Could Airbnb caps boost rental supply?


It's been a tough few years for Australians renters who have not only faced increasingly stiff competition for homes, but have had to stomach considerable price rises along the way.

Australia's capital cities have now notched the longest streak of continuous rental price growth on record according to the latest research from Domain, with rent on both houses and units now more than 30% higher than they were during COVID.

While there are signs that vacancy rates are finally beginning to rise at a national level, the pressure is by no means off renters - a fact which has prompted a flurry of ideas from governments and political parties aimed at boosting rental stock and easing affordability.

councils introduce airbnb caps to improve rental supply

Capping rent increases, boosting housing supply and strengthening renter's rights more broadly are among the initiatives that have been floated, as has further regulating forms of short-stay accommodation like Airbnb.

In fact, some local and state governments around the country have already started to step in in order to ensure a greater balance between short-stay properties and longer rental housing - particularly in tourist hotspots.

How are councils regulating short stays?

In New South Wales, short-term rental accommodation is already capped at 180 days a year in a number of local council areas including Greater Sydney, Ballina and Byron Bay.

The Byron Shire Council has also sought to restrict the number of days that non-hosted, short-term accommodation can be rented out for even further from 180 to 90 days.

Elsewhere, Brisbane City Council is now charging homeowners who list an entire property on platforms like Airbnb and Stayz 50% more on their rates, while Warrnambool City Council in Victoria recently introduced a $400 annual fee for short-term accommodation providers.

Just last week, Hobart City Council became the latest local government to step in after voting to double the rates charged on short-stay accommodation in residential areas and on vacant residential land.

Councillor and Deputy Lord Mayor Helen Burnet says that she hopes the change will encourage owners to shift their homes over to the long-term rental market and help ease the rental affordability issue the city is currently facing.

"It has been the situation for quite some time that our rental vacancy rate has been less than 1%, though currently it is 1.3% according to SQM's March figure. So there's been some vacancies, but it is still well below what's seen to be a good rental market.

"Of course, rent affordability is a huge issue as well. Affordability is becoming much worse in Hobart, particularly post-COVID, and it's really hitting home and making it much harder to live affordably in Tasmania's capital city."

Burnet says the decision isn't all about hitting people who rent out homes as short stays or hold vacant land, and that the council would be looking at ways to incentivise property and landowners as well.

"I know in other jurisdictions, rate rebates are offered for residential property that is vacant but is then built upon. So in our rates review over the course of the next 12 months, the council will be looking at what sort of incentives can be used to ensure that housing stock is retained."

Is there a tourism trade-off?

Disincentivising the likes or Airbnb is not without its potential consequences. One of those is that fewer short-term rentals could lead to a reduction in tourist numbers, which might then have a negative impact on the tourist-related economy.

Joey Moloney, senior associate at the Grattan Institute, says that it's certainly a point worth considering, though one that will need to be weighed against any improvement in housing affordability for locals.

"Our [the Grattan Institute's] position, given the state of the rental market and the heightened risks of homelessness, is that intervention is probably justified, and our preferred measure is a higher rate of land tax. But we need to be clear that we are trading that off against the benefits of short-stays, which is facilitating tourism.

"Often in areas where short-stay accommodation is prolific, tourism creates a lot of jobs for young and lower-skilled people in particular. That's to say that if you take a sledgehammer to short-stay accommodation without paying attention to that, you're likely to have knock-on effects of reducing tourism and therefore reducing jobs and incomes in those areas that come with it."

Burnet says that the Hobart council will certainly be monitoring the impact of the new rate regime, but at the end of the day, the fact that people in the city are struggling to find homes is not an issue that can be ignored.

"This is new territory for Hobart, so there are a lot of things that we need to determine with this. We know that other cities and municipalities do have differential rates, particularly on the mainland, to tackle things like short stays or the use of vacant land. So we'll have to see if there is an impact.

"But I suppose the whole shared economy approach has become somewhat distorted. What we're seeing is rental properties taken off the market, whereas the short-stay economy was always about sharing accommodation.

"So it has, itself, had consequences for the people of Hobart, and particularly those who find themselves in situations where they have no roof over their heads."

Caps on short stays not a cure-all

So are restrictions on short-term rentals actually likely help improve rental stock and affordability? As Moloney explains, they could have a positive impact at a local level, though they are by no means a salve for the renting crisis nationally.

"Every property on the short-stay rental market is theoretically a property that could otherwise be available for long-term lease, so any interventions at the margin that push a property from short-stay to long-stay is going to have a net positive effect on rental affordability.

"Airbnb's aren't equally distributed across local government areas though - they're concentrated in popular tourist areas. So, in those areas, you could probably move the needle reasonably significantly.

"But this hot rental market is a broad-based phenomenon, so would measures to shift short-say stock onto the long-term rental market make a big difference nationwide? Probably not. Would it make a difference in particular LGA's where short-stay accommodation is ubiquitous? Probably yes."

For the localities where short-stay accommodation is plentiful and regulation could have a positive impact, Moloney says he would favour tax changes over yearly caps as a means of reform.

"All property investors pay land tax on investment properties, whether they're in the long-term or short-stay rental market, so if you wanted to swing some properties away from short-stay at the margins - which is probably justified in the current climate - an easy and simple way to do it would be to levy a higher rate of land tax on properties that are short-stay.

"The reason I like using the tax system is because it's less blunt then just capping the number of days. And land tax is an efficient tax, so either it will swing properties off short to long-term and therefore ease the tightening of the rental market, or if it doesn't, it will raise more revenue in an efficient way."

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Tom Watson is a senior journalist at Money magazine, and one of the hosts of the Friends With Money podcast. He's previously worked as a journalist covering everything from property and consumer banking to financial technology. Tom has a Bachelor of Communication (Journalism) from the University of Technology, Sydney.
Garry Hall
July 3, 2023 12.52am

Thought this article was well balanced but I find this whole discussion frustrating.

I'm a p/time disability worker and my wife is a p/time nurse.

We have saved hard and put all our life savings into 2 properties. One is a long term rental in Vic, the other a short stay rental in a tourist area in Q'land.

Last week I told our long term tenant that their property will be sold as being a landlord in Vic is now just too costly and hard.

Last week I also called the rental manager of our short stay property to get his views on things. He expressed the view that short stay accomodation in their town had changed little over the years and recently he had 2 short term unit owners instruction him to move their properties to long term rentals. He said potential long term renters were scarce and it took 2 months to find a tenant for one of these units. He feared a State wide approach to any perceived issue would be negative for their local economy.

As someone who recently subdivided some land we purchased 25 years ago, it is my view and experience, that our current housing shortage has more to do with lack of supply due the layers of bureaucracy and costs associated with developments. It was a mind numbing experience. Local and state governments are never going to admit this so hence they talk about more costs and regulations for existing properties owners!

David McPherson
July 3, 2023 4.45pm

Every one of Garry's points is spot on.