Guide to Ontario Short-Term Rental Regulations

Tourism rates in Ontario continue to surge. As the province keeps drawing more visitors, the average daily rates for vacation rentals are also steadily increasing. While Ontario presents a great investment opportunity, it’s important to maintain compliance with its regulations. You risk a fine or legal issues if you violate one of its laws. In some cases, you might lose the right to operate certain properties as a business. That’s why we’re providing this guide to Ontario short-term rental (STR) regulations. We look at the requirements for both the province and popular cities and towns. Disclaimer: Our guide is intended for informational purposes only and doesn’t constitute legal advice. For guidance on specific cases, please consult a property lawyer.

Short-term rental regulations in Ontario

Ontario has adopted a flexible approach to tourist accommodation. There are very few regulations at the provincial level. Instead, the government lets the municipalities decide which laws and standards they want to enact. As a result, STR regulations can vary drastically between nearby cities and towns. Always research the by-laws for your exact location to avoid unwittingly breaking a rule. The main consideration at the provincial level is registering your business in Ontario. You’re required to do this even if you’ve already established a legal presence elsewhere in Canada. Anyone can register online or update their details using this webpage. Another concern is complying with the fire code as Ontario experiences a lot of wildfires. Properties must have a safety plan if they’re over two stories high or can take ten or more occupants. The plan should show staff and guests how to safely leave the building, among other things.

Tax requirements for Ontario short-term rentals

All Canadian businesses must pay national income tax. The base rate is 38% but you’re likely to pay somewhere in the range of 15% to 28% after reductions. Ontario also applies its own income and corporate tax rates. Your income tax is based on your business type and annual revenue. Corporate tax is at a fixed rate of 11.5%. Aside from these taxes, short-term rental operators are usually required to pay the following:

• Harmonized sales tax (HST): A combined federal and provincial tax for the sale of goods and services. This currently stands at 13%.

• Education tax: All homeowners are expected to contribute a portion of their property tax towards local education services.

• Municipal accommodation tax (MAT): Some cities and towns impose special fees on short-term rental properties.

Short-term rental regulations for popular Ontario destinations

As most regulations are set at the municipal level, you need insights into specific cities and towns. Let’s look at the rules and guidelines for major tourist hotspots across Ontario.

Ottawa

As Canada’s capital city, Ottawa is sure to get plenty of demand. It welcomes almost 10 million visitors every year to enjoy its rich history and culture. Ottawa has detailed bylaws concerning the use of short-term rentals. The local government recently introduced new measures aimed at regulating these types of businesses more closely. The first thing to know is that all vacation rental operators are required to get a permit. There are two types: one for primary residences and another for secondary residences. Only people can apply for rental permits, not companies. However, this doesn’t stop you from hiring an agent to manage the properties. You can apply for a host permit via the website. You should include the following in your application form:

• Your personal details
• The property address
• A floor plan showing the square footage of the property
• Proof that the property is your principal residence (if applicable)
• Proof that you own the property or have permission to use it
• Proof of sufficient insurance
• Payment for the permit and registration fees
• The dedicated contact person (if that’s not you)
• A signed declaration

The host permit costs $116 in total and last two years. You may renew the permit within 30 days of the expiry date. Each host permit comes with a serial number. You must advertise this on property listings alongside the maximum number of guests you can accept.

Toronto

While Toronto is a profitable location, it has prohibitive short-term rental laws. The city is most suited to homeowners trying to make extra income rather than those looking into investment properties. The main obstacle is that you can only rent out your primary residence. That means you must be registered to the address and prove you spend most of your time there. What’s more, if you have self-contained units within your property, these count as a secondary residence. Another concern is that you’re limited to 180 nights per calendar year. If you violate the bylaw, you can be fined CAD $700. Short-term rental operators are required to register their property before they accept guests. You can apply via the website. All you need are your government ID, contact information, and details about the property. Once you’ve registered, you must add your registration number to all your property listings on platforms like Airbnb and VRBO. You’re also responsible for collecting and remitting the 6% MAT from guests.

