If you’re a property owner eyeing the lucrative world of short-term rentals, you’re not alone. Platforms like Airbnb and Vrbo have turned ordinary homes into profitable vacation destinations. But as regulations tighten across North America—and especially in Canada’s Windsor-Essex region—it’s becoming clear that hosting isn’t as simple as listing your spare room online.
From bans to licenses to tax implications, let’s unpack the myths and clarify the most recent developments around short-term rentals.
The Housing Crisis vs. Short-Term Rentals
Canada is grappling with a housing crisis, and many believe short-term rentals are making the problem worse. The argument? These rentals shrink the pool of available long-term housing, driving up costs for residents.
To counter this, municipalities across the country have started regulating short-term rentals more aggressively. The goal is to protect housing stock for locals, reduce rental costs, and ensure short-term rental operators play by the rules.
But how do these regulations play out in real-world scenarios? Let’s take a look at the Windsor-Essex region in Ontario, a hotbed of short-term rental discussion.
Windsor-Essex: A Tale of Eight Municipalities
The Windsor-Essex region includes eight municipalities, each with its own approach to short-term rental regulation. Here’s how they compare, ranked from strictest to most lenient:
1. Town of Lakeshore
In October 2023, Lakeshore took the bold step of banning all short-term rentals throughout the municipality. Existing operators must comply with regulations similar to those for bed-and-breakfast establishments. The message? Housing supply comes first.
2. Town of Essex
Essex takes a balanced approach. Operators need a valid license, and short-term rentals are only allowed in specific zones: Residential Districts (pre-existing units as of May 2022), Agricultural Districts, Commercial Districts, and campgrounds. New short-term rentals in the Residential Districts are strictly prohibited. A non-refundable licensing fee is $700 which is valid for 3 years.
3. City of Windsor
As of September 6, 2022, Windsor’s rules are clear: You can only list your primary residence, and a license is required. The application process is detailed, involving proof of residence, insurance, and even a criminal record check. The fee for a new license is $232 with annual renewal fee being $191.
4. Town of Amherstburg
As of June 2023, Amherstburg allows short-term rentals, but only with a license. Like Windsor, the application process requires proof of insurance and a background check, emphasizing safety and accountability. The application fee for a short-term rental (STR) license in Amherstburg is $550 for a new license and $500 for renewal.
5. Town of Kingsville
On November 4, 2024, the Kingsville Council approved a Short-Term Rental By-law (By-law 82-2024), mandating that all short-term rentals be licensed in order to advertise or operate. To apply for a license, applicants must provide property insurance, the results of an annual fire inspection, a criminal record check, and other required documentation. Licensing fees range from $250 to $1,750, depending on factors such as whether the property is owner-occupied, the zoning designation, and the number of occupants.
6-7. Towns of LaSalle and Tecumseh
These municipalities appear to have taken a more hands-off approach—for now. There’s no publicly available information about specific regulations, leaving operators in a gray area.
8. Pelee Township
Information about Pelee Township’s stance on short-term rentals is elusive, reflecting the challenges smaller municipalities face in addressing this issue.
The Taxman Cometh: New Rules from the CRA
Short-term rental operators in Canada face more than just local regulations—they’re also under increasing scrutiny from the Canada Revenue Agency (CRA). Starting January 1, 2024, new rules will impact how hosts report income and deduct expenses.
What’s Changing?
- Stricter Reporting: Platforms like Airbnb must now report host income to the CRA, making it harder to hide earnings. The Canada Revenue Agency (CRA) began requiring new reporting from digital platform operators such as Airbnb on January 1, 2024. The first reports are due to the CRA by January 31, 2025.
- Expense Deductions: Starting January 1, 2024, non-compliant short term rentals will lose the ability to deduct rental-related expenses, potentially resulting in significant tax burdens.
- Legal Precedents: A recent Tax Court of Canada ruling classified a short-term rental property as a commercial operation, subjecting its sale to HST. This decision underscores the financial risks of misclassifying short-term rental income or property sales.
The Bottom Line
Short-term rentals are a double-edged sword. They offer economic opportunities for homeowners but come with increasing responsibilities and risks. Whether you’re in the heart of Windsor or the quiet shores of Pelee Island, staying informed is the key to success.
In this rapidly changing landscape, one thing is clear: short-term rentals aren’t going away. But navigating this evolving world requires more than a spare room and a good camera—it demands preparation, compliance, and a willingness to adapt.
Thinking of turning your property into an Airbnb but feeling lost in the sea of regulations across Windsor-Essex? Don’t stress – CoHostsCircle is here to guide you through it all! We’re your trusted Airbnb property managers, and we’ll help you navigate the rules, keep things hassle-free, and get your place booked out in no time. Book a FREE consultation today, and let’s chat about how we can help you unlock the full potential of your property without all the confusion.