There is a crisis of rental housing across Australia. Areas in major cities and regional Australia alike are facing extremely low rental stock and record high rents .
Many cities around the globe have cracked down on platforms such as Airbnb and Stayz to try and deal with the overlap of rental shortages and high numbers of short-term rentals.
The aim is to preserve rental supply for locals by restricting short-stay accommodation for tourists to certain areas, limiting the number of nights an unhosted home can be rented, or banning short-term rentals altogether.
Australia has been following suit, and the big question is: will it work?
What rules are in force?
A broad range of new rules have been put in place in the past few years, as outlined in our recent study .
New South Wales , Western Australia and Victoria require short-term rentals to be listed on state registers, an important first step to regulation. Tasmania goes further by forcing platforms to share detailed listings data, so registry information can be checked.
Victoria has introduced a 7.5% levy paid by the booking platform or hosts on stays of less than 28 days. This has two goals: shifting profitability in favour of long-term rentals, and raising revenue for social and affordable housing.
The NSW government limits unhosted short-term rentals to 180 days per year across Greater Sydney. In high-demand Byron Shire, the limit is 60 days per year, outside of designated tourism precincts. Other councils, such as the City of Sydney , which has both high tourism demand and extreme affordability pressures, want to follow suit.
In WA, local councils are able to ban short-term rentals in particular land-use zones. Within the Perth metropolitan area, property owners must seek development approval to offer short-term rentals for more than 90 nights per year. There is also an incentive payment of A$10,000 to encourage owners to shift to the long-term rental market.
In Tasmania, Hobart City Council has begun the process of modifying its planning scheme to ban the issuing of new permits in residential areas.
How effective are these changes?
There are some promising results from the different approaches.
In Victoria, there are signs growth in short-term listings has stalled, and the $85.8 million in revenue collected from the levy has been greater than expected , meaning more money for social housing. However, the funds aren’t necessarily directed to the tourism regions most affected by short-stay demand.
In Byron Bay, the strict day caps have contributed to a 15% decline in short-term listings and some properties have come back onto the long-term market. But after one year, it’s too early to say how effective the caps have been.
Evidence from overseas
International research does show that regulating short-stay accommodation reduces pressure on the long-term rental market. For instance, Canadian researchers have found that regulations restricting short-term rentals caused rents to fall in following years, although the declines were modest.
In cities with longstanding bans, such as in Barcelona, which imposed a total ban on new registrations for short-term rentals in 2014, researchers estimated there were 9,000 fewer Airbnb listings than there would have been without the policy. That prevented an estimated 3% of rentals from becoming short-stays.
The strict enforcement of short-term rental bans in New York City has cut short-term listings by 90%.
However, rental market changes are difficult to analyse because short-term listings are only one factor affecting the market. It’s also clear that day caps, levies and outright bans are not the silver bullet to encourage property owners to make the switch.
Barriers to making the switch
Our latest report investigated the financial and other motivations for short-term rental providers in Australia. We found:
some properties – particularly those in scenic areas away from key services and amenities – may not be competitive, appropriate or affordable on the long-term market
some owners want to use their property or are reluctant to rent to a long-term tenant. Switching between short and long-term rental markets is complex
property owners with a low or no mortgage are less likely to be affected by financial penalties such as day caps or levies.
Without considering these aspects, tighter regulation could result in vacant properties rather than more long-term rental supply.
What can be done?
Better data on short-term rental stock: we found that most state registration systems are yet to deliver consistent and reliable data to enable local councils to monitor compliance with rules, and monitor the effects on the housing market.
Increased enforcement : greater resources and collaboration across levels of government are needed to ensure rules are being followed.
Considering the housing system as a whole: unfavourable borrowing conditions to buy a property, such as the recent interest-rate rises and changes to negative gearing and capital gains tax, can affect the feasibility of the short-term market.
These indirect changes can be additional tools beyond direct regulation to change investor behaviour. For example, the ATO’s updated guidance on expenses and deductions for holiday homes could have more impact on short-stay rentals than government or council policies.
By making these changes, we can focus on the acute need to properly house local residents, while balancing the needs of tourism economies.
