Written by Natalka Falcomer, Vice President Corporate Development
It’s trite to say that COVID-19 has had an impact on how we live, how we work and how we make money. Those in the hospitality industry are especially reeling from the brakes put on travel. Many may not survive and this includes Toronto’s Airbnb hosts. There is, however, a silver lining.
Airbnb hosts, unlike larger hospitality firms such as the Marriott, Hilton etc, don’t have millions in cash reserves to offset the loss of bookings. While Airbnb is lobbying our federal government to help Airbnb hosts deal with the wash of COVID-19 related cancellations and drop in bookings, these efforts will likely not come fast or earlier enough. All this, along with a mass ban of short-term rentals in many of Toronto’s condominiums and rural places in Canada, is why we’re seeing more units up for rent. Some attribute this long-awaited surge in supply as the reason for rapidly declining (hooray for renters!) rental rates. Finally, renters will catch a break. They’re right, but not completely.
What’s happened with demand?
A quick search on Airbnb shows that I have hundreds, if not thousands, of places to choose from in the downtown core should I want to book a stay between April 7th and April 12th, 2020. Another site that helps manage and analyze Airbnb data, Airdna, shows well over 16,000 Airbnb listings in the Toronto area. This suggests that supply may not be as robust as we initially assumed. In fact, even if all of the 16,000 Airbnb listings converted to rentals, it would not alone dramatically depress rental rates … if it wasn’t for COVID-19.
The real story is about demand. The 100,000 immigrants we expected to arrive in Ontario will no longer be coming. These immigrants played a critical role both in our economy and our tight rental rates. What is more, during this time of social distancing, renters who wanted to move are not able to move due to logistical issues such as hiring movers. Long-time renters in Toronto’s tight rental market have also learned that moving typically results in more expensive rent, a risk that many laid off Torontonians are simply not able to take. As such, unlike the resale market where drops in price are simply not happening because supply (low) continues to match demand (low), we’re seeing a noticeable decline in rental rates because supply (lowish) has finally outpaced demand (lower). But….
While more affordable rental rates are finally available in Toronto, no one can take advantage of them. It also remains to be seen as to whether or not these low rates will be available once we return to work, to patios and to shaking hands, regardless of any Airbnb restrictions. Unfortunately, it’s unlikely.