Can you buy a second unit in Toronto, furnish it, and let nightly Airbnb bookings cover the mortgage? The honest answer is no, and the reason has nothing to do with financing or condo fees. It comes down to one line in the city's own bylaw that most listings marketed with "income potential" never mention: you can only register a short-term rental at the address where you actually live.
That single requirement, in force since Toronto Municipal Code Chapter 547 took effect in November 2019, rules out the exact investment most buyers picture when they say they want an Airbnb property. Not a fine you might pay later. Not a licensing hurdle you can work around with paperwork. A structural rule that makes a second, investment-only unit ineligible from the start.
The rule that ends the conversation before it starts
Chapter 547 limits every operator to one registration, and that registration has to sit at their principal residence, defined as the address on their driver's license, tax filings, and utility bills. You can rent your entire home while you're away for up to 180 nights a year, or you can rent individual rooms in the home you live in with no annual cap, up to three bedrooms. What you cannot do is buy a second condo purely to run it as a nightly rental. The property has to be the one place you live, and the bylaw treats you as having only one principal residence at a time.
This is the detail that separates a Toronto purchase from a lot of the "STR-friendly" language floating around listings and investor forums. A pro forma built on year-round nightly income for a non-owner-occupied unit inside city limits is not a conservative projection. It's a projection for a business model the city has already closed off.
What "principal residence" has to match, on paper
The city doesn't take your word for it. Misrepresenting principal residence is one of the city's top enforcement targets
The City of Toronto says that, as of January 2025, every approved registration is also subject to an annual compliance inspection, and the operator has to be present for it. This isn't a complaint-driven system anymore. It's a standing checklist the city works through every year.
Toronto's short-term rental rules at a glance
If nightly-rental income is genuinely the goal, the geography of the purchase changes the entire calculation. Toronto's principal-residence rule doesn't travel to every municipality in the region.
| Toronto | |
|---|---|
| Where STRs are allowed | Principal residence only |
| Night limits | 180 nights/year for entire unit, unlimited for rooms (max 3 bedrooms) |
| Registration cost | Nurture Stays reports $375 to register, $390 to renew annually |
| Accommodation tax | bnbcalc reports 6% as of August 1, 2026 |
The tax rate just moved, and a lot of listings haven't caught up
Toronto raised its Municipal Accommodation Tax from 6% to 8.5% on June 1, 2025, under Bylaw 1259-2024, with the increase running through July 31, 2026 to help fund 2026 FIFA World Cup preparations. As of August 1, 2026, the rate is back down to 6%.
That reset happened nineteen days ago as of this writing, and the internet hasn't fully absorbed it. Several current host guides and investment calculators still quote 8.5% as the standing rate. If you're reviewing a projected cash flow sheet for a Toronto STR right now, check whether the tax line and any built-in cleaning or service fee still assume the higher rate. A pro forma running stale math isn't fraudulent, it's just out of date, but it will overstate your break-even point either for the guest-facing price or for what you'd need to charge to hit a target return.
There's a genuine discrepancy worth flagging here too. The city's own registration page lists a $390 fee without distinguishing new applications from renewals, while most third-party guides report $375 for a first-time registration and $390 for each annual renewal after. Budget for the higher number and treat the lower one as a possible first-year discount rather than a guarantee.
What "income potential" can legally mean inside city limits
None of this means a Toronto purchase has no path to rental income. It means the path runs through a narrower set of options than "list it on Airbnb" implies.
- A legal secondary suite in the home you live in. If the property has a basement suite or similar, you can register it as a partial-unit rental with no night cap, provided you occupy the rest of the home as your principal residence. Ontario Regulation 462/24, effective November 2024, also eased setback requirements for garden suites and laneway houses, which widens the pool of properties where adding a legal second unit is realistic.
- Mid-term rentals of 28 days or longer. Stays this length fall under the Residential Tenancies Act as standard tenancies, not under Chapter 547 at all. No registration, no night cap, no principal-residence requirement. For an investment property you don't live in, this is the legal lane that actually exists.
- A multiplex bought and held for long-term leases. This sidesteps the short-term rental bylaw entirely and evaluates the property on standard rental income instead of nightly rate assumptions.
Each of these is a different asset profile with different numbers attached. Confusing them, or assuming a listing's "Airbnb potential" language applies to whichever one you're actually buying, is where a lot of investment purchases go sideways after closing rather than before it.
The condo layer that surfaces after you've already made an offer
Even a buyer who plans to live in the unit and rent a room isn't automatically clear. Condo corporations can ban or restrict short-term rentals through their own declarations and bylaws regardless of what the city permits, and Ontario courts have upheld those restrictions. City registration and condo board approval are two separate hurdles, and clearing one says nothing about the other.
If a short-term rental of any kind, even a room in your own unit, is part of why you're buying a specific condo, read the declaration before you write the offer, not after your lawyer sends it to you during the review period.
FAQ
Can I rent my basement while I live upstairs? Yes, as long as the whole property is your principal residence and you register it as a room rental rather than an entire-unit rental. Room rentals have no annual night cap but are capped at three bedrooms under Chapter 547.
Can I hold two registrations if I own two properties? No. The bylaw allows one registration per person, tied to a single principal residence, whether you own one property or ten.
If you're weighing a Toronto purchase against a Niagara property specifically because of how each treats rental income, or trying to figure out whether a listing's basement suite could legally support a room rental once you own it, that's exactly the kind of question worth working through before you make an offer, not after. Christina Cruise has spent years on the ownership side of renovations, rentals, and property management across Toronto and Niagara, and can help you separate what a property is actually zoned and permitted to do from what a listing description implies. Let's Connect.
This article is general information, not legal, tax or financial advice. Consult a qualified professional about your situation.
