How ‘the Montreal shuffle’ is skewing the city’s rental market

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Jordan: By now, you’ve no doubt heard about the impact that Airbnb has had on housing markets and cities around the world, and here Canada dropping the vacancy rate, driving up rents, turning badly needed downtown apartments into, well, basically hotel rooms. It’s for these reasons that many places have moved to regulate short-term rentals and enforce strict standards for compliance to limit the impact. The problem with regulatory standards, however, is that someone has to enforce them, which brings us to a little trick known as the Montreal Shuffle, and a case study of how short-term rentals can help turn a city that’s long been known for its rental culture and relatively affordable apartments into the same kind of thing we’re seeing in Toronto, Vancouver, and other unaffordable hotspots. So what exactly is the Montreal shuffle? Who’s behind it? How does it work? Is it technically legal? Is it a loophole in regulations, or just a lack of any government or company willing to crack down and put a stop to it? I’m Jordan Heath Rawlings. This is the big story. Ethan Cox is the senior editor and co-founder at Ricochet Media, which has done an extensive deep dive into the presence of Airbnb in Montreal. Hey, Ethan.

Ethan Cox: Hi.

Jordan: Why don’t you take us back to earlier this year and the old port building that caught on fire in Montreal. I imagine most people kind of remember this, what happened?

Ethan Cox: Well, thanks for asking, Jordan. I think that is a really important piece of the puzzle here to understanding what’s going on. So, you know, in Montreal, we, we have a fair number of fires. We have a lot of older wooden buildings, but it’s exceedingly rare that they’re dead. And so what happened at the end of March this year is there was a fire in a building in old Montreal that ended up killing seven people. And, and that was very shocking and very upsetting to everyone here. And I think the, the immediate question in the aftermath was how this could happen. That we have such strong regulations around things like fire escapes, alarms exits, all of these things. How, how could this have happened? And so, what, you know, Zachary Kamel who’s, who’s a freelance journalist working for Ricochet on these stories, what he was able to dig up in those immediate hours after the fire was that this building was in fact a ghost hotel. That there were horrendous violations of fire safety happening there, that that contributed to the desk, and that the, the owner of this building was, was operating it as a ghost hotel alongside as many as 22 other that he owned in the city.

Jordan: First, I need you to define Ghost Hotel for people who aren’t familiar with the term. And then maybe if you could just explain or give us examples of some of the things that were not up to code that may have contributed to, to the fire being deadly.

Ethan Cox: Sure. So, so a ghost hotel is basically just a term that we use for what was previously a residential apartment building. What you know, UN officials talk about is purpose-built rental housing that has been turned into a defacto hotel because all or most of the units are being rented out on a short-term basis on a platform like Airbnb. So it’s functioning a lot like a hotel, but it doesn’t have any of the regulation that a hotel does. And when it comes to safety, that’s a real problem. So, to, to go back to, to the building in, in old Montreal that burned down. What we saw in the aftermath of that fire was that there were units that had no exits. There were units that had windows that were nailed shut. There was one couple that was staying there through Airbnb that Zachary spoke to who described how they, they heard an explosion around five in the morning. They were trying to get out. They found that their windows were nailed shut, . So they had to smash the window and climb out through jagged broken glass to save their lives. There was another gentleman who, who had to jump out of a second story window because there were not fire escapes. There were not functioning fire alarms, smoke alarms throughout the building. Fire escapes were missing, not there. If you were to write this in a movie script, it would seem too ridiculous too, on the nose, the, the extent to which every fire code in the book was violated in this building.

Jordan: So what happened in the aftermath then? Was anybody charged who was operating this? I imagine the police really dug in here.

Ethan Cox: That’s a great question. Obviously there was a lot of reporting done by us and a lot of other outlets in Montreal. So there was a lot of information there for public authorities. A massive lawsuit has been filed against Emile Benamor and the operator of the Airbnb by the parents of, of one of the people who died.

Jordan: Okay. So just a quick note here. The class action was commenced against the building owner, Emile Benamor, the owner of the short-term rental units to Hassan and Airbnb. The lawsuit claims that all three were negligent. None of the plaintiff’s allegations have been proven in a media interview. The building owner’s lawyer said the building was up to code and the unit owner declined to comment

Ethan Cox: To date. There is no indication of of charges or arrests or anything like that. One hopes those are coming. I, I wouldn’t say I have a great deal of confidence that they are, but we’re within an amount of time where it, it may simply be that the investigation is ongoing and, and hasn’t yet concluded.

