The Impact of Tariffs & Regulations on Short-Term Rentals in Canada

In this episode of STR Data Lab, Jamie Lane, Chief Economist at AirDNA, welcomes Catherine Ratcliffe, CEO of STR Benefits Consulting and Lost Together Stays. The conversation takes a deep dive into how tourism’s economic impact, new regulations, and short-term rental tax policies are reshaping Canada’s vacation rental industry.

With recent political and economic shifts, Canadian short-term rental (STR) operators are facing significant challenges, from currency fluctuations and travel restrictions to new regulations in key markets like Montreal and British Columbia. Catherine shares her expert insights on navigating these uncertainties and highlights strategies for vacation rental investment in a rapidly changing landscape.

What You’ll Learn in This Episode

  • The impact of proposed tariffs and regulations on the Canadian tourism economy
  • How political tensions are influencing cross-border travel between the U.S. and Canada
  • Recent changes in short-term rental tax laws and enforcement in key provinces
  • The evolving regulatory landscape in Montreal and British Columbia
  • Strategies for navigating uncertainty in the vacation rental investment market

Episode Highlights

The Growing Political & Economic Impact on Tourism

Catherine opens the conversation by highlighting how political changes and economic policies are affecting short-term rentals across Canada. She notes that recent tariffs and travel restrictions between the U.S. and Canada have created economic uncertainty, directly impacting travel demand.

The Canadian dollar has weakened, making it more expensive for Canadians to travel abroad while making Canada a more attractive destination for American travelers. However, heightened political tensions and travel warnings may discourage some visitors, creating mixed effects on the market.

Jamie points out that Canadians make up a large portion of U.S. short-term rental demand, with over 20 million Canadians traveling to the U.S. in the past year. That accounts for nearly 30% of all international visitors. Any changes in travel behavior due to political factors could create ripple effects across both economies.


How New Short-Term Rental Taxes & Regulations Are Impacting Hosts

Recent policy changes have significantly altered the short-term rental tax landscape in Canada. In cities like Montreal and Vancouver, new rules have increased tax obligations for hosts, requiring them to register their properties and pay additional tourism and occupancy taxes.

Catherine explains that while short-term rental tax policies aim to create fair competition with hotels, they also introduce complexities for hosts trying to remain compliant. She urges STR operators to stay informed about local tax laws, as enforcement is becoming stricter in many provinces.

Key tax changes include:

  • New GST/HST collection requirements for STR operators across Canada
  • Higher provincial taxes for vacation rentals in major tourism markets
  • Stricter enforcement of tax compliance, leading to increased audits and penalties

These changes add a financial burden to STR hosts, making it essential to integrate tax planning into investment strategies.


Montreal’s Short-Term Rental Ban: A Turning Point for STR Regulations

One of the biggest surprises in Canadian STR regulations was Montreal’s sudden short-term rental ban, which restricts STR operations outside of peak summer months. This drastic move caught many investors off guard and raised concerns about government overreach in the rental market.

Catherine explains that the regulation was introduced in response to safety concerns following a tragic fire in an illegal STR property. However, rather than focusing on better enforcement, the government chose to impose sweeping bans that limit legal operations.

The effects of this regulation include:

  • A 50% reduction in active STR listings in some areas
  • Increased difficulty for tourists finding accommodations outside of hotels
  • Uncertainty for investors, as other cities may adopt similar measures

Despite these challenges, Catherine believes policy shifts in Montreal could lead to new opportunities elsewhere, particularly in surrounding areas that still allow STRs.


British Columbia’s Evolving STR Market: What Hosts Need to Know

British Columbia has long been a hotspot for vacation rental investment, but new laws have led to a 10% decline in STR listings across the province. While some feared a major industry collapse, the impact has been uneven, with some areas seeing only minor shifts.

Key changes include:

  • Victoria’s market shrinking by 50%, signaling a strong regulatory crackdown
  • New zoning laws restricting short-term rentals in residential areas
  • Reduced demand due to fewer available properties, making STRs in allowed zones more valuable

Catherine highlights that some investors have switched to long-term rentals, while others are waiting to see how enforcement plays out. She advises hosts to stay ahead of regulatory changes and consider shifting their focus to areas with more favorable policies.


Vacation Rental Investment: Navigating Market Uncertainty

With changing tax laws and increased regulations, STR investors must rethink their vacation rental investment strategies. Catherine shares key factors to consider when evaluating new STR markets:

  1. Regulatory Stability – Investing in cities with long-standing STR-friendly policies reduces risk.
  2. Tax Implications – Understanding short-term rental tax obligations can prevent unexpected financial strain.
  3. Cross-Border Travel Trends – American travel to Canada is increasing, creating new demand for STRs.
  4. Diversification – Expanding into secondary markets or offering extended-stay rentals can mitigate risk.
  5. Revenue Optimization – Using tools like dynamic pricing and occupancy forecasting can help maintain profitability.

Jamie and Catherine agree that while Canadian STRs face growing challenges, opportunities still exist for well-prepared investors.


Actionable Takeaways for STR Investors

  1. Monitor political and economic trends to anticipate shifts in tourism economic impact.
  2. Stay updated on new short-term rental tax laws and register properties to remain compliant.
  3. Diversify vacation rental investment portfolios by considering emerging markets.
  4. Adapt to changing regulations by shifting to STR-friendly zones or extended-stay models.
  5. Leverage market data to adjust pricing, occupancy strategies, and tax planning.

Conclusion: What’s Next for STRs in Canada?

Catherine predicts that Canada’s short-term rental market will continue evolving, with new regulations and tax policies shaping the industry’s future. While some cities are restricting STRs, others are embracing them, creating shifting opportunities for investors.

For operators looking to navigate market uncertainty, understanding tax obligations, staying compliant, and adapting investment strategies will be key to long-term success.

Catherine encourages STR hosts to engage with industry networks, stay informed on policy updates, and proactively plan for tax changes to stay ahead of these changes.

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