Did Banning Airbnb Actually Fix Canadian Housing? An Evidence-Based Audit of the STR Restriction Experiment

Executive summary

The thesis that short-term rental (STR) restrictions would meaningfully improve Canadian housing affordability rests on a chain of causal assumptions — that STRs significantly reduce long-term housing supply, that banning them returns those units to the long-term rental (LTR) market, and that this added supply lowers rents. The evidence assembled below indicates that each link in this chain is weaker than political messaging suggested, and that there is a credible, peer-reviewed economic counter-argument that STRs play a stabilizing role in accommodation markets via supply elasticity and competition. The official Canadian narrative is not entirely wrong — there are local pockets where STRs visibly squeezed rentals — but the empirical magnitudes are small enough that economists outside the activist-policy ecosystem regularly describe STRs as "a drop in the bucket" of the affordability problem. Where rents have fallen in Toronto and Vancouver in 2024–2025, the dominant drivers appear to be new condo and purpose-built rental completions, slowing immigration and international-student inflows, and rate-driven investor exits — not STR-to-LTR conversion.

1. The official narrative versus the data: did Canadian STR restrictions actually lower rents?

The strongest single piece of Canadian-specific economic analysis on this question comes from the Conference Board of Canada's 2023 study (Tony Bonen, Director of Economic Research), which used Airbnb's own internal listings data and CMHC neighbourhood-level rent data across 330 Canadian neighbourhoods. The headline finding directly contradicts the policy rationale used by federal, provincial, and municipal politicians:

Of the roughly 30% increase in rents observed across Canadian neighbourhoods between 2016 and 2022, at most less than one percentage point (under ~$10) could be attributed to Airbnb activity.
The average share of dwellings used for "high-use" Airbnb activity was less than 0.5% per neighbourhood, peaking at roughly 1% in the highest-density Airbnb markets.
Critically, the Conference Board found that municipalities that had already imposed principal-residence restrictions did not subsequently exhibit lower rents than comparable municipalities without them. In fact, restriction-adopting cities tended to have higher rents — suggesting these cities adopted the policies because they were already in housing stress, not that the policies caused affordability.
Bonen's bottom line: "If your goal is to reduce short-term rentals so that rental prices across the market come down, it's not going to happen."

This finding was independently corroborated by Statistics Canada's 2024 "Short-term rentals in the Canadian housing market" report (Bernard et al.), which constructed a "Potential Long-Term Dwelling" (PLTD) measure — STR units listed long enough that they likely could function as long-term housing. The agency found:

PLTDs accounted for less than 0.5% of housing units in Canada's five largest CMAs in 2021.
Vancouver had the highest big-city share at 0.45%; Toronto, Montreal, Ottawa-Gatineau, and Calgary were lower.
Only resort markets — Whistler (~35%), Tofino, Sun Peaks, Mont-Tremblant, parts of Muskoka — had STR concentrations large enough to plausibly move local housing markets, and these are precisely the areas exempted from B.C.'s 2024 principal-residence law because tourism cannot be substituted there.

In other words: in the cities the bans were designed to fix, the STR stock is too small a fraction of housing to mechanically explain or reverse the rent crisis.

Toronto and Vancouver after the crackdowns

Toronto implemented principal-residence rules in 2020, ramped up enforcement in 2022–2023, and raised the registration fee from $55.35 to $375 (an ~677% jump) for 2025, with annual inspections beginning. Average asking rents in the GTA did fall in 2024 — Rentals.ca reported November 2024 average apartment/condo rents down 9.4% year-over-year to $2,640 in Toronto, and the trend continued into 2025. However, every credible analyst attributing this decline cites the same cluster of causes:

A wave of investor-owned condo completions (a record pipeline from 2021–2022 starts) hitting the rental market as units became unsellable; small investor condos in Toronto reportedly lost roughly a quarter of their value.
A sharp drop in international student demand following federal study-permit caps in early 2024.
Slower population growth as federal immigration targets were tightened.
High interest rates squeezing investor-landlords into renting whatever they couldn't sell.

