Why short-term rental regulation needs a micro approach

This question has recently led to Victoria introducing a 7.5 per cent levy on bookings made through short-term rental sites and Byron Shire introducing a 60-day cap on short-term bookings per property. In 2021, NSW required all hosts to register their property and implemented a 180-day cap.

Dr Crommelin noted that while the current rental crisis can not be attributed entirely to the rise of STRA, it’s important for regulators to consider and manage its impact on rental markets.

“Housing was already unaffordable before short-term letting platforms like Airbnb came along, but it is another factor exacerbating the problem,” Dr Crommelin said. “Just because it’s not the sole cause, doesn’t mean it’s not having a significant impact”.

“There is a strong likelihood that short-term letting is taking away some properties that would otherwise be in the rental market, particularly in places with significant tourism appeal,” Dr Crommelin added.

She described Australia’s approach to the issue as largely “permissive” and noted that in jurisdictions with light rules, there was more risk that homes would be used as full-time commercial rentals – often part of large portfolios leveraged entirely on short-term sites – than those classified as “home sharing”, where a person rents their residence for part of the time.

Research conducted by Dr Crommelin and the City Futures Research Centre found many Airbnbs in Sydney and Melbourne were likely to be classified as full-time commercial letting rather than house-sharing, with the former having far more of an impact on the market, as well as their surrounding communities.

“For residents living next to these properties, there are concerns about changing neighbourhood dynamics, trust and safety, and well-documented problems with party houses,” she said.

And because the impact of STRA on a community is so related to that location’s distinct character as well as its tourism market, Dr Crommelin advocates for a tailored approach when jurisdictions look to regulate short-term rentals.

“The decision to approve a 60-day annual cap for Byron Shire Council makes sense, given the particularly acute housing market issues in that part of the state. Some other Airbnb hotspots would also benefit from a lower cap like this.”

But she opined that elsewhere, the benefits for tourism from allowing more Airbnb activity may outweigh the housing market impacts.

“Short-term letting activity is spatially concentrated, so it makes sense to take a much more nuanced approach. The fact the government has approved reducing the cap in Byron Shire suggests the current regulations aren’t sufficiently discouraging investors from using their property as a short-term rental in some areas,” Dr Crommelin said.

While tighter caps won’t necessarily put every short-term rental back into the long-term rental market, Dr Crommelin said that it is likely to boost long-term supply for at least a short period.

“There is at least some proportion of existing housing stock used for Airbnb that would return to the rental market if short-term letting were a less attractive proposition,” Dr Crommelin said. “However, there will still be some owners who would prefer to leave their property vacant rather than ever use it for permanent rental housing”.

She noted that introducing a levy, such as the one that Victoria has imposed, is less tested in its effectiveness in rebalancing the rental market.

“I’m not sure it will have a significant impact on booking rates, though it might mean some people decide to revert back to using hotels instead,” Dr Crommelin said.

“But, if it provides some more revenue to help with enforcement and support other housing policy goals, then that’s a good thing,” she added.