The current housing crisis has renewed discussions about the regulation of short-term rental platforms such as Airbnb.
The international research on the impact of these rental properties is clear: when landlords ‘receive’ tourists instead of residents, the housing supply becomes exhausted, rents rise and neighborhoods change.
Given Australia’s severe shortage of rental properties, limiting short-term rentals seems like a good idea. New research published this week showed the share of rental properties under $400 per week has fallen to 15% in most capitals – half of what it was a year ago.
We have long studied these issueswatching as major cities around the world – from New York to Berlin to Barcelona – enacted strict laws to protect local housing stock and neighborhoods.
But do they work? And would controlling short-term rentals solve Australia’s long-term rental crisis?
What some cities are trying
Amsterdam, San Francisco And London set limits of 30-90 nights per year that an entire house can be booked on a platform like Airbnb. After this time, planning permission is required to change the use of the property.
Airbnb regulation with teeth delivers results #Amsterdam: ‘Airbnb lost 80% of its addresses in Amsterdam after introducing new rules requiring owners to register with the city. Landlords are limited to 30 days’ rent per year. Those who break the rules can face a fine of €21,000 to get’ https://t.co/1qAGLg66It
— Action against empty houses @emptyhomes (@emptyhomes) October 19, 2021
New Orleans has zoning laws that restrict vacation rentals to certain locations. Scotland has recently introduced similar laws requiring authorization for short-term rentals in certain cases “plan control areas.”
Numerous cities including Boston, Amsterdam And Toronto, imposing occupancy taxes as a disincentive for short-term rental operators and even for the hotel playing field. The proceeds are then used to compensate for the consequences of lost rental properties.
Paris has gone one step further and is demanding short-term rental operators”compensatefor lost rental stock in the city by purchasing commercial floor space and converting it to residential use. The goal is to put homes back on the market.
— Reuters (@Reuters) February 8, 2021
Enforcing regulations has been an ongoing battle, with data on short-term rental activity closely monitored by rental platforms.
Some platforms, such as Airbnb, now ensure that hosts comply with local rules through their booking systems, although these collaborative actions usually come after lengthy legal battles.
Many local authorities have set up dedicated compliance units to enforce rules, often acting on neighbors’ complaints. For example, New Orleans uses highly visible code enforcement teams and even threats shut off the electricity.
In Australia, change is gradual and slow
The planning laws are overseen by state governments in Australia. They are much slower in dealing short term rentals than places abroad.
New South Wales, for example, has moved to standardize short-term rental regulations following lengthy consultation processes and enquiries. This regulations generally allows short-term rentals of whole houses without special approval, but limits bookings to 180 nights per year in metropolitan Sydney. Other areas may apply to impose the same conditions.
This is intended to preserve rental properties, but it is unlikely to happen as owners can book their properties for any weekend, as well as for the Christmas holidays, before approaching the 180-night limit.
This is why Byron Bay, where housing is scarce for local residents and workers, has tried to impose a tighter 90-night limitapart from designated areas with a concentration of second homes.
Byron Bay has one of the highest concentrations of short-term rental properties in the country. Rents in the area have fallen in 2020 as short-term properties aimed at the long-term rental market when borders were closed due to COVID.
However, this did not last long. As more people moved to Byron during the pandemic and the return of the short-term rental market, weekly rents rose from $555 in June 2020 to $800 by September 2022. The shortage of long-term rentals is one of the reasons why Byron’s companies are struggling to find staff.
Western Australia has proposed limiting short-term rentals to 60 days per year without local planning approval. Otherwise, local urban planning rules apply.
In Margaret RiverFor example, owners of holiday homes must annually renew their building permits in order to offer short-term accommodation. This can be withheld if there are complaints about the accommodation.
Again, the primary focus is to protect the established supply of long-term rental properties. Ironically, the lack of permanent rental supply is increasing put pressure on the tourism operators in the region, whose employees cannot find housing in the area. Meanwhile, caravan parks – intended for holidaymakers – provide shelter for the homeless.
Tasmania has sought to enable local councils to develop and enforce their own regulations, although this may require new legislation.
In short, regulating short-term rentals to prevent further loss of rental supply is critical, but governments are slow to move and enforcement is difficult.
Creative use for short term rentals
As holiday homes will continue to be an important part of the tourism infrastructure in regional areas, could we use them in more strategic ways? For example during natural disasters or housing crises?
An estimated 65,000 people were temporarily displaced during the 2019-2020 wildfires that ravaged the East Coast. About 3,100 houses were also destroyed, leaving about 8,000 people in urgent need of shelter.
Similarly, more than 14,000 homes in NSW were damaged by last year’s floodsand more than 5,000 were left uninhabitable.
A year later, many people in NSW continue to live in inadequate housing. Government-issued temporary housing, such as RVs and “pods,” are woefully scarce.
But the number of uninhabitable houses is enormous. Lots of motorhomes and motorhomes this week this is a caravan park near the center of Lismore pic.twitter.com/7tnNBg57DD
— Pete Williams (@rexster) May 13, 2022
Housing generally takes a long time to build, making it difficult to respond to such short-term increases in demand.
A more strategic and creative use of the short-term rental stock could be the solution. We’ve seen some gestures from Airbnb and other platforms to support people displaced by disastersbut these responses were largely ad hoc and uncoordinated.
When disaster zones are declared, Commonwealth and state governments can mandate and coordinate access to temporary rental accommodation for displaced residents and aid workers.
We could even extend such statements during housing crises like the one we are experiencing now, as the mayor of Eurobodalla on the south coast of NSW has done suggested. This would give governments time to provide longer-term housing solutions in areas of high demand.
From short-term thinking to long-term reform
Compared to much of the international regulation of the short term rental market, Australia is very “light touch”. The overarching goal is to stimulate the tourism economy.
While this may have been appropriate five years ago, when the rental market was in better shape and long-term housing demand focused on inner-city areas, the current crisis calls for a new approach. Regulations must be tailored to the conditions of the local housing marketinstead of the one-size-fits-all approach that exists today.
More broadly, large-scale tenant protections, increased rent subsidies for low-income households and more social housing construction are really needed to solve Australia’s housing crisis. Preserving existing housing stock – and making better use of transitional housing in times of need – would also make an immediate difference to tenants across the country.
However, looking further into the history of housing regulation in Australia, tenants should not place too much hope on politicians to provide any real help.