Will WA crack down on Airbnb-style accommodation?

In February, the Victorian Greens added their voice to the growing chorus calling for a crackdown on short-stay accommodations in a bid to alleviate the state’s rental squeeze. 

Putting REIWA’s home state in focus, Western Australian Premier Mark McGowan flagged to the media on Sunday that his government is exploring further regulation of short-term rental accommodation services like Airbnb but acknowledged that banning the service would be “a big call”.

“Obviously, a lot of people have made business decisions in regard to Airbnb. And a lot of tourists that come to Western Australia use Airbnb to stay, so it’s a bit of a vexed question.”

While the state’s government is already looking at limiting the number of nights a year an investment property can be rented as short-stay accommodation, the premier hinted that more changes could be on the way.

But Ms Hart underlined that such measures will not be the “silver bullet” to the ongoing housing issue and is merely a diversion from the broader problem.

Ms Hart contends that short-stay accommodations such as Airbnb represent “a relatively small portion of the overall housing stock”, albeit more prevalent in popular tourist destinations. 

“A recent search of Airbnb showed about 700 properties available across WA, so even if all these properties suddenly converted to the rental market, it would not be enough,” she explained.

To add weight to her argument, she expounded on why turning short-stay accommodation options into long-term rentals may be impractical, as they are not always suitable for lengthy tenancies. 

“For example, it may be a granny flat, a self-contained apartment that is part of the owner’s property, an extra room rented out occasionally, or even a property the owners occasionally use themselves and rent out at other times. 

“Or it may be an eight-bedroom, four-bedroom luxury home that is ideal for groups of people looking for a holiday but unsuitable as a rental and possibly unaffordable as well,” she remarked. 

Ms Hart said REIWA’s modelling estimated that around 18,000 to 20,000 properties were required to compensate for the drop in the number of rental properties in the last two years and keep pace with population growth. 

She also highlighted that prior to the pandemic, investors in the state had experienced an “extended downturn” period. 

“The Perth median house rent price declined from $450 per week in early 2015 to $350 in mid-2017 and remained there for a year before lifting slightly in 2018. House prices also experienced a steady decline during that time. The vacancy rate was much higher than it is now,” she said.

While market conditions have improved, Ms Hart pointed out that there have been over 19,000 rental properties removed from the rental pool since January 2021 as investors exit the market, either to take advantage of long-awaited capital growth, to use the properties for themselves or in response to interest rate rises. 

“This significant reduction in rental properties combined with a continually growing population is what’s driving WA’s rental shortage,” she stated. 

In addition to the investor exodus, Ms Hart noted that delays in the building industry was also a factor that played a hand in the state’s undersupply issue. 

“[Many] tenants who took advantage of COVID-19 building incentives are still waiting for their homes to be completed and need to retain their rental accommodations in the meantime,” she said. 

Ms Hart said bolstering the number of rental properties would take time and require support, particularly from the government. 

“Whether it’s at a local, state or federal level, we have to ensure we have policy settings that encourage rather than discourage people from investing in rental properties. This could be local planning policies, fair and equitable regulations on rentals, or tax settings for negative gearing or capital gains,” she said. 

The institute also called for the creation of policies that support development, with the state estimated to require around 22,000 new builds each year to replenish the market.

“We’ve fallen well below that [level] over the past decade. That has contributed to the current situation with rentals,” Ms Hart explained. 

On a positive note, Ms Hart said REIWA welcomed the state government’s recent announcement of an $80 million Infrastructure Development Fund to help local governments and developers offset the costs of providing water, sewerage and electricity services to new housing developments. 

The scheme will help address these costs, which Ms Hart criticised as a “barrier to new development”, adding that “this assistance should help boost housing supply in Perth and the regions.” 

“The government has also been reviewing the planning approvals process, which will help encourage development,” she said.

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