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Increasingly, state and local governments are legislating to curb the use of properties for short-stay accommodation, in hopes of easing a historically tight and costly rental market. By Saul Eslake.
Governments crack down on Airbnb rentals
As governments across the country struggle to address the housing crisis, South Australia has become the latest state to turn its attention to the impact of Airbnb and other short-stay accommodation providers on an increasingly tight rental market. A parliamentary inquiry last month recommended that the state government impose a registration fee or levy to pay for a registration scheme to track the use of such accommodation.
This year both the Victorian government and the ACT have imposed levies aimed at curbing the pressures arising from increasing numbers of properties being deployed as holiday rentals.
An important aspect of Australia’s ongoing, multidimensional housing crisis is the squeeze on rental accommodation – one that typically commands less public attention than the difficulties faced by households with large mortgages in the face of rising interest rates. That’s despite the fact that renters typically pay 20 per cent of their (lower) incomes on housing costs, as against 15.5 per cent for home owners with a mortgage.
More than a third of Australian households – and more than half of householders aged under 35 – lived in rented accommodation at the last census in 2021, an increase of more than 4 percentage points since the 1980s. But the supply of rental housing has failed to keep pace with demand. Rental vacancy rates in Australia’s capital cities have averaged less than 1.5 per cent over the past three years, according to SQM Research, down from an average of more than 3.5 per cent in the early 1990s, according to the Real Estate Institute of Australia.
Unsurprisingly, therefore, rent increases have averaged more than 8 per cent a year over the past three years – almost double the overall inflation rate – compared with an annual average of just 3 per cent over the previous two decades. As a result, rental affordability has declined across the country.
Australia’s rental housing crisis has multiple causes. One is the significant increase in the number of middle-income households forced to rent for longer stretches of their lives because of the greater difficulty they face in buying a first home, and the recent rapid increase in population driven by the post-pandemic surge in immigration. On the supply side are the long-term reductions in government spending on social housing and the impact of onerous planning and zoning laws and regulations on the capacity of the housing industry to build new dwellings.
Researchers have also pointed to the rapid growth in the number of properties being used to offer short-stay accommodation for tourists.
One study from the University of Queensland found that 191,123 properties were listed for short stays in December 2023, down from a peak of 208,515 in February 2019 but well above the 73,790 in July 2017, at the beginning of the researchers’ data series.
They found that at any given time, about 1.5 per cent of the just over 11 million dwellings in this country are given over to active, unhosted short-term stays, or “whole house” rentals. That’s roughly equivalent to the number of new dwellings built each year, according to UQ researchers Thomas Sigler and Zhenpeng Zou.
The Australian Coastal Councils Association found much higher proportions in regional areas, ranging from 3.2 per cent on Queensland’s Sunshine Coast to 17.7 per cent in Byron Bay, on the New South Wales north coast.
The proliferation of properties being used for short-stay accommodation has prompted a variety of responses from state and local governments.
Some local governments have begun to impose higher rates on properties used for this purpose. The City of Adelaide charges rates on properties used for short-stay accommodation for more than 90 days at the higher rate applicable to commercial properties. The Brisbane City Council raised its surcharge on rates payable on short-stay accommodation properties to 65 per cent last year. Since 2023, the City of Hobart has levied rates on properties used for short-stay accommodation at twice the rate applicable to residential properties. Greens councillors this week called for the City of Sydney to impose a 60-day cap on the operations of short-term accommodation providers, following a policy implemented by Byron Shire Council last year.
The Victorian government introduced a 7.5 per cent levy on short-stay accommodation (other than in principal places of residence) from the start of this year. It is expected to raise $75 million a year when fully in effect. The ACT government has imposed a 5 per cent levy on such bookings made through online platforms starting on July 1 this year, which it expects to raise $4 million a year.
The Tasmanian Liberal government promised to introduce a similar levy ahead of the 2024 state election, saying the revenue generated – which it estimated at about $11 million a year – would be directed to assisting first-home buyers. Since that election, the Tasmanian government has trebled the First Home Owner Grant and abolished stamp duty for first-time buyers on homes valued at up to $750,000 – but has not introduced the levy on short-stay accommodation.
All of these measures are aimed, in part, at reducing the incentive to offer properties to tourists rather than as long-term rentals to local residents, by reducing the profitability of the former. But such measures will only succeed in that objective if property owners are unable to pass on the levy to their paying visitors – which is more likely if (as in Victoria and the ACT) the levy is payable in the first instance by online booking platforms.
An alternative approach adopted by some governments has been to offer incentives to short-stay accommodation providers to revert their properties back to long-term rentals. Since late 2023, the Western Australian government has granted $10,000 to providers who offer their properties to long-term renters for at least 12 months – paying $4000 once the application has been approved and the balance after the property has been rented for a year. More than 450 properties were converted to long-term rentals under this scheme in 2024.
Similarly, the Tasmanian government offers a one-year exemption from land tax for properties converted from short-stay accommodation to long-term rentals of 12 months or more.
On balance, it seems unlikely that these measures will shift the dial between short-stay tourist accommodation and long-term rentals significantly, given that property owners can typically earn considerably more for renting a property to tourists for, say, 180 days a year than they can from renting it for 52 weeks. Moreover, state or local government charges can be offset against federal income tax – which means that between 32 and 45 per cent of any such charges are in effect paid for by the Commonwealth, depending on the taxpayer’s marginal personal income tax rate.
An alternative possibility, proposed by housing advocacy organisation Everybody’s Home, would be to phase out tax concessions – negative gearing and the 50 per cent capital gains tax discount – for property investors who use their properties for short-stay accommodation rather than long-term rentals.
Using a similar methodology to the federal Parliamentary Budget Office, a report from Maiy Azize of Everybody’s Home estimates the revenue foregone by the federal government as a result of concessions for short-stay accommodation providers is somewhere between $111 million and $556 million in 2025/26 – depending on how many of these properties are negatively geared. That rises to between $212 million and $1.06 billion by 2035/36. “This is public funding that could be better used to deliver long-term, affordable housing solutions,” the report says.
Such a proposal would undoubtedly have a larger impact than the differential rates and levies implemented thus far by some state and local governments. Needless to say, however, that suggestion has not been welcomed by property interests, nor by the federal government, which appears determined to retain the existing tax concessions for all property investors, whether they be short-stay accommodation or longer-term rental providers.
More broadly, this debate highlights the ongoing tension between two competing views of the role of housing: to provide basic human needs for shelter, personal security and a stake in a community, on the one hand, and a means of accumulating income and wealth, on the other. Over the past three decades, the latter has become an increasingly important consideration in the minds of voters, and hence in the deliberations of politicians.
While Millennials and Gen Z have begun to outweigh the older cohorts whose interests have been thus served, these young voters don’t yet to hold sufficient sway to drive policy. For now, the majority – to use a trite political phrase – is “mums and dads trying to get ahead”. If we ask ahead of whom, it is their children’s generation.
This article was first published in the print edition of The Saturday Paper on October 17, 2025 as "To be or not to Airbnb".
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