Jordan: In general. And, and this is the reason that we wanted to talk to you today is because of your, your work on this all across the city. We’ve described a specific example here. How big are ghost hotels and short-term rentals in Montreal? Can you give us a sense of the scale of what we’re looking at here?

Ethan Cox: Yeah. So prior to that fire I was talking about, there were about 13,000 short-term rentals listed on Airbnb in the city of Montreal. Right now, there are about 9,000 Airbnb listings in Montreal. And of those only about five and a half or or 6,000 are, are short-term rental Airbnbs. And so what you’re seeing there is a lot of pullback from people who have the ability to take their units off the market, sort of trying to weather out the storm and, and, and see which way things are going, trying to avoid getting, getting fines. And you’re also seeing a transition that’s happening right now, which is that some of these operators are moving to, to try and escape changes to the law, to doing more, quote unquote long-term rentals of 32 days or longer, and targeting specifically international students, newcomers to the country, vulnerable people who, who will accept to pay significantly above market rates. So that, that’s sort of one of the new phenomenons that we’re, that we’re tracking of what’s going on. The good news is that Airbnb is less prevalent in Montreal than it was before this fire. But greed is just such a significant factor. There’s one Airbnb operator in my neighbourhood that I’ve been working with my neighbours to try and get ’em to shut down. I’ve gone and I’ve spoken to one-on-one and said, look, why don’t you just put these apartments back on the normal rental market sign leases, just rent them out normally. And he said, you know, no, I’ve, I’ve invested too much money in these places to accept market rate and, and in my neighbourhood market rate has doubled in the last five years. So at a certain point you have to wonder like how much is enough? Like you’re, you, you could rent out at the normal market rate and you’d still be making a fortune ’cause you’ve owned these buildings for years. The rents are just going through the roof normally, but you just have to make that extra buck by, by exploiting international students by, by putting stuff out illegally on the short term rental market. So for some people, they’re just, they’re never gonna stop doing this.

Jordan: When you say putting stuff out illegally on the short-term rental market, what does that mean? You guys did a whole investigation into this.

Ethan Cox: Yeah. So there’s, there’s a lot of legal grey area when it comes to short-term rentals, and the situation’s very different across the country. So we’ve got an explainer on our website that sort of explains it in more detail that you can look at depending where you are. But, but speaking just for Montreal there’s, there’s two primary layers of regulation, one of which is that certain boroughs in the city of Montreal have banned Airbnbs outside of certain geographical locations. And the other of which is that the, the Quebec government requires that every Airbnb be registered with the Tourism bureau, which oversees hotels and have a number with them. And, and what we’ve seen lately since the fire is that Airbnb has put a mandatory field on their listings where you have to enter that you have a licence number from the provincial government, but people have just been entering made up numbers because Airbnb’s doing no verification. So for instance, in the investigation we did into Mike Firmin’s network, every single one of his licence numbers was fraudulent. And we checked it against a list of, of, of good licence numbers. We were able to get through an access to information request. So

Jordan: How was the enforcement supposed to work then? You checked the licence numbers. They didn’t exist. Who’s supposed to enforce that? Is Airbnb supposed to be enforcing it? Are police or city bylaw officers supposed to be watching these rentals? Like how does it work?

Ethan Cox: Well, that’s a great question. When Zachary Kamel was, was asking questions to Airbnb about exactly this for, for his latest expose, the answers they gave made clear that they expected the city to assume the cost of creating a technological solution to allow for these numbers to be verified. And it’s hard really to understand that position, because Airbnb is a private company. They’re required to be in compliance with the law. So why is it that Airbnb thinks it’s the government’s responsibility to pay for them to check, to make sure that their listings are in compliance with the law? Like, that’s, that’s an expense that I think has always been, been seen as, as something that should be borne by the business. And now with these sort of platform monopoly tech giant companies, you know, we see them increasingly trying to bully governments. We see it with the legislation around news and, and what Google and Meta are doing there. And, and, and we see it in things like this.

Jordan: You’ve mentioned a fellow named Firmin a couple of times. This was a major subject of your investigation. Can you quickly run through what you’ve allegedly discovered about him? And I should be clear here. There are no charges.

