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

, Jean-François Cloutier , Charles Mathieu and Nicolas Brasseur MISE À DAY

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-François Cloutier, Bureau of investigation

Quebec has allocated in recent months a first tranche of $6 million to the American giant Survey. 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 regions, where the housing crisis is pronounced .

Sonder CEO Francis Davidson.

“It’s a company that has caused a net loss of traditional housing and is monopolizing 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 an “acquired right” or an exemption.

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Playing on words

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

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 in the rue Saint-Denis where a medical clinic was supposed to be, but which serves as a “hotel” (see other text below).

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

The company defends itself by saying that 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 tranche 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 as a result of the pandemic.

Tougher regulations

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

The Quebec government says Sonder “operates in a legal framework where the 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 SONDER?

• Co-founded in 2014 by Montrealer Francis Davidson
• Davidson was subletting apartments on Airbnb by offering wine and valet parking to its 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 nearly 80% of its value   &nbsp ;
• Manages 6,300 homes worldwide
• Present in 35 cities in ten countries      &nbsp ;

HOW DOES IT WORK?

The company signs long-term leases with real estate owners.

She deals with decorating rented accommodation and subletting them on different platforms, including Airbnb.

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

$460 for two days in a 3 1 /2

The Sonder firm rents Airbnb-type apartments like this one in the Sud-Ouest borough.

Booking a Sonder home on Airbnb is like stepping into a rental condo building that might otherwise be used by long-term Montreal tenants.

Charles Mathieu, Office of Investigation

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 Bill includes $100 cleaning fee, GST, QST and 3.5% tax on lodging.

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

When the application was approved, the access codes to use to enter the building and in the room were sent to us.

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Arrival

At the time of our arrival, 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 reception staff,” read the instructions sent to us. We could ask questions about the mobile app to Kate Anne, a Sonder employee in the Philippines.

Each room door had a touchpad 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 UNITS TO ONE HOTEL

The Cours de Brésoles project in Old Montreal.

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

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

The company first presented a project for 43 housing units to the City. Six months after obtaining its permit, the builder amended its application to transform the building into a “hotel” with 46 apartments. They will be rented out on a short-term basis by Sonder— when the reconstruction is complete.

“The project would not 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 travelers.

A CLINIC THAT BECAME “AIRBNB”

A building operated by Sonder opposite the CHUM.

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 concluded a lease with Sonder, then asked the City to modify its permit to develop 21 apartments.

These are now for rent in short term, especially on Airbnb.

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

UN 52e 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 52nd hotel?” laments May Chiu, a member of the Chinatown Task Force. 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 Heraldreported 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 issued incorrectly 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,” defended the firm 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 landlord 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</strong >  

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

Jean-François Cloutier, Office of Investigation

In 2017, the program La Facture</em >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.

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

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

Attempted eviction

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 from the Administrative Housing Tribunal had dismissed the request of the owner of the building, because she had believed that the City was preparing to legislate against the intended use.

The judgment was appealed by the owner, but it was subsequently withdrawn. 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.

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