Amid a housing crisis, millions to an Airbnb king

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

Dominique Cambron-Goulet and Jean-François Cloutier, investigation office

Quebec has given an initial $6 million tranche to American giant Sonder in recent months. The rest will follow over the next four years.

The company offers dozens of Airbnb accommodations in Sud-Ouest, Ville-Marie and Plateau Mont-Royal, where the housing shortage is acute.

“It is a company that has caused a net loss of traditional housing and that is monopolizing the rental stock,” said Cédric Dussault, spokesman for the Regroupement des Comités Logements et Associations de Tenants du Québec (RCLALQ).

Accommodation in Montreal is also offered on the Special 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 under municipal regulations, but the business benefits from a “grandfathering” or exemption.

Pun

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

On the Mont-Royal plateau, for example, a former publishing house has been converted into a “hotel” with 54 apartments.

Sonder also operates accommodation in a building on Rue Saint-Denis which was intended to house a medical clinic but which serves as a “hotel” (see other text below).

In Ville-Marie, a project that Sonder is active in, Penny Lane, received a special permit in 2017 for short-term rental of 58 apartments. Valérie Plante had expressed her dissidence, but the resolution was accepted by the former Coderre government.

The company’s defense is that it respects the regulations.

“Sonder is working with its real estate partners in Montreal to refresh properties that are frequently in need of repair and to help bring commercial real estate back to market,” spokeswoman Fiona Story said.

The Quebec loan, announced in 2020, aims, among other things, to create a growth center and 700 jobs in Montreal. According to the company, the first installment of the loan has not yet been called.

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

Stricter regulations

Montreal building official Benoit Dorais declined to comment on Sonder, but he wants stricter regulations.

For its part, the Quebec government believes that Sonder “operates within a legal framework where the zoning permits.”

“Like the hotels, the accommodation offered by Sonder is not the result of converting rental buildings into tourist accommodation,” said Mathieu St-Amand, spokesman for Economy Minister Pierre Fitzgibbon.

WHAT IS PROBE?

  • Co-founded in 2014 by Montreal native Francis Davidson
  • Davidson rents out apartments on Airbnb by offering wine and valet parking to guests
  • In 2017, Sonder moved its headquarters from Montreal to San Francisco
  • In 2019, the company was reportedly worth more than $1 billion forbes
  • Listed on the Nasdaq in January 2022, the stock has lost nearly 80% of its value since then
  • Manages 6,300 properties worldwide
  • Present in 35 cities in ten countries

HOW IT WORKS ?

The company enters into long-term leases with property owners.

She takes care of the furnishing of rental apartments and their subletting on various 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


The company Sonder rents Airbnb-style apartments like this one in the Sud-Ouest district.

Photos by Charles Mathieu

The company Sonder rents Airbnb-style apartments like this one in the Sud-Ouest district.

Booking a special offer on Airbnb is like stepping into a condo that would otherwise serve long-term renters in Montreal.

Karl Matthew, investigation office

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

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

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

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

arrival

When we arrived, we had to fill out a register of the building’s entrances and exits 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 have no front desk staff,” the instructions sent to us read. We could ask Kate Anne, a special worker in the Philippines, questions about the mobile app.

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

In the apartment, a 3 1⁄2 of about 550 square feet, there is in particular a TV with Google Chromecast, a washer-dryer duo and a kitchen with a dishwasher, oven and refrigerator, as well as air conditioning.

Our investigative agency tried to speak to local tenants and landlords to find out about their experiences. However, we came across a building manager who asked us to stop questioning them.

Building equipped for special

FROM 43 ACCOMMODATION TO HOTEL


The Cours de Brésoles project in Old Montreal.

Photo Pierre Paul Poulin

The Cours de Brésoles project in Old Montreal.

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

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

The company first presented the city with a project for 43 residential units. Six months after receiving the permit, the client changed their request to convert the building into a 46-apartment “hotel”. They will be rented out by the Sonder company for a short time – once the conversion is complete.

“The project would not have been possible without the contract with Sonder,” says Alberto Bernardi, President of the owner company. The project is based on the agreement with Sonder from the start. »

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

A CLINIC BECOMES “AIRBNB”


A building run by Sonder opposite the CHUM.

Photo Pierre Paul Poulin

A building run by Sonder opposite the CHUM.

In 2017, the municipality of Ville-Marie agreed to change the zoning of a building on rue Saint-Denis to create a medical clinic and offices. Two months after receiving the permit, Développements Quorum Mtl struck a lease with Sonder and then asked the city to change its permit to build 21 apartments.

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

The developer, Quorum Mtl, has not responded to an email.

A52e HOTEL ?


probe

Photo by Jean-Francois Cloutier

A lease was signed by Sonder with Swatow Developments at the end of 2021 to rent four floors in Plaza Swatow in Chinatown. Swatow’s first shareholder is a company numbered Quebec, which itself has shareholders in the Seychelles and the British Virgin Islands. “There are already 51 hotels within a kilometer of Chinatown. Do we really need a 52e 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 where Sonder sublet dozens of apartments was the focus of at least three lawsuits. In April 2020, two longtime residents of the building specifically sued their landlord and Sonder over an alleged nightmare stemming from Sonder’s presence. Among other things, they denounced drug trafficking and harassment in the building. “Sonder is the worst neighbor imaginable,” they claimed. According to the court record, settlement talks took place in November 2021.

In Boston, the Boston Herald reported in late 2019 that Sonder had received multiple fines related to short-term rentals. “These were 9 potential fines and they were all dismissed as being wrongly issued for compliant properties or for properties not operated by Sonder. We haven’t had to pay any fines and our properties comply with Boston regulations,” the firm defended via email.

In San Francisco, in July 2020, Sonder sued a builder for termination of a lease, citing the effects of the pandemic. An agreement was reached, but last year the owner sued Sonder for his part because a tenant who was agreed to move out was still there.

In Long Island City, Sonder was sued by a building owner in August 2020 for $2.5 million for breach of contract. Sonder was to lease an entire hotel. “We have made use of a contractual right of termination that we are entitled to due to non-compliance with the contractual conditions,” explains Sonder.

An eventful past

The Sonder company has already made a name for itself in the metropolis with its procedures in the past.

Jean Francois Cloutier, investigation office

2017 the show The invoice at Radio-Canada had revealed that Sonder had illegally rented a hundred apartments in the metropolis without the slightest permit. The company’s CEO, Francis Davidson, then admitted to working “in horror” and not being licensed, despite the fact that it was clearly a legal requirement at the time.

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

A newspaper report Subway Three years ago it also became known that the company rented an apartment on Airbnb without a permit in 2019.

Eviction attempt

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

A judge at the Administrative Court for Housing denied the building’s owner’s application because she believed the city was preparing a law against the proposed use.

The verdict was appealed by the owner, who later withdrew it. The project with Sonder never saw the light of day, according to one of the tenants affected at the time, Charlotte Jacob-Maguire. However, she says she still has a bitter taste from the experience.

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