In the midst of a housing crisis, millions to an Airbnb king

In the midst of a housing crisis, Quebec will provide $30 million in aid to a controversial short-term rental company that operates 389 apartments in Montreal, including several on Airbnb.

^{Dominique Cambron-Goulet and Jean-Francois Cloutier, Investigation office}

Quebec has allocated in recent months a first tranche of $ 6 million to the American giant Sonder. The rest will follow over the next four years.

The firm offers dozens of accommodations on Airbnb in the Sud-Ouest, Ville-Marie and Plateau Mont-Royal, where the housing crisis is pronounced.

“It’s a company that has caused a net loss of traditional housing and that monopolizes the rental stock,” denounces Cédric Dussault, spokesperson for the Regroupement des Comités Logements et Associations de Tenants du Québec (RCLALQ).

Montreal accommodations are also offered on the Sonder platform and in particular on the Booking.com and Hotels.com sites.

Several apartments are located in areas where short-term rentals are now prohibited, according to municipal regulations, but where the company benefits from a “grandfathering” or an exemption.

play on words

The company and its partners use the terms hotel, hotel-apartment or tourist residence, but in all cases, these are complete accommodations.

For example, on the Plateau Mont-Royal, a former publishing house has been converted into a “hotel” with 54 apartments.

Sonder also operates accommodation in a building on rue Saint-Denis where a medical clinic was to be located, but which serves as a “hotel” (see other text below).

In Ville-Marie, a project where Sonder is active, the Penny Lane, obtained special authorization in 2017 to allow it to rent 58 apartments on the short term. Valérie Plante had expressed her dissidence, but the resolution was adopted by the former Coderre administration.

The company defends itself by saying it respects the regulations.

“Sonder works with its Montreal real estate partners, often to refresh properties in need of repair and help bring commercial real estate back to market,” said spokesperson Fiona Story. .

Announced in 2020, the Quebec loan aims, among other things, to create a growth center and 700 jobs in Montreal. The first installment of the loan has not yet been drawn down, however, according to the company.

However, a visit by our Bureau of Investigation to the site planned for the center allowed us to see many empty spaces. Sonder says it employs more than 160 people in Montreal, but has yet to reopen its offices in the wake of the pandemic.

Tougher regulations

Montreal housing official Benoit Dorais wouldn’t comment on Sonder, but he wants tougher regulations.

The Government of Quebec, for its part, believes that Sonder “operates within a legal framework where zoning allows it”.

“The accommodations offered by Sonder, like the hotels, are not the result of the transformation of rental buildings into accommodation establishments,” said Mathieu St-Amand, press officer for the Minister of the Economy, Pierre Fitzgibbon. .

WHAT IS PROBE?

• Co-founded in 2014 by Montrealer Francis Davidson
• Davidson sublet apartments on Airbnb by offering wine and parking valet service to his guests
• In 2017, Sonder moved its headquarters from Montreal to San Francisco
• In 2019, the firm was worth more than US$1 billion, according to Forbes
• Listed on Nasdaq in January 2022, the stock has since lost almost 80% of its value
• Manages 6,300 accommodations worldwide
• Present in 35 cities in ten countries

HOW IT WORKS ?

The company signs long-term leases with property owners.

She takes care of decorating rented accommodation and subletting them on different platforms, including Airbnb.

Sonder communicates with customers almost exclusively via the internet or mobile phone.

– With Nicolas Brewer

$460 for two days in a 3 1/2

Booking a Sonder listing on Airbnb is like stepping into a rental condo building that might otherwise serve long-term Montreal tenants.

^{Charles Matthew, Investigation office}

Our Bureau of Investigation spent the night of May 30 to 31 at the Richmond, a building in Griffintown where 47 condos are sublet by Sonder on three floors.

The accommodation was booked on Airbnb. We absolutely had to rent for two nights. Total cost: $460.22 The invoice includes cleaning fees of $100, GST, QST and 3.5% tax on lodging.

After payment, we were redirected to the California-based company’s app to continue the process.

When the request was approved, the access codes to be used to enter the building and the room were sent to us.

Arrival

When we arrived, we had to fill in a register of entries and exits of the building by hand.

There was only a security guard, who does not work for Sonder, but for the owner of the building.

“Unlike traditional hotels, many Sonders do not have front desk staff,” read the instructions sent to us. We could ask questions about the mobile app to Kate Anne, a Sonder employee in the Philippines.

The door of each room was equipped with a tactile keypad with numbers.

