Australia's rental housing crisis has prompted a wave of new regulations on short-stay rentals, but experts say the measures are only part of the solution. While some policies show early promise, significant barriers prevent a mass shift of properties from short-term to long-term rental markets.
New Rules Across States
New South Wales, Western Australia, and Victoria now require short-term rentals to be listed on state registers, a crucial step for enforcement. Tasmania goes further by mandating platforms to share detailed listings data. Victoria introduced a 7.5% levy on stays under 28 days, aiming to tilt profitability toward long-term rentals and fund social housing. The levy has generated $85.8 million, exceeding expectations, though funds are not necessarily directed to the most affected tourism regions.
In NSW, unhosted short-term rentals in Greater Sydney are capped at 180 days per year, while Byron Shire has a stricter 60-day limit outside tourism precincts. Perth property owners need development approval for rentals exceeding 90 nights annually, with a $10,000 incentive to switch to long-term leasing. Hobart City Council is modifying its planning scheme to ban new short-stay permits in residential areas.
Early Results and International Evidence
In Victoria, short-term listing growth has stalled. Byron Bay's day caps contributed to a 15% decline in short-term listings, with some properties returning to the long-term market. However, researchers caution it is too early to assess the caps' full impact after just one year. International studies show regulation can reduce rental pressure. Canadian researchers found that restrictions led to modest rent declines in subsequent years. In Barcelona, a total ban on new registrations since 2014 prevented an estimated 9,000 Airbnb listings, saving 3% of rentals from conversion. New York City's strict enforcement cut short-term listings by 90%.
Barriers to Switching
According to a recent Australian study, many short-term rental properties are in scenic areas unsuitable for long-term tenants due to lack of services. Some owners use the property themselves or are reluctant to rent long-term. Switching between markets is complex, and owners with low or no mortgage are less affected by financial penalties. Tighter regulation could lead to vacant properties rather than increased long-term supply.
Policy Recommendations
Researchers call for better data on short-term rental stock, as state registration systems have not yet provided consistent, reliable data for local councils. Increased enforcement and collaboration across government levels are needed. Broader housing system factors, such as interest rates, negative gearing, and capital gains tax changes, also influence investor behavior. The ATO's updated guidance on holiday home expenses could have a greater impact than direct regulation. A balanced approach is needed to address the acute need for housing while supporting tourism economies.
