UNSW expert's insights on short-term rental regulation in Australia
Strict global regulations contrast with Australia’s lenient stance on short-term rental market, affecting housing supply. Image: Canva.
  • Differing views on the feasibility of short-term rental regulations.
  • Australia's housing market affected by Airbnb's rise, straining housing supply.
  • Commercialisation of housing at the crux of the problem.

The Australian rental market has been clamouring for change, and calls for a clamp down on short stay accommodation platforms like Airbnb have regained traction.

Recently, the Real Estate Institute of Western Australia (REIWA) explored the challenges of short-term rentals in light of the Real Estate Institute of Australia’s (REIA) review of short-stay accommodation.

It was argued that while short term rental regulations were well-meaning, it was ultimately an unfeasible solution to the rental crisis. Not only did short term rentals comprise just a fraction of total dwellings, not all short-stay homes could be converted to long-term accommodation.

While the case against further regulation is strong, University of New South Wales’ (UNSW) Arts, Design and Architecture senior lecturer in city planning at the School of Built Environment, Dr Laura Crommelin, believes the argument for tighter restrictions on short term rentals has legs.

Dr Crommelin said that while short stay accommodation may not be the sole issue leading to the current rental challenges, it is important that regulators recognise and control the effects of short-term letting 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.”

Dr Laura Crommelin, UNSW

These insights come off the back of Victoria’s recently introduced 7.5% short-term levy on short-term accommodation and New South Wales’ (NSW) approval of a 60-day cap in Byron Shire.

Dr Crommelin said that short-term rental platforms have intensified the scale of short-term letting, placing additional strain on the dwindling housing supply, with some landlords having refitted former long-term accommodations into year-round short-term rental listings.

“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,” Crommelin said.

Lax laws lead to less long-term leases

Dr Crommelin observed that lax laws on commercial short-term rentals can incentivise landlords to rent out homes year-round for short-stay accommodation.

“What we’ve seen emerge in places with light regulation is the type of short-term rental that is not just renting out a spare room a few nights a week, but one that’s on the market all year-round, often run by a professional property manager with large portfolios – more like permanent tourist accommodation,” she said.

This is in contrast to many cities overseas that have strict regulations in place to safeguard the housing supply. For instance, New York has banned ‘unhosted’ short-term rentals, with listings being permitted only if the host lives in the same property.

Indeed, Australian Housing and Urban Research Institute (AHURI) research carried out in 2018 by Dr Crommelin and the City Futures Research Centre showed that a substantial number of Airbnbs in Sydney and Melbourne were likely to be classified as full-time commercial letting rather than house-sharing.

She added that the issues with short term rentals extend beyond just impacting the Australian rental market.

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

Tailoring regulations to the location

In NSW, hosts must register their short-term letting properties and are subject to a 180-day cap on the nights their property can be leased throughout the year in certain areas. The rules also distinguish sharing from commercial letting.

On the surface, this may seem like good news, but Crommelin asserted that caps should be designed considering the nuances of the local housing market.

“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.”

On the other hand, in other areas, the benefits that short-term letting offers to tourism may far outweigh its impacts on the housing market.

“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.”

Though tighter caps may not see all short-term rentals be shifted into the long-term rental market, Crommelin stated that it may give a much needed injection of supply into a market where vacancies are at a historical low.

“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.”

“However, there will still be some owners who would prefer to leave their property vacant rather than ever use it for permanent rental housing.”

Crommelin was uncertain if modest short-stay levies, like the one recently implemented in Victoria, would help 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.”

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

An asset, not a home

The crux of the issue was the commercialisation of housing, according to Crommelin.

Short-term accommodation platforms have given rise to financially driven attitudes towards real estate, where houses were viewed as profit generating assets rather than a home.

“There are those who have housing equity and can grow their wealth through property and those who don’t and whose chance of acquiring it is drifting further away.”

“Short-term letting is simply another way housing can be monetised by those who already have access to it, making the challenges even greater for those who don’t.”

Dr Laura Crommelin, UNSW

While targeting the housing shortage is necessary in alleviating the housing crisis, she added that stronger renter protections and social housing are critical.

“There is a much bigger discussion to be had around how broader housing policies, like negative gearing, capital gains discounts and a lack of social housing construction, have led us to the situation we’re in right now,” Dr Crommelin opined.

“So, while Airbnb and short-term letting is part of that conversation, it would be a mistake to assume that addressing it alone will fix all of our housing affordability problems.”

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