Giacomo Ladas of Rentals.ca and the CBC's market commentary explicitly attribute the drop to "developers putting new condos on the rental market that were not selling," "greater supply of purpose-built rentals," and reduced international student demand — STR conversion is rarely listed among the leading causes. Even after the 2024 declines, Ontario rents remain 20–25% above pre-COVID levels.

Vancouver (city rules from 2018; B.C. principal-residence law from May 1, 2024): Wachsmuth's freelance study for the B.C. Hotel Association found a 15.8% drop in active STR listings by July 2024. Vancouver one-bedroom rents fell roughly 5.8% in 2024, with average asking rent on liv.rent for an unfurnished one-bedroom dropping from about $2,376 in April 2024 to about $2,278 in April 2025 and continuing lower into late 2025. But CMHC vacancy rates remained near 0.9% for most of 2024, and Vancouver still has more inventory of unsold condos than at any point in 11 years — again pointing to interest-rate-driven investor capitulation, not STR liberation, as the dominant supply mechanism.

Crucially, Wachsmuth himself conceded to CBC: "It's still unclear what happens to these units after they are removed from the STR listings." That admission is the empirical hole that the policy is built over.

2. The actual scale of STR-to-LTR conversion

The number of units genuinely converted from short- to long-term use is far smaller than the number of STR listings suppressed. Three pieces of evidence make this concrete:

Vancouver: the city's STR task force reported about 2,700 units returned to the long-term market in the two years after stricter rules — against a metro housing deficit measured in the hundreds of thousands and a CMHC-estimated supply gap of roughly 570,000 units in B.C. by 2030.
New York City (the most-studied natural experiment): Local Law 18 took listings from ~22,000 to ~6,800 (a ~90% drop). Yet the city's Mayor's Office of Special Enforcement confirmed only about 1,400 actual conversions to long-term leases — meaning roughly 9 out of every 10 suppressed STRs did not become a long-term home. AirDNA's chief economist Jamie Lane documented that a large share of former STR hosts simply pivoted to 30+ day "medium-term" rentals that fall outside the STR rules, while others kept the unit vacant for personal use, sold, or warehoused it.
Montreal: as of January 2025, more than half of the ~4,000 STR units operating in Montreal were unauthorized despite the post-2023 (Old Montreal fire) provincial registration regime, suggesting suppression of nominal listings rather than real conversion.

Statistics Canada explicitly cautioned that the PLTD count should not be read as a count of units that will return to long-term use — many are second homes, snowbird units, or vacation properties whose owners would rather warehouse them than rent them out year-round.

The McGill / Wachsmuth-St-Hilaire estimate that Ontario STRs added "$2.6 billion in additional rent payments" — and that regulation is "saving renters more than $1 billion annually" — is the source most quoted by politicians, but is essentially a counterfactual modelling exercise rather than a direct measurement of paid rents falling. It is contested by the Conference Board's contemporaneous direct empirical work, which used the same broad data sources and found a roughly 30× smaller effect.

3. Did rents actually fall where conversions happened? The cleanest natural experiments

The international evidence on whether binding STR bans actually lower rents is mixed and the magnitudes are small:

Los Angeles (Koster, van Ommeren & Volkhausen, 2021, Journal of Urban Economics) — quasi-experimental regression discontinuity on 18 cities in LA County that adopted Home Sharing Ordinances: ordinances cut listings by ~50% and reduced rents by approximately 2%.
Irvine, CA (Chen, Wei & Xie / Purdue, 2024) — STR ordinance reduced long-term rents by approximately 3% within two years, with the effect concentrated in larger units that resembled Airbnb stock.
Berlin (Duso, Michelsen, Schäfer & Tran, 2024, Regional Science and Urban Economics) — each additional commercial Airbnb listing displaces 0.23–0.37 rental units; non-commercial restrictions had no measurable effect.
New York City (Local Law 18) — despite a 90% listings drop, rents rose 3.4% in the first 11 months (StreetEasy), Manhattan asking rents hit a record $5,000/month, and the city's vacancy rate was unchanged at ~3.4%. Hotel ADR rose $14–19/night, generating $2.1–2.9 billion in extra hotel revenue over 18 months (Calder-Wang and follow-up International Review of Law and Economics paper). The hotel industry spent an order of magnitude more lobbying for the ban than Airbnb spent against — a textbook regulatory-capture pattern.
Berlin's earlier 2016 outright STR ban was quietly partially reversed in 2018 after sustained pushback, with the city conceding the policy had not delivered measurable affordability gains.

