Open this photo in gallery Condos and apartment buildings are seen in Toronto, on Jan. 31, 2019. Fred Lum/The Globe and Mail

An Ontario tribunal has upheld Toronto regulations on short-term rentals that will restrict the most prolific hosts on Airbnb and other home-sharing services.

Almost two years after Toronto council voted for zoning bylaw amendments meant to crack down on what are known as "ghost hotel” operators, the city can move forward with the restrictions. The new rules apply to homeowners and tenants who want to offer rooms and homes for short-term rental on such services as Airbnb or VRBO. The regulations restrict short-term rentals to a homeowner’s principal residence, and then only to a maximum of 180 days a year.

Monday’s ruling by the Local Planning Appeal Tribunal (LPAT) found that these restrictions “represent good planning in the public interest.”

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Mayor John Tory said the decision is good news for Toronto residents and affirms the city’s balanced approach on short-term rentals.

Commercial operators – some of whom manage or own networks of dozens of apartments and rooms in the city – stand to lose the most under the new regime. A group of Airbnb hosts launched the appeal to the city regulations, with the first hearings taking place in June and August.

“My corporate clients who operate short-term rentals are disappointed that the zoning bylaws were allowed to go into force. They are planning to appeal and argue that the LPAT decision included legal errors,” said Jason R. Cherniak, who represented several of the commercial operators in the appeal. He also contends that the ruling may allow his clients’ “grandfathered” status to continue letting them operate their businesses.

The tribunal did leave open the possibility that because the previous bylaw did not define a length of time for a tenancy, any short-term rental units created before the new bylaw passed might qualify for “legal non-conforming” status under Ontario’s Planning Act.

There are about 21,000 short-term listings in the city, but local activists and researchers have argued that as many as 5,000 homes in Toronto have been permanently converted to short-stay accommodations. In a city facing acute rental shortages, with the vacancy rate falling as low 1.1 per cent, returning those units to long-term renters could ease what many see as a crisis.

The ruling states that about 30 per cent of all listings are not in the primary residence of an operator, and those units account for more than half of the 1.8 million nights sold in the city on short-term platforms.

LPAT adjudicator Scott Tousaw, who wrote the ruling, cautioned that the new rules would not necessarily return any of those units currently used for short-term rentals (STR) to the long-term housing market.

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But he stressed that the rules could help in future. “One fact is indisputable: each dedicated STR unit displaces one permanent household. That household must find another place to live. This phenomenon is occurring in increasing numbers in Toronto’s residential areas, the very places that are planned, designed and built to provide housing for residents,” he wrote.

“This is a major victory for tenants across Ontario,” said Thorben Wieditz, in a statement released by Fairbnb Canada, which has lobbied for stronger rules on short-term rentals. “Much of the chair’s reasoning reflects our position and confirms that we have been reasonable advocates for fair rules from the very beginning.”

In June, McGill University professor David Wachsmuth released research that suggested more than 31,000 homes across Canada are rented out on Airbnb often enough to remove them from the housing supply. The report estimated that hosts who rent out these units in cities collected as much as $374-million in revenue in 2018. Toronto was the platform’s largest metropolitan market. McGill estimated 5,200 units have been removed from long-term housing uses in the city.

Airbnb has challenged Prof. Wachsmuth’s numbers, but has not provided access to its own data for researchers to verify its assertions.

“While this ruling provides regulatory certainty for home sharing in Toronto, we continue to share our hosts’ concerns that these rules unfairly punish some responsible short-term rental hosts who are contributing to the local economy,” said Alex Dagg, director of public policy for Airbnb Canada.

Downtown councillor Joe Cressy called the ruling "an overwhelming victory" for the city. He noted that a healthy vacancy for residential rental is around 3 per cent, while Toronto's is 1.1 per cent.

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"In order to get from 1.1 per cent to 3 per cent, in order to get to that healthy rate we need about 5,000 [units of] new rental housing," Mr. Cressy said.

"There are currently, based on the analysis that's been done, around 6,500 units on AirBnB that don't comply with the new rules. If only half of them come back on the market, that will take us a long way."

The councillor said that the city "is ready to go" to enforce the rules.

“At the city we have put in place the licensing framework, cause we were waiting with bated breath for this [ruling] to happen,” he said

With a report from Oliver Moore