Thousand Islands

There are plenty of business opportunities on Thousand Islands. The archipelago has everything from quaint cottages and secluded cabins to luxurious maisons. Navigating the short-term rental rules is challenging, though. As Thousand Islands is made up of many little towns, you have to check the regulations for your area. Some may have limited details online and require you to contact them. Legislation can vary between places. For example, Leeds still seems to be in the process of defining their STR regulations. Whereas Gananoque has a fully established licensing scheme and a detailed set of guidelines.

Kingston

You’ll find Kingston is a popular spot for domestic tourists. Thousands of Canadians come to the city to enjoy its heritage sites or spend time in nearby nature. Kingston has some specific bylaws concerning vacation rentals including:

• Licenses are required for all properties
• No more than two licenses per person
• A maximum of two guests per bedroom (and ten in total)
• A maximum of three parties at one time if you rent by the room
• A copy of your license must be visible on your premises and any marketing materials

Local authorities may wish to inspect your property. However, they’ll give you advanced notice and arrange the inspection at a convenient time for you.

Muskoka

Muskoka has some of the most stunning natural backdrops in the world. That’s why it’s unsurprising the government has introduced detailed guidelines to protect the area while supporting the local tourism industry. There are strict zoning bylaws. Some areas don’t permit rentals and others restrict how many guests you take or days you accept bookings. For instance, you must rent out your property for a minimum of seven consecutive days during the summer in some areas. All STR operators are required to get a license regardless of their zone. You must submit an application including:

• Your basic details
• Written permission from the property owner (if that’s not you)
• Proof your business is legally allowed to operate in Ontario
• Proof of $2 million in insurance
• The property deed
• Photos of the property
• A site map and floor plan
• Full payment for the license
• A sworn statement that the property complies with local standards

STRs have occupancy limits. You can only have two guests per bedroom (except for children under the age of two.)

Niagara Falls

As one of the most famous landmarks in the world, it makes sense that Niagara Falls has strict STR regulations. Vacation rentals are banned from residential areas. You’re limited to the Tourist Commercial, General Commercial, and Central Business zones. Bed and Breakfasts are allowed but you must live on the property and remain on-site. Everywhere else in Niagara Falls requires you to get a license if you have three bedrooms or less. It costs $500 for the first year and $250 for each subsequent renewal. Note that the year starts from April 30th and not January 1st as you might expect. There are harsh penalties for operating an illegal vacation rental. Fines start at $50,000 and can be as high as $100,000 depending on the severity of the offense.

Upcoming changes to Ontario short-term rental laws

There’s a call for Ontario to introduce more STR regulations at the provincial level. While the government isn’t taking any steps, this suggests there may be changes soon. Member of Provincial Parliament, Jessica Bell, has said, “Many municipalities don’t have short-term rental laws at all. And there are many who’ve implemented short-term rental laws but they don’t have the human power, the staff power, the resources to get short-term rental hosts to comply.” That means you can’t assume a city’s short-term rental by-laws will remain the same. Local authorities may tighten regulations there in the coming months. Consider whether a borough is likely to permit your business in future when deciding between areas.

Resources

• Fire Safety Plans in Ontario, National Life Safety Group
• Corporation tax rates, Government of Canada
• Corporate Income Tax, Ontario
• Harmonized Sales Tax, Ontario
• Short-term rentals, City of Ottawa
• Short-term rentals, City of Toronto
• Short-term rentals, Leeds and the Thousand Islands
• Short term accommodations, Gananoque
• Short term rental licensing, Kingston
• Media Release – Council Approves Short-Term Rental Accommodation Licensing By-Law, Muskoka Lakes
• Vacation Rental Units, City of Niagara Falls
• New B.C law is cracking down on short-term rentals, Toronto Star