After 10 years of Airbnb and short-term rentals, is Australia ready for regulation?

For six months after breaking up with her partner, elderly worker Adriana Breen searched for a rental home on Victoria’s Mornington Peninsula.

“The rental market was just non-existent,” she said.

“Rents were also unaffordable. You’re looking at over $400 when they were $280 before.”

Mrs. Breen still works on the peninsula, but she no longer lives there.

Instead, she has to drive the 80 kilometer round trip from Frankston in Melbourne’s southeast every day.

“Mentally it affects me because it was my happy place – I love the peninsula,” she said.

“I know it’s only half an hour away, but it might be on the other side of the earth as far as I’m concerned because I’m not near my family.”

Adriana Breen, an elderly carer, had to move away from her family to find an affordable rental.(ABC News: Darryl Torpy)

Ten years ago, the Mornington Peninsula had a “healthy” vacancy rate of 3%, but now it is 0.7%.

Experts – using figures from independent advocacy and data group InsideAirbnb – say that for every vacant rental, there are around 30 short-stay rentals available on Airbnb.

“Non-metro Australia has…always had tight rental markets,” said town planner and policy analyst Nicole Gurran.

“Even a small increase – and we have seen a significant increase – in housing demand associated with the short-term tourism market will exacerbate these tight rental vacancy rates.”

a woman with documents in a park
Nicole Gurran, urban planner and policy analyst from the University of Sydney.(ABC News: John Gunn)

But coastal communities face more than an increase in short-term accommodation. During the pandemic, people fled the cities and moved to the regions.

“With increased demand from people moving to coastal destinations…combined with increased tourism demand, this has created a perfect storm in which rental vacancy rates are pitifully low,” said Professor Guran.

There are around 100,000 Airbnbs properties across Australia, according to figures from data group AirDNA. About 85% of them are whole houses.

And while short-term stays have always been popular in coastal areas and tourism hotspots, when it launched in Australia 10 years ago, Airbnb brought vacation homes to capital cities.

“In Australia, we don’t have a tradition of having holiday homes in our big cities,” Prof Gurran said.

“So when you see the cluster of short-term rentals around [our big cities] it is safe to assume that these are residential houses and apartments that have been taken off the permanent rental market.”

The impact of COVID-19

The sharing platform says it has boosted local economies by attracting tourists and creating jobs.

A report from Oxford Economics found that Airbnb contributed over $10 billion to the Australian economy in 2019.

But a 2019 report from the American Institute for Economic Policy found that Airbnb’s economic benefits were outweighed by the cost to renters.

Then in 2020, global tourism came to a halt.

“COVID has really shown that there is a link between the short-term rental market and rents across Australia, and indeed around the world,” said housing researcher Peter Phibbs.

A man wearing glasses and a suit with the city of Hobart in the background.
Peter Phibbs says the regulations help protect long-term rental markets in other countries.(ABC News: Luke Bowden)

In the Tasmanian capital of Hobart, residents have been in the midst of a pre-COVID-19 housing crisis.

Prof Phibbs said the number of Airbnbs in the city equaled around 9% of the total rental market.

This is much higher than any other capital city in Australia.

And the housing vacancy rate in Hobart is just 0.3%, the lowest of any capital city.

During the pandemic, the balance has shifted.

“When the housing stock moved from short-term rental to the long-term rental market, in places like Hobart, we saw a big reduction in rents,” he said.

A landscape shot of Hobart from across the water.
The pandemic has seen rental prices plummet in Hobart.(ABC News: Luke Bowden)

Professor Phibbs estimated that during COVID rents in Hobart have fallen by around 9%.

Another Sydney study by William Thackway and Christopher Pettit found that rental prices in the busiest Airbnb neighborhoods fell by up to 7%.

While this couldn’t all be attributed to Airbnb, Professor Phibbs said the evidence was clear: you can’t have an unregulated short-term accommodation industry and a healthy long-term rental market.

“Those two things just can’t coexist,” he said.

“We need some sort of regulation to limit the spread of short-term rentals so that we can allow the long-term rental market to provide homes to as many households who are looking for them right now.”

A matter of regulation

Around the world, major tourist destinations are preparing to regulate short-term rentals.

In Amsterdam, an entire house can only be rented for a maximum of 30 nights per year.

In New York, it is generally illegal to rent an entire unit for less than 30 days. Although there are exceptions.

Meanwhile, Berlin allows you to rent out your primary residence, but it can be a little more difficult to put a second home on the market at short notice and you can only rent a second home for a maximum of 90 days.

“Developing the regulations is probably the easiest part,” Professor Phibbs said.

“Regulation enforcement can be quite difficult. It certainly requires a lot of resources. It sometimes involves quite lengthy legal processes.

“It’s important to have some sort of tax regime where short-term rentals pay the cost of this regulation through some sort of bed tax.”

In Australia, New South Wales has 180-day caps in some areas, while Western Australia is considering a 60-day cap.

Meanwhile, Hobart hopes to become the first capital to limit the number of short breaks.

Several houses grouped together at different levels on a hillside.
Hobart could lead the way in regulating short-term rentals in Australia.(ABC News: Luke Bowden)

If successful, this will prevent other entire homes from becoming short-term housing.

But it could take some time to change the planning scheme, and in the meantime could lead to a rush to convert homes into short stays.

Prof Phibbs said it was a hard-nosed option, but the only one available to the council.

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