prohibited) and administrative requirements (obtaining certificates and registration numbers). The relative success of these measures depends, however, on the monitoring capacity of the authorities. In Montréal, the pressure exerted by tourist demand remains strong, but the regulatory framework acts as a necessary dam. The study suggests that without these barriers, the price escalation could have reached even more critical levels, directly threatening access to housing for essential workers and students who make the city vibrant.
The persistent obstacles of complex regulation
Despite these successes, oversight remains difficult due to several structural obstacles. The opacity of digital activities complicates the task of municipalities, which struggle to access precise data from platforms, whether it concerns the real names of hosts or the exact frequency of rentals. Technology companies often invoke privacy protection to limit the sharing of information with inspection services, which considerably slows down verification and fining procedures.
Furthermore, the cat-and-mouse game between municipal inspectors and fraudsters requires significant human and financial resources. Recalcitrant owners use ingenious methods to bypass prohibitions, using fake registration numbers or posting ads on multiple sites simultaneously to cover their tracks. The McGill study reminds us that the law is only effective if it is accompanied by real enforcement power and technological means capable of competing with the tools used by the platforms themselves.
Sanctions and transparency: the missing levers
Furthermore, the financial consequences for those who do not respect the regulations are often deemed too light. The researchers also note that legislation is systematically lagging behind the rapid evolution of technology. Québec has, however, taken a major step with the introduction of a centralised registry and the obligation to pay taxes related to the accommodation sector. These measures aim to standardise the sector and ensure that every rented unit contributes fairly to the financing of public services, just as hotels do.
Transparency is the central pillar of any effective regulation. For the authors of the study, it is imperative that municipalities have direct access to the platforms’ application programming interfaces (APIs) to automate the verification of permit validity. Without this technical cooperation, the work of regulation remains artisanal in the face of a globalised and automated industry. Strengthening financial sanctions is also identified as a necessary lever to make illegal activities less profitable than scrupulous compliance with the law.
A solution among other public levers
The authors of the study, however, call for some caution in interpreting the results. While regulation has helped curb the rise, a saving of $55 per month constitutes only a modest portion of the rents charged in 2022, when one had to pay approximately $1,500 for a one-bedroom apartment in Montréal. Airbnb regulation cannot, therefore, be the sole solution to the housing crisis. It must be integrated into a comprehensive strategy including the construction of social housing, the protection of the existing rental stock, and the regulation of rent increases when tenants change.
Airbnb under control: a sustainable solution?
Stricter control of Airbnb is one of the solutions that can be considered to fight the current housing crisis. The future challenge now lies in the ability of the various provinces to standardise their efforts and in the willingness of cities to go further to protect the purchasing power of citizens against the speculative pressures of tourist rentals. Collaboration between provincial and municipal levels of government is essential to create a united front against digital giants that operate on an international scale.
The future of Canadian urbanism will depend on the ability of decision-makers to reaffirm the primacy of the right to housing over short-term commercial profit. The data provided by David Wachsmuth and Cloé St-Hilaire show that the path of regulation, although complex, is the right one. By restoring to neighbourhoods their primary vocation as living environments, municipalities can hope to stabilise their social fabric and maintain an appeal that is not based solely on tourist consumption, but on the quality of life offered to all their residents.
Key data from the study
- Type of study: Impact analysis of short-term rental regulation on the Canadian rental market (2017-2022).
- Sample: 309 Canadian neighbourhoods analysed over a 6-year period, covering major metropolises and urban areas.
- Methodology: Statistical comparison between regulated and non-regulated zones to isolate the effect on rent prices.
- Financial impact: Average differential of $24 to $55 per month on rent in favour of regulated zones.
- Researchers: David Wachsmuth and Cloé St-Hilaire (McGill University School of Urban Planning).
- Publication: Regional Studies, documenting the effectiveness of municipal policies in Canada.