The literature in favour of restriction (Barron, Kung & Proserpio's much-cited Marketing Science paper finding a 10% increase in Airbnb listings raises rents 0.42% and house prices 0.76%) describes small effects per unit, large only in absolute terms because many listings exist. Even at face value, that paper implies that eliminating Airbnb entirely would only reduce rents by single-digit percentages in the highest-exposure neighbourhoods, and considerably less elsewhere — a result entirely consistent with the Conference Board's Canadian findings.

4. The competition / supply-elasticity argument: is there a legitimate economic case that STRs help?

There is a respectable and peer-reviewed economic case, separate from the housing question, that STRs improve consumer welfare in accommodation markets through three distinct channels. The user's intuition (Niagara Falls hotel competition keeping off-season prices low) maps onto a published mechanism known as supply elasticity in lodging markets.

Farronato & Fradkin (2018, NBER; later American Economic Review, 2022) — "The Welfare Effects of Peer Entry." This is the canonical paper. Without home-sharing, the short-run supply of accommodation is inelastic (hotel rooms are fixed, take years to build). Home-sharing creates a flexible supply that expands during demand surges (events, peak tourism) and contracts when demand falls. Their welfare estimates show home-sharing reduced peak-period hotel-room prices and increased consumer surplus, with the largest gains accruing in cities with the most inelastic hotel supply.

Zervas, Proserpio & Byers (2017, Journal of Marketing Research) — Texas Airbnb study. Each 10% increase in Airbnb listings reduced hotel revenue by roughly 0.4%, with the largest impact on lower-end and tourist-segment hotels. The effect was sharpest during peak demand, exactly the case the user describes.

The NYC reversal experiment. When the STR supply was choked off via Local Law 18, NYC hotel ADR jumped roughly 7.4% versus 2.1% nationally, and Manhattan ADR reached an inflation-adjusted record near $445/night in December 2024. Shelter CPI in NYC rose ~6% YoY. This is the "competition removed → prices rise" prediction borne out directly. The Congressional Research Service's 2024 STR primer explicitly notes: "STR de facto bans … have been shown to increase hotel prices due to decreased competition in accommodations."

Sheppard & Udell (Williams College, 2016) — early NYC analysis. Found that doubling Airbnb listings was associated with 6–11% home-value appreciation but argued that the wider economic activity, tax receipts, and consumer surplus from STRs outweighed the housing-cost drawbacks at the city level.

Oxford Economics (2023), commissioned but methodologically conventional: across the U.S., STRs accounted for only about 0.4 percentage points of the 32.7% increase in housing prices over the analysis window — i.e., STRs explained ~1% of the housing-price story.

The theoretical link to long-term rents is more contested. The strongest argument that STR competition spills into the LTR market is hedonic — if STR yields fall (via competition or saturation), the opportunity cost of switching a unit to LTR falls and more housing flows into LTR voluntarily. That is the mirror image of the conversion-via-ban story, and it is why several economists argue that the policy-relevant variable is commercial (multi-unit) listings, not STRs in general.

