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

In the midst of a housing crisis, Quebec is providing $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}

In recent months, Quebec has allocated a first installment of 6 million dollars to the US giant Sonder. The rest will follow for the next four years.

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

“It is a company that has caused a net loss of traditional housing and that monopolizes the rental stock,” denounces Cédric Dussault, spokesman for the Regroupement des Committees 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 an “exemption” or exemption.

pun

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

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

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

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

The company defends itself by saying that it respects the regulations.

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

Announced in 2020, the Quebec loan is intended, among other things, to create a growth center and 700 jobs in Montreal. However, according to the company, the first installment of the loan has not yet been arranged.

However, a visit by our Research Office to the planned site 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.

more stringent regulations

Montreal housing official Benoit Dorais declined to comment on Sonder but wants stricter regulations.

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

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

WHAT IS THE PROBE?

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

HOW DOES IT WORK ?

The company signs long-term leases with the owners.

It is in charge of decorating the rented accommodations and subletting them on different platforms, including Airbnb.

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

– With Nicholas Brewer

$460 for two days in a 3 1/2

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

^{Charles Matthew, investigation office}

Our Bureau of Investigation spent the night of May 30-31 in Richmond, a building in Griffintown where Sonder sublets 47 condominiums on three floors.

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

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

When the application was approved, we were sent the access codes that will be used to enter the building and the room.

Arrival

When we arrived, we had to fill out a log in and out of the building by hand.

There was only one 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,” the instructions sent to us read. We might ask Kate Anne, a Sonder employee in the Philippines, questions about the mobile app.

The door to each room was equipped with a touch pad with numbers.

Inside the apartment, a roughly 550-square-foot 3 1⁄2, highlights a TV with Google Chromecast, a washer-dryer duo, and a kitchen with a dishwasher, oven, and refrigerator and air conditioning.

Our Bureau of Investigation reached out to tenants and landlords on the site to learn about their experience. However, we ran into 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 of $1.4 million, following a public bid.

The company first presented a project of 43 homes to the City Council. Six months after obtaining its permit, the developer modified its application to transform the building into a “hotel” with 46 apartments. The Sonder company will rent them on a short-term basis—when the reconstruction is finished.

“The project would not have been viable if it had not 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 beginning. »

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

A CLINIC BECOMES “AIRBNB”

In 2017, the municipality of Ville-Marie agreed to rezoning a building on rue Saint-Denis for the creation of a medical clinic and offices. Two months after obtaining their permit, Développements Quorum Mtl signed a lease with Sonder and then applied to the city to modify their permit to develop 21 apartments.

These are now available for short-term rentals, especially on Airbnb.

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

a 52^me HOTEL ?

A lease was signed in late 2021 by Sonder with the firm Swatow Developments for the lease of four floors at Plaza Swatow in Chinatown. Swatow’s primary shareholder is a Quebec-numbered company which in turn has shareholders in the Seychelles and British Virgin Islands. “There are already 51 hotels within a kilometer radius of Chinatown. Do we really need a 52^me 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 subject of at least three lawsuits. In April 2020, two long-term residents of the building specifically sued the owner and Sonder for what they claimed 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 file, settlement discussions were taking place in November 2021.

In Boston, the boston herald reported in late 2019 that Sonder had received several fines in connection with short-term rental. “These were 9 potential citations, and all were dismissed because they were incorrectly issued to eligible properties or 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 owner to terminate a lease, citing the impact of the pandemic. A settlement was reached, but the landlord in turn sued Sonder last year because a tenant who was to leave under the settlement 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 rent an entire hotel. “We exercised a right of contractual rescission that we had for breach of the terms of the contract,” Sonder justified.

a troubled past

The Sonder company has already found itself on the bench in the past for its way of doing things in the metropolis.

^{Jean Francois Cloutier, investigation office}

In 2017, the show The invoice on Radio-Canada he had revealed that Sonder illegally rented, without having the slightest license, a hundred houses in the metropolis. The company’s CEO, Francis Davidson, then admitted that he was working “in the dark” and that he did not have a license, despite clearly being required by law at the time.

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

a news report Underground three years ago it also revealed that the company was still renting an apartment on Airbnb until 2019 without having a permit.

attempted eviction

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

A judge of the Administrative Court of Housing had dismissed the request of the owner of the building, considering that the City Council was preparing to legislate against the intended use.

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