Australia has taken a 'light touch' with Airbnb. Could stronger regulations ease the housing crisis?

The current housing crisis has renewed debates about how to regulate short-term rental platforms such as Airbnb. The international research on the impact of these rentals is clear: when landlords “host” tourists rather than residents, housing supply is depleted, rents rise and neighbourhoods change.

Given Australia’s dire shortage of rental housing, restricting short-term rentals seems like a no-brainer. New research published this week showed the share of rental properties under $400 per week has fallen to 15% in most capital cities – half of what it was a year ago.

We’ve long studied these issues, watching as major cities around the world – from New York to Berlin to Barcelona – have enacted strong laws designed to protect local housing supply and neighbourhoods.

But do they even 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 home can be booked on a platform like Airbnb. Beyond this time, planning permission is needed to change the use of the property.

New Orleans has zoning laws that restrict holiday rentals to certain locations. Scotland has recently introduced similar laws requiring permission for short-term lets in certain “planning control areas”.

Numerous cities, including Boston, Amsterdam and Toronto, impose tourist taxes as a disincentive to short-term rental operators and to even the playing field with hotels. Revenue is then used to offset the impacts of lost permanent rental accommodation.

Paris has gone a step further, requiring short-term rental operators to “compensate” for lost rental supply in the city by purchasing and converting commercial floor space for residential use. The goal is to return housing to the market.

Enforcing regulations has been an ongoing battle, with data on short-term rental activity closely guarded by rental platforms.

Some platforms, such as Airbnb, now ensure hosts comply with local rules through their booking systems, although these cooperative actions typically occur after protracted legal battles.

Many local authorities have established dedicated compliance units to enforce regulations, often acting on neighbour complaints. New Orleans, for instance, uses highly visible code enforcement teams and even threats to cut off the electricity.

Ironically, some cities are contracting specialist platform firms to ensure compliance, such as “Sublet Spy”, which uses military-style technology to detect illegal lettings.

In Australia, change is piecemeal and slow

Planning laws are overseen by state governments in Australia. They have been much slower to act on short-term rentals than localities overseas.

New South Wales, for example, has moved to standardise regulations for short-term rentals following lengthy consultation processes and inquiries. These rules generally permit short-term rentals of whole homes without special approval, but limit bookings to 180 nights per year in metropolitan Sydney. Other areas can apply to impose the same conditions.

This is intended to preserve rental housing, but it is unlikely to do so given owners could book their properties for every weekend, as well as the Christmas holidays, before approaching the 180-night cap.

This is why Byron Bay, where housing is scarce for local residents and workers, has sought to impose a tighter cap of 90 nights, aside 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 fell in 2020 as short-term properties pivoted to the long-term rental market when the borders were shut due to COVID.

However, this didn’t last long. With more people moving 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 Byron’s businesses have struggled to find staff.

Western Australia has proposed capping short-term rentals at 60 days annually without local planning approval. Beyond that, local planning rules apply.

In Margaret River, for instance, holiday home owners need to renew their planning permission annually to provide short-stay accommodation. This might be withheld if there have been complaints about the property.

Again, the primary focus is to protect established long-term rental housing supply. Ironically, the lack of permanent rental supply is putting pressure on the region’s tourism operators, whose employees are unable to find housing in the area. Meanwhile, caravan parks – meant for holidaymakers – are accommodating the homeless.

Tasmania has sought to enable local councils to develop and enforce their own regulations, although this might require new legislation.

In short, regulating short-term rentals to prevent further loss of rental supply is critical, but governments are moving slowly and enforcement is difficult.

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Creative uses for short-term rentals

Given holiday homes will remain an important part of tourism infrastructure in regional areas, could we make use of them in more strategic ways? For instance, during natural disasters or housing crises?

An estimated 65,000 people were temporarily displaced during the 2019-20 bushfires that ravaged the east coast. Some 3,100 houses were also destroyed, leaving around 8,000 people in urgent need of accommodation.

Similarly, over 14,000 homes were damaged in NSW by last year’s floods, and more than 5,000 were left uninhabitable.

A year later, many people in NSW continue to live in inadequate accommodation. Government-issued temporary homes, such as campervans and “pods”, are in woefully short supply.

Housing generally takes a long time to build, making it difficult to respond to such short-term increases in demand.

More strategic and creative use of the short-term rental stock might be the answer. We have seen some gestures by Airbnb and other platforms to support people displaced by disasters, but these responses have largely been ad hoc and uncoordinated.

When disaster zones are declared, Commonwealth and state governments could mandate and coordinate access to short-term rental accommodations for displaced residents and relief workers.

We could even extend such declarations during housing crises like the one we’re experiencing now, as the mayor of Eurobodalla on the NSW south coast has suggested. This would give governments time to deliver longer-term housing solutions in areas of heavy demand.

Read more: Ever wondered how many Airbnbs Australia has and where they all are? We have the answers

From short-term thinking to long-term reform

In comparison to much of the international regulation of the short-term rental market, Australia is very “light touch”. The overarching aim is to encourage the tourism economy.

While this might 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 demands a new approach. Regulations must be tailored to the conditions of local housing markets, rather than the one-size-fits-all approach that exists today.

More broadly, large-scale protections for renters, increased rental subsidies for low-income households and more construction of social housing is what’s really needed to solve Australia’s housing crisis. Preserving existing housing supply – and making better use of short-term accommodation during times of need – would also make an immediate difference for renters around the nation.

However, going on the history of housing regulation in Australia, renters should not hold out too many hopes for politicians to provide any real assistance.