Federal government cracking down on illegal short-term rentals.

Saturday Nov 25th, 2023


In 2023 Fall Economic Statement, among other changes the federal government is introducing the measures to crack down on illegal short-term rentals as well as financial assistance to the municipalities to help enforce the municipal short-term rental rules.

We have compiled a list of rules and regulations for GTA by municipalities.

The rules will be implemented on January 1, 2024.

The federal government will be denying expense deductions on any short-term rentals where the properties are located in the municipalities that have banned the short-term rentals. Furthermore, the expense deductions will be denied for any short-term rental properties not compliant with provincial or municipal regulations.

To date the enforcement of the short-term rental rules have been, to put it mildly, lacking, to assist the municipalities with the enforcement of the rules, the federal government is promising them $50 million funding help over the next three years.

What it means in practical terms.

The tax on the units that do not follow the local regulations will be based on the gross income, not net income. As an example, if the unit is bringing $50,000 gross income and has $40,000 expenses (interest, property taxes, insurance, repairs etc), the tax would have been based on the $10,000 net profit. Starting in 2024 the tax will be based on the $50,000 gross income since the expenses will be denied.

The goal of the federal government is to change the usage of these units, increase the pool of the long-term rental units and lessen the housing crisis.

The issues will be the enforcement, the fact that the number of short term rental units is relatively small and won’t tangibly affect the crisis we are in, and the long term tenancy rules in provinces such as British Columbia and Ontario preventing the landlords from evicting non paying tenants for months or even years, which was one of the reasons the landlords turned into short term rentals to begin with.


CPA Canada.


Post a comment