5. The "pivot" question: what do banned operators actually do?

This is the single most under-analyzed empirical question in Canadian policy debates, but the available evidence converges on a clear answer: most banned STRs do not become genuine long-term rentals. They split into roughly five buckets:

Medium-term (30+ day) rentals — by far the largest substitution channel. AirDNA documented this in NYC, and Toronto's Airbnb help page actively directs hosts to "switch to long-term stays (28 or more nights)." These are typically furnished, premium-priced corporate/relocation rentals at well above market LTR rates and do little for affordability for ordinary renters.
Sale of the unit — particularly visible in Toronto's small-condo segment, where REM and BMO have documented investor exits, with units losing approximately 25% of value. These units do enter the for-sale market but often sit unsold; they are not necessarily occupied as housing.
Vacant / personal use / pied-à-terre — vacant home taxes in Toronto and Vancouver were introduced explicitly because this bucket exists. NYC's vacancy rate did not rise after Local Law 18, suggesting many former STRs did not become any kind of rental.
Continued illegal STR operation — Montreal's 2025 inspection regime found more than half of ~4,000 STR units operating without authorization. The consensus from compliance officers is that enforcement is the binding constraint, not the rule.
True conversion to long-term rental — the smallest bucket. Vancouver's task force claims ~2,700; NYC's enforcement office confirmed ~1,400 out of ~15,000 listings removed.

The Toronto condo case is particularly instructive: the same cohort of investors who made small downtown condos viable during the 2014–2021 STR boom withdrew en masse around 2023–2024 in response to higher rates, the foreign buyer ban, vacant home taxes, and the STR crackdown layered together. Realtors describe small-format units as "literally unsellable" with monthly sales running at ~10% of inventory in early 2025. Whether one views this as a successful policy or an investor capitulation crisis depends largely on prior beliefs; it is not, however, a clean STR-to-affordable-rental conversion story.

6. Economic dissent from the official narrative

There is a clear divide between politically prominent academic voices (chiefly the McGill UPGo group led by David Wachsmuth, whose work has informed B.C., Ontario, and federal policy and which is funded in part by the Hotel Association of Canada and the B.C. Hotel Association) and a broader economic literature that is at minimum agnostic on the affordability case for STR bans.

Critical voices in Canada and beyond:

The Conference Board of Canada (2023) — the most thorough Canadian-specific quantitative study explicitly concludes the rent-Airbnb causal link is too small to matter and that principal-residence restrictions have not lowered rents where adopted.
Statistics Canada (2024) — non-partisan, deliberately avoided characterizing STR conversion as a meaningful affordability tool, pointing out that PLTDs are <0.5% of stock in big cities.
The Montreal Economic Institute has criticized Montreal's 2025 bylaw as economically counterproductive given measured housing impacts.
BMO senior economist Robert Kavcic in 2024 described the STR market as being under "full-scale attack" at the provincial and federal levels and questioned the affordability rationale.
Alicia Glen, former NYC Deputy Mayor for Housing under Bill de Blasio, publicly stated she "never saw data showing that short-term rentals were affecting the housing crisis in a significant way."
Tyler Cowen (Marginal Revolution) and Chamber of Progress have aggregated the NYC evidence to argue that STR bans are a regressive transfer to the hotel industry that does not solve housing.
The broader peer-reviewed literature — including Farronato & Fradkin, Zervas et al., Sheppard & Udell, and the Berlin commercial-vs-noncommercial finding — supports targeted regulation of commercial multi-unit operators rather than blanket bans, and recognizes consumer-welfare benefits of well-functioning STR markets.

A recurrent theme in the dissent is that the political coalition behind STR bans (incumbent hotel associations + tenant-rights groups + housing-affordability advocates) has interests that align in favour of restriction even when the empirical case is weak. The NYC econometric study in International Review of Law and Economics documented that the hotel industry spent roughly an order of magnitude more on political contributions than Airbnb in the run-up to Local Law 18 — a textbook public-choice (rent-seeking) capture pattern, not a public-interest pattern.

