The Weather Network
May. 18, 2022 | Wednesday
Local News
Only 12 of 255 short-term rentals eligible for new accommodation tax
A NOTL vacation rental on Delater Street that’s charging $1,120 per night on Airbnb will not be taxed, under council’s accommodation tax plan. (Sourced/Airbnb)

Only 12 of 255 licensed short-term rentals in Niagara-on-the-Lake would have to collect the town's new accommodation tax, which targets properties with five or more rooms.

Of the 255 licensed short-term rentals in town, only a dozen meet the five-room criteria and they are either villas or country inns, according to research by The Lake Report.

Council passed a motion on Aug. 30, spearheaded by Lord Mayor Betty Disero, instituting a 2 per cent tax on rental accommodation. The 2 per cent phased-in tax would begin in 2022 and eventually increase to 4 per cent.

Here's how The Lake Report determined the vast majority of registered, legal rental units would be excluded from the new levy. 

Under the town bylaw on short-term rentals, bed and breakfasts and cottage rentals cannot legally have more than three rooms. This means every licensed establishment of that nature is exempt from the accommodation tax.

The 255 licensed short-term rentals listed on the town’s website include 96 classified as B&Bs and 120 as cottage rentals, for a total of 216 exempt from the new tax.

The remaining 39 licensed facilities are villas, country inns or vacation apartments. Of the 22 registered villas, only five advertise having five or more rooms, while seven of the nine country inns advertise five or more rooms.

There are eight vacation apartments registered with the town but none has five bedrooms.

And just like that the list of taxable short-term rentals drops to 12 from 255. The majority of the municipal accommodation tax revenue will thus be coming from visitors who stay in hotels.

There are no details available on how many illegal, unlicensed rentals might qualify for the tax, but in March, Granicus Host Compliance issued a report stating there could be over 200 unlicensed short-term rentals in NOTL.

Disero cited the Ontario Retail Sales Act as the reason for the five or more rooms stipulation.

“There’s a distinction in the Retail Sales Tax Act” between accommodations with five or more rooms, she said in an interview on Sept. 7.

She pointed to a paragraph in section 1 which says transient accommodation “does not include the provision of lodging let for a continuous period of one month or more or lodging in a lodging house, rooming house or boarding house that has accommodation for fewer than four tenants.”

Disero stressed that the stipulation is pending legal review from the town’s lawyers.

“It will all be vetted by legal during the process and they will make a correction if necessary,” she said.

The mayor wouldn't speculate on whether council might change the motion to include more short-term rentals, noting she didn’t want to engage in “hypotheticals about what may or may not happen.”

Some municipalities, such as Huntsville and Oakville, have no such stipulation and apply the tax to any and all short-term rentals regardless of the number of rooms, representatives from the respective towns confirmed.

Disero also said the distinction in the town’s motion is to give short-term rentals a break since the town increased their licensing fees over the years.

“It seems to me we need to allow them to build in the increase in licence fees instead of hitting them again with the municipal accommodation tax,” Disero said.

Town council approved a 33 per cent reduction to short-term rental annual licensing fees in March to help the businesses through the pandemic. Fees are now $117.25 per room.

Most short-term rentals also are exempt from paying commercial fees like hotels and other businesses since they exist in residentially zoned areas.

The full commercial tax fee in urban areas as listed on NOTL’s website is $23.08 per $1,000 of a property's value.

The residential tax rate in an urban area is $9.76 per $1,000, less than half the commercial rate.

On a $1 million residentially zoned home inside the urban boundary the owners are paying about $9,700 in property taxes. If a $1 million short-term rental was classified as commercial that figure would jump to more than $23,000.

That means a short-term rental valued at $1 million and operating as a business could save almost $14,000 per year by being assessed at the residential rate.

Comparatively, a retail space on Queen Street valued at $2 million could face a commercial tax of more than $46,000.

As it stands, short-term rental owners generally need not fear paying commercial taxes and only visitors who book rooms at a major hotel or one of the 12 short-term rentals eligible will be paying the municipal accommodation tax once it comes into effect in 2022.