Inside the apartment, a 3 1⁄2 of approximately 550 square feet, are notably a television with Google Chromecast, a washer-dryer duo and a kitchen with dishwasher, oven and refrigerator and an air conditioner.

Our Investigation Office tried to speak to tenants and landlords on site to find out about their experience. However, we came across a building manager who asked us to stop questioning them.

Buildings fitted out for Sonder

FROM 43 ACCOMMODATIONS TO A HOTEL

In 2017, the City of Montreal sold a heritage building, located a stone’s throw from the courthouse, to Cours de Brésoles inc.

In very poor condition, the building was sold at a loss for $1.4 million, following a public call for tenders.

The company first presented a project for 43 housing units to the City. Six months after obtaining his permit, the builder amended his request to transform the building into a “hotel” with 46 apartments. They will be put up for short-term rental by the Sonder company— when the reconstruction is finished.

“The project wouldn’t have been viable if it hadn’t been for the contract with Sonder,” says the president of the owner company, Alberto Bernardi. The project is based on the agreement with Sonder from the start. »

He explains that these will be luxury spaces for business travellers.

A CLINIC BECOME “AIRBNB”

In 2017, the borough of Ville-Marie agreed to modify the zoning of a building on rue Saint-Denis for the creation of a medical clinic and offices. Two months after obtaining its permit, Développements Quorum Mtl entered into a lease with Sonder, then asked the City to modify its permit to develop 21 apartments.

These are now available for short-term rental, notably on Airbnb.

The developer, Quorum Mtl, did not respond to an email.

A 52^e HOTEL ?

A lease was signed at the end of 2021 by Sonder with the firm Swatow Developments for the rental of four floors in Plaza Swatow, in Chinatown. Swatow’s largest shareholder is a Quebec numbered company which itself has shareholders in the Seychelles Islands and the British Virgin Islands. “There are already 51 hotels within a one kilometer radius of Chinatown. Do we really need a 52^e hotel ? said May Chiu, a member of the Chinatown Task Force.

CONTROVERSIES IN THE UNITED STATES

Short-term rental giant Sonder has been embroiled in several disputes and controversies in the United States in recent years.

In New York, a building near the New York Stock Exchange in which Sonder was subletting dozens of apartments has been the focus of at least three lawsuits. In April 2020, two long-term residents of the building notably sued their landlord and Sonder for what they alleged was a nightmare due to Sonder’s presence. Among other things, they denounced drug trafficking and harassment in the building. “Sonder is the worst neighbor anyone can imagine,” they alleged. According to the court record, settlement discussions were taking place in November 2021.

In Boston, the Boston Herald reported in late 2019 that Sonder had received multiple fines in connection with short-term rental. “These were 9 potential fines, and they were all dismissed as they were incorrectly issued to compliant properties, or to properties that were not operated by Sonder. We have not had to pay any fines and our properties comply with Boston regulations,” the firm defended itself by email.

In San Francisco, Sonder in July 2020 sued a building landlord to terminate a lease, citing the impact of the pandemic. An agreement was reached, but the owner in turn sued Sonder last year because a tenant who was to leave according to the agreement was still present.

In Long Island City, Sonder was sued in August 2020 by a building owner for US$2.5 million for breach of contract. Sonder was expected to lease an entire hotel. “We exercised a contractual right of termination that we held for non-compliance with the terms of the contract”, justified Sonder.

A troubled past

The Sonder company has already found itself in the hot seat in the past for its ways of doing things in the metropolis.

^{Jean-Francois Cloutier, Investigation office}

In 2017, the show The bill at Radio-Canada had revealed that Sonder illegally rented, without holding the slightest license, a hundred dwellings in the metropolis. The company’s CEO, Francis Davidson, then admitted to working “in the gray” and not holding any license, even though it was clearly required by law at the time.

He had boasted of having one of the largest short-term rental companies in the world.

A newspaper report Subway three years ago also revealed that the company was still renting an apartment on Airbnb as late as 2019 without holding a permit.

Eviction attempt

In addition, in 2019 and 2020, a building conversion project ended up in court. Tenants then claimed to be evicted from a six-unit building in Little Burgundy to make way for a short-term rental project managed by Sonder.

A judge of the Administrative Housing Tribunal had rejected the request of the owner of the building, because she had considered that the City was preparing to legislate against the planned use.

The judgment was appealed by the owner, but he later withdrew. The project with Sonder never saw the light of day, according to one of the tenants concerned at the time, Charlotte Jacob-Maguire. However, she says she still has a bitter taste of this experience.