7. Cases where high STR density coexisted with stable or improving affordability

A handful of natural experiments cut against the "ban-helps" narrative:

Tourist resort towns in B.C. (Whistler 35% PLTD, Tofino, Sun Peaks): these towns have been explicitly exempted from B.C.'s 2024 principal-residence law because eliminating STRs would devastate the local tourism economy without producing meaningful long-term housing — a regulatory concession that implicitly admits the affordability mechanism is weak.
Berlin, 2016–2018: outright STR ban, then partial reversal, with no measurable affordability win during the ban period.
NYC post-LL18: STR supply down ~90%, rents up 3.4%, hotel prices up sharply — the sign on the affordability metric is wrong for the policy.
Tourist-heavy U.S. cities in Sheppard & Udell's analysis where additional STR revenue and economic activity outweighed measured housing-cost effects.
Toronto's contemporary rent decline is occurring while there are still ~9,800 active Airbnb listings (Airbtics, late 2025) — i.e., the rent decline did not require the STR market to disappear, and it tracks new construction far more closely than enforcement intensification.

No serious economist argues that STR deregulation would improve LTR affordability; the contrarian position is more limited and more defensible: that STR restriction produces small or zero rent benefits while imposing real consumer-welfare and small-business costs, and that the marginal regulatory dollar would do far more in zoning reform, missing-middle housing, and supply-side reforms than in STR enforcement.

8. Synthesis: was the "ban Airbnb to fix housing" policy evidence-based or political?

The honest answer is mostly political, with a thin layer of supporting evidence that has been substantially overstated in public discourse.

What the evidence supports:

In specific dense neighbourhoods of Montreal (Plateau, Old Port), parts of downtown Toronto (Entertainment District, King West), and parts of West End Vancouver, commercial multi-unit STR operators were genuinely removing housing from the long-term market and contributing measurably (though modestly) to local rent pressure.
Targeted regulation of commercial operators (not principal-residence hosts) has demonstrable, if small, effects on rents in those microgeographies.
Safety regulation (post-Old Montreal fire) is plainly justified on its own terms regardless of the housing question.

What the evidence does not support:

The claim that STR restrictions are a meaningful tool for solving Canada's housing crisis. The arithmetic does not work: <0.5% of stock cannot offset a deficit measured in hundreds of thousands of units.
The implication that the Toronto and Vancouver rent declines of 2024–2025 were caused by STR conversion. They were caused by interest-rate-induced supply shocks, immigration moderation, and student-permit caps.
The implicit claim that banned STRs become long-term homes. NYC's 90% suppression yielded ~1,400 confirmed LTR conversions; the rest pivoted to medium-term, sat vacant, were sold, or kept operating illegally.

The user's competition/supply-elasticity intuition is directly supported by mainstream economics literature (Farronato & Fradkin; Zervas et al.; the post-LL18 NYC hotel-price evidence). STRs do appear to compete with hotels and to flatten peak-period accommodation prices, and the suppression of STR supply demonstrably raised hotel ADR in NYC. The weaker (and more contested) version of the user's claim — that STR competition spills over into long-term rents — is not directly supported, but neither is the opposite claim that banning STRs lowers rents at the city scale.

The most intellectually honest framing is the one offered by Tony Bonen of the Conference Board: regulating short-term rentals "can be part of the policy mix, but it's not going to get you much bang for your buck on its own." The political appeal of STR bans lies in their visibility and the identifiable villain (out-of-town investor with multiple Airbnbs) rather than in their measured affordability impact. The genuinely binding constraints on Canadian housing affordability — restrictive zoning, slow permitting, infrastructure-charge structures, construction-cost inflation, and population growth outpacing housing starts — are all harder to politicize and slower to address. STR bans were an available, low-cost-to-government, optically powerful policy that polled well; their evidentiary base for actually lowering rents at scale is thin and, in the jurisdictions with the cleanest natural experiments (NYC, Berlin), broadly negative.

The defensible centrist position the evidence does support is: regulate commercial multi-unit STR operators tightly, leave principal-residence hosting largely alone, and stop pretending that any of this is a substitute for building more homes.