Short-Term Rental Guide for Ontario

What Is a Short-Term Rental?

A short-term rental (STR) is a furnished residential unit rented out for periods of less than 28 consecutive days. Unlike traditional long-term rentals where a tenant signs a lease for a year or more, STRs cater to travellers, business visitors, and anyone seeking temporary accommodation.

The most common platforms for listing STRs are Airbnb, VRBO, and Booking.com. Each platform has different fee structures and audience demographics. Airbnb typically charges hosts a 3% service fee and guests around 14%, while VRBO often uses a host-only fee model of 5-8%. Many hosts list on multiple platforms to maximize occupancy.

The key distinction between an STR and a traditional rental is that the Residential Tenancies Act does not apply to accommodations under 28 days. This means STR guests do not have tenant rights, you do not need to use the Ontario Standard Lease, and you are not subject to rent control. However, this also means you operate more like a hospitality business than a landlord.

Toronto STR Regulations

Toronto has some of the most specific STR regulations in Ontario. If you plan to operate a short-term rental in the city, you must understand and comply with the following rules.

Registration Requirement

All STR operators in Toronto must register with the City of Toronto through the Municipal Licensing and Standards division. The registration fee is $50 per year. You will receive a registration number that must be displayed on all platform listings. Operating without registration can result in fines.

Principal Residence Requirement

Toronto restricts entire-home short-term rentals to your principal residence only. This means you cannot purchase a property solely for the purpose of running it as a full-time Airbnb. You can rent out your entire home for up to 180 nights per year when you are away, or you can rent individual rooms within your home year-round while you continue to live there.

Municipal Accommodation Tax

Toronto charges a 6% Municipal Accommodation Tax (MAT) on all short-term rentals. Platforms like Airbnb collect and remit this tax automatically on your behalf. If you list on platforms that do not handle MAT collection, you are responsible for collecting and remitting it yourself.

Ontario Legal Framework

Beyond Toronto-specific rules, the provincial legal landscape affects how you can operate an STR anywhere in Ontario.

As noted above, the Residential Tenancies Act does not apply to rentals of fewer than 28 days. This gives you more flexibility in terms of pricing, guest requirements, and termination. However, if a guest stays for 28 days or more, they may gain tenant rights under the RTA, which significantly complicates the arrangement. Many STR operators set maximum stay lengths to avoid this threshold.

Condo boards have the authority to restrict or outright ban short-term rentals through their declaration, bylaws, or rules. Before purchasing a condo for STR purposes or listing your current condo, review the condo corporation's governing documents carefully. Some buildings impose minimum stay requirements of 30 days or more, effectively prohibiting Airbnb-style rentals.

Insurance is another critical consideration. Standard homeowner or condo insurance policies typically exclude commercial hosting activities. Operating an STR without proper coverage could void your policy entirely if a claim arises.

Tax Obligations

Running an STR has significant tax implications that many new hosts overlook.

HST and the Small Supplier Threshold

If your total taxable revenue from STR activities exceeds $30,000 over four consecutive calendar quarters, you are required to register for GST/HST and collect it on all bookings. This is known as the small supplier threshold. Once registered, you must charge 13% HST on your nightly rate and remit it to the CRA. You can also claim input tax credits on eligible business expenses.

Income Reporting

STR income must be reported on your annual tax return. Depending on your level of involvement and the services you provide, the CRA may classify your STR income as either rental income or business income. Business income classification triggers CPP contributions but may also unlock additional deductions.

Eligible Deductions

Common deductions for STR operators include mortgage interest (not principal), property taxes, utilities, insurance premiums, cleaning costs, platform service fees, furnishing depreciation (CCA), repairs and maintenance, professional photography, smart lock subscriptions, and a portion of your internet and phone bills if used for the business. Keep detailed records and receipts for all expenses.

Getting Started: Setup Costs

Converting a property into a guest-ready STR requires upfront investment. For a typical one-bedroom condo in Toronto, expect to spend between $10,000 and $25,000 on initial setup. Here is where that budget typically goes.

• Furniture and decor: $5,000 to $12,000 for quality pieces that photograph well and withstand guest use
• Linens, towels, and kitchenware: $1,000 to $2,500 for hotel-quality supplies with backups
• Professional photography: $200 to $500 for listing photos that drive bookings
• Smart lock and keypad: $200 to $400 for contactless check-in
• Cleaning supplies and starter kit: $200 to $500
• Insurance upgrade: varies, but expect $50 to $150 more per month than standard coverage
• Minor renovations or touch-ups: $1,000 to $5,000 depending on condition

Use our LTR vs STR Calculator to see how long it takes to recoup your furnishing costs from the STR premium over long-term rental income.