Ethan Cox: Yeah, sure. So the latest article that Zach wrote, which she can all read on, on Ricochet and an abridged version in French on Pivot for Francophone readers. I encourage you to read the whole story, but in a nutshell, he was able to, to deconstruct one of the largest networks of ghost hotels in Montreal. And it was run by a gentleman named Mike Firmin. He was able to speak to Mike. He was able to speak to former business partners of Mike’s. He was able to speak to building owners who handed over their, their leases to Mike to participate in what we’re calling the Montreal Shuffle. You know, these, these Airbnb o operators, they’re operating in a legal grey area. They may be subject to fines and, and perhaps what they’re doing is illegal. And, and that catches up to them at some point. But I think the, the important thing not to lose sight of as well in these stories is that this isn’t just marginal operators that are participating in this. There’s this new kind of scam that, that we’ve identified here called the Montreal Shuffle. And what it does is it just turbocharges the incentive for landlords to get rid of long-term tenants and take apartments off of the long-term rental market. And that’s why it’s such a concern why we’ve made investigating it a priority. So basically how this works is the first step is that a landlord will get rid of their long-term tenants. Now, there are legal ways to do this. In Quebec, you can claim that you need to do major renovations, you can claim that you’re having a close family member move in. You can try and do it that way. They’re also illegal ways. And if you look at, at some of Zachary’s reporting about Emile Benamor the landlord there a number of his former tenants alleged that he undertook a, a campaign of harassment to drive them out when they were long-term tenants because he wanted to do this. But whether legally or illegally, the first step is that you get rid of of your long-term tenants. You now have however many empty units. Let’s say for the sake of this example, you, you have one building with six units in it. You now have six empty units. So you find an Airbnb entrepreneur, either you put an ad up somewhere like Craigslist, maybe you, you work through a real estate agent. We know in several cases, real estate agents have been the brokers that make these connections. But you find an Airbnb entrepreneur, you sign all six of these leases over to them at an exaggerated rent. So in the case of Firmin’s network, what we were seeing was about four times what the prior rent had been for some of these units. So, so these Airbnb operators agree to pay these, these radical rents, and it takes advantage of a loophole in Quebec’s rent protection law because in Quebec, you can’t raise the, the rent more than a, a small percentage without the consent of the tenant. And tenants, of course, normally don’t agree to 60, 8400% increases in their rent. But in this case, these operators of these Airbnb ghost hotels are happy to agree to any rent increase because they’re keeping all of the profits from their business. And the landlord not only quadruples his monthly revenue, he also sees a huge increase in the value of his building, because now he’s got a building filled with tenants who are ostensibly paying four times as much in rent. And that means that the value of his building when he sells it or when he borrows against it, is that much higher. So, so this is the basic outline of, of, of the Montreal shuffle. And, and what we’re seeing is that it’s extremely profitable for the owners. They’re, they’re able to massively maximize their profits. These Airbnb entrepreneurs are able to come out of nowhere and make money hand over fist, but of course, it’s a disaster for people that actually need housing in this city because we have a housing crisis for reasons that are bigger than this. But this is absolutely participating in making it worse in taking more units off the market.

Jordan: What else exists that is or isn’t working to try to keep these units in the actual rental market or prevent these crazy markups? Or, like when you say it’s a legal grey area, tell me maybe how the province has tried and, and I guess from talking to you failed to prevent this kind of thing.

Ethan Cox: Right. Well, I think it’s a, a frustrating question here, here in Quebec, we have a provincial government that is the Assemblée nationale du Québec, the Premier François Legault, and this is a, a populist centre right government. And so I think here they’re torn between two impulses, one of which is a populist impulse to do something about something that is an irritant to the population. And the other is, is a contrary impulse to, to serve the interests of property owners and investors, because those are the type of business people that the, the government sees itself as a naturally allied with. Hmm. And so, you know, on the one hand, the government is introducing new legislation that will increase fines for short-term rentals. There’s some good stuff in that legislation. So there are, there, there are some halting forward steps that we can see being taken on short-term rentals. But at the same time, in that same legislation, the government is getting rid of one of the most important forms of rent control that exists in this province. Because in the absence of proper rent control, we have rent control that goes away when you move. And so to combat that, people in Quebec have taken advantage of a provision in the law that allows you to transfer your lease. So if I wanna move, I can find somebody else who has a, a good rent in an apartment where I wanna move to, and I can trade them my lease for theirs. We transfer the leases to each other. And so this has been a, an important tool in, in, in the toolkit of tenants in, in keeping rents low is to transfer their leases rather than return them to the landlord. And the government is in the process of, of doing away with that. The, the minister in charge of housing is a former real estate agent. And actually coincidentally Zachary Kamel and and Sam Harper reporting for Ricochet and Pivot were the first to report on a number of of meetings that the, the minister had after she came into office with former business partners that may have been violations of conflict of interest rules. So, you know, on the one hand, some stuff is happening at the provincial level. On the other hand, it’s hard to have a lot of confidence in a housing minister who’s made clear over and over again that she sees herself really as more a representative of property owners than, than of renters. And, and who’s actually trying to dismantle the, the weak rent control that we have, rather than doing what all of the community groups we talk to, all of the, the NGOs that we talk to say is needed, which is to strengthen rent control.

Jordan: What about the actual short-term rentals themselves that are created from these units that we’re talking about? Are they one per unit? What are they like who rents them? Like, I’m trying to get a sense of, of what the landlords do to them.

Ethan Cox: That’s a great question. There, there’s a wide variety. There are some, you know, high-end rentals that are included in, in, in rings like this, the, the one next to me. They’re, they’re very, they’re in very good shape. So when he is saying he put a lot of money in there, I believe that that’s true. He’s got about 20 buildings. His thing is, is, is is having ones that are in good shape when it comes to Emile Benamor in particular, and also Mike Firmin, to a lesser degree, that wasn’t what was going on. And so what we saw in those networks was just constant complaints about sanitary problems apartments that weren’t clean bed bugs, blood on sheets. Hmm. Clearly these were big operations rolling over a lot of apartments and doing absolutely the bare minimum when it came to maintenance or safety or, or, or anything like that we saw with tragic consequences in the case of Emile Benamor in, in fact, you know, one of the, one of the points in this investigation that I think really drove things home for me was that one of the buildings that Emile Benamor owned is across the street from me. And I was having breakfast with, with Zachary Kamel, the journalist, and and one of our sources. And while we were sitting there breakfast, we were sent by a source who had been tricked into staying in, in the basically rooming house that Benamor was running outta this building across the street. A video from him that just showed sewage backing up into his basement apartment, to the point where there was a foot of sewage on the floor throughout the whole apartment. There was water leaking through the ceiling. It was just unbelievable unliveable conditions. He also showed us a video of him trying to serve legal papers to Benamor about the situation, demanding that he make repairs, Benamor swatting the papers out of his hand, calling him names, spitting at the papers. So really, you know, in some of these cases just horrific conditions and taking advantage of tourists who, who don’t know what they’re booking, who are taken in by false photos. And also, again, you know, really vulnerable new arrivals. Like the other thing that we saw with Benamor, in particular with many of these people, is that they also run rooming houses where they just rent out apartments by the room to people who have just arrived in the country, who might be asylum seekers, who might be immigrants and, and might not know where to look for affordable housing. And they get them paying absurd amounts of money for really unlivable conditions.

Jordan: You mentioned you spoke to Firmin. Did you speak to Benamor? When you bring these allegations to them what do they say?

Ethan Cox: Right. Well, that’s, that’s a good question. So Zachary’s the journalist on this, so Zachary Kamel’s, the one that’s, that’s tried. Bena Moore never spoke to us. He was you know, lawyered up from minute one, of course, right? It was after the fire. He was, he was facing a lot of issues. Zachary was able to speak to Firmin and Firmin had a lot of things to say. I mean one thing that Zachary observed that’s in the article was the negative reviews were disappearing inexplicably from Firmin’s page. And that as soon as Zachary would go and like, document a negative review disappear for no reason. And so Firmin had this long, convoluted story about how it wasn’t his fault, and these reviews were fake, and so he got Airbnb to remove them. And so Firmin had a lot of things to say, but nothing that really justified the right, they’re running a hustle, but then it’s so much bigger than them because the people that they’re partnering with to run this hustle are these massive real estate investors, people that own 20, 30, 40, 50 buildings that are, that are doing something that has shockwaves throughout the housing market.

Jordan: Maybe if you can describe what is happening to the rental market there and, and what kind of role these short-term rentals play.

Ethan Cox: Right. So, I mean, the first thing to know is just that the rent the rental market in Montreal is out of control. And so this won’t be too shocking to people in Toronto and Vancouver.

Jordan: Well, for a long time, people in Toronto and Vancouver would look to Montreal as like, man, if only I live there, look at this place I could get for this cost.