Pricing Strategy

Pricing an STR is fundamentally different from setting long-term rent. Your nightly rate should fluctuate based on demand, seasonality, day of week, local events, and competition.

Dynamic pricing tools like PriceLabs, Beyond Pricing, and Wheelhouse analyze market data and automatically adjust your rates to maximize revenue. Most charge 1% of booking revenue and can increase your annual income by 10-40% compared to static pricing.

Key pricing considerations include setting higher rates for weekends and holidays, offering discounts for stays of 7 or more nights to reduce turnover costs, adjusting for major Toronto events (TIFF, Pride, Caribana, sports playoffs), and monitoring competitor listings in your neighbourhood. Minimum stay requirements of 2-3 nights can also reduce cleaning costs while maintaining revenue.

Running the Numbers: LTR vs STR

The fundamental question for any property investor considering STR is whether the additional revenue justifies the extra work, cost, and risk. The answer depends on your specific property, location, and circumstances.

The break-even occupancy rate is the single most important metric. This tells you the minimum occupancy your STR needs to match what you would earn from a long-term tenant. In most Toronto neighbourhoods, this falls between 55% and 75% depending on the property and nightly rate.

Use our LTR vs STR Calculator for a side-by-side comparison of cash flow, cap rate, and break-even occupancy. For a deeper dive into STR revenue projections with seasonal variations, try the STR Revenue Estimator.

Insurance and Liability

Insurance is one of the most underestimated aspects of running an STR. Standard homeowner insurance and condo insurance policies explicitly exclude short-term rental activities. If a guest is injured in your property and you do not have proper coverage, you could be personally liable.

Airbnb offers AirCover for hosts, which provides up to $3 million in host damage protection and $1 million in host liability insurance. However, AirCover has notable limitations and exclusions. It is not a replacement for a proper commercial hosting insurance policy.

Dedicated STR insurance providers in Canada include Duuo, Front Row, and some traditional insurers who offer hosting endorsements. Expect to pay $50 to $150 per month more than standard coverage. This is a non-negotiable operating cost.

Condo-Specific Considerations

If your STR is in a condo, you face additional layers of regulation beyond municipal bylaws. Condo corporations have broad authority to restrict or prohibit short-term rentals.

Before listing, review the condo's declaration, bylaws, and rules. Many boards have amended their governing documents in recent years to address STRs specifically. Common restrictions include outright bans on rentals under 6 or 12 months, requirements for board approval before any rental, limits on the percentage of units that can be rented at any time, and mandatory minimum stay periods.

Even if your condo currently allows STRs, rules can change. A board can pass new rules restricting short-term rentals with a simple board vote in many cases. This regulatory risk is something STR investors in condos must accept. Noise complaints from neighbours are another common issue that can lead to enforcement action by the condo board.

What Nobody Tells You

The STR marketing from platforms paints a rosy picture of passive income. The reality involves several factors that are rarely discussed upfront.

Seasonal income volatility. Toronto STR demand drops significantly from November through March. Your January income may be half or less of your July income. Many hosts are unprepared for months of low or negative cash flow during winter.

Cleaning and management burnout. Managing turnovers, guest communication, reviews, and maintenance requests is essentially a part-time job. Self-managing hosts report spending 10-15 hours per week on STR operations. Hiring a property manager costs 20-25% of revenue, which significantly reduces your margin.

Regulatory risk. Cities across Canada are tightening STR regulations. Toronto's principal residence requirement effectively eliminated the investment STR model. Other municipalities could introduce similar or stricter rules at any time. Building a business on a regulatory framework that could change is inherently risky.

Guest damage is real. Despite security deposits and platform protections, guest damage happens. From stained furniture to broken appliances, the wear and tear on an STR property is significantly higher than a long-term rental. Budget 5% of gross revenue for maintenance and replacement.

Reviews are everything. Your STR business lives and dies by reviews. A few bad reviews can tank your occupancy rate and force you to lower prices. The pressure to maintain a perfect guest experience is constant and can be stressful. For more landlord resources and rental market insights, visit The Rental Market.