Ethan Cox: Right? And, and part of what we’re seeing, you could chalk up to a, to a correction to bringing it back in line. But look, the, the bottom line in Montreal is just that we’re in the middle of a real insignificant crisis. And I don’t mean to diminish what’s happening in other places. We have a housing crisis across this country, but in Montreal, it’s, it’s just gotten very acute all of a sudden. And like I said, in the past five years the prevailing market rent, a lot of parts of the city has doubled. The vacancy rate is, is very low. And so it’s just becoming harder and harder for people to find an apartment. Hmm. So a lot of people are priced into the places where they are, if they’re lucky enough to have a place, and for people that aren’t lucky enough to have a place, they, they’re facing a really catastrophic situation. You know, this past July 1st, which is the main moving day here in Quebec, there were hundreds of people who were left homeless on July 1st, who, who moved out with nowhere to move into. So, so that’s the crisis that we’re facing, and it’s in that context that we’re looking at, you know, 13,000, but more than that, right. 15, maybe 20,000 units at least in terms of the overall stock that goes on and off the market, that’s being taken away for the purposes of short-term rentals. And that’s, you know, we’re, we’re, we’re still in the process of doing this investigation. There’s a lot more journalism to come. We’ve got journalists following up on these networks in Toronto, on the West coast. You know, we’re gonna be trying to quantify more the impact that this has on the housing market. But even without that hard data, I don’t think it takes a rocket scientist to say that, you know, 15,000 units being taken off of the long-term rental market is gonna have a, a, a significant impact on what people are having to pay just to, to find housing for themselves and their families.

Jordan: Last question. Is there a fix to this that is accessible and relatively easy? Like if the government really wanted to do something tomorrow, could they, what would they do?

Ethan Cox: I think there, there absolutely is a fix. It starts with enforcement, because in some places we have decent rules. They’re just completely unenforced. In Quebec, the rules are pretty decent. You have to get a, a permit, it has to be your principal residence. You can only rent it out like 30 something days out of the year. Like, all, all, all of this is good, but there’s absolutely zero enforcement, so that makes it kind of meaningless. So the first thing is enforcement. I think we’re seeing halting steps towards that. But, you know, obviously legislative relief is needed. And I think one thing that’s a bit frustrating when you’re following this is that governments are, are slow. They, they, they don’t move quickly, they turn slowly. And so often what we’re seeing is, is the people that are running these scams are just out ahead of government. And I think now government’s finally starting to figure out how to regulate and enforce against the most egregious ghost host, ghost Hotels, the most egregious, unregulated, unsafe, fly by night things that are happening. But as I said, what we’re seeing on the ground is that these, these entrepreneurs, these operations, they’re evolving to that threat by now going into the one month at a time rental business to international students, vulnerable newcomers, whoever they can trick into paying a, a ridiculously above market price. And I don’t see a lot of indication that governments are on that kind of change, that they’re looking ahead to make sure that their legislation addresses it. So I’m afraid we’re, I’m afraid that we’re gonna get a, a, a certain amount of legislation now that addresses the most egregious examples of, of Ghost hotels and short-term rentals. But I’m, I’m afraid that legislation won’t necessarily be looking ahead at, at how this industry is evolving and, and what government has to do to make sure that it’s regulated and, and under control and not having this devastating effect on, on people’s ability to house themselves.

Jordan: Ethan, thank you so much for this and for the work you guys are doing. If somebody wants to help you continue this investigation, where should they go?

Ethan Cox: Thanks so much. So I, I, I’d recommend that everybody start by going to ricochet.media. You can search Zachary Kamel and Ricochet Media and see all of the stories he’s written on this. It’s a, an incredible archive. The second thing is that we’re running a crowdfunder to support this journalism. We’ve hired four journalists across the country. They’re producing investigative journalism in English and French if you’d like to help support their work. You can search investigating Airbnb on GoFundMe, or you can you can look on Ricochet Media on all of our stories, all of Zach’s stories. There’s a link to that Crowdfunder. So this is, this is the type of investigative journalism that is not profitable. It’s what you might call a money pit. And that’s why we exist as a nonprofit media outlet is, is to do stuff that isn’t profitable, but we’re, we’re dependent on the support of readers like you to, to actually put the money together to do it.

Jordan: Well, thanks so much for giving us some of your time and walking us through this.

Ethan Cox: Thank you so much for having me. And again, just all credit to Zachary Kamel. He’s an incredible investigative journalist, and he’s driven incredible work on this project. So I hope everybody will remember his name.

Jordan: Ethan Cox, senior editor and co-founder at Ricochet Media. That was the big story. Joseph Fish is the lead producer of the Big story. Robyn Simon is our producer. Our sound design work is led by Ryan Clark. Stephanie Phillips is our showrunner. You can find us on Twitter at the Big story fpn. You can also reach us via email hello, at the big story podcast.ca. And you can call us on the phone and leave a voicemail Absolutely anytime. 4 1 6 9 3 5 5 9 3 5. Thanks for listening. I’m Jordan Heath Rawlings. We’ll talk tomorrow.