Are short-term rentals like Airbnb fueling the rental crisis? It depends on where you live – ABC News

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When hospitality giant Merivale rolled into Lorne, a sleepy seaside town on the Great Ocean Road with a population of about 1,100 that bloats to more than 10 times that over summer, people were excited.

While Justin Hemmes-helmed venues cover Sydney like a rash, it was the company’s first foray interstate after taking control of the 145-year-old Lorne Hotel — a commanding three-storey castle sitting just a breath behind the iconic surf beach.

It’s a huge venue, encompassing a bistro, a beer garden, another more upscale restaurant and boutique hotel rooms. The only problem is that there were few permanent places for the staff needed to run it to live.

This week, more than a year after Merivale came to town, a search of the major real estate listing sites produces just three properties available to rent in Lorne: two three-bedroom houses for around $700 a week and a “compact” one-bedroom unit nestled under another house coming in at $400. Earlier searches have resulted in even less.

But over on Airbnb, it’s a very different story. A quick search of the short-term letting site with no date restrictions pulls up more than a thousand listings (the point where the website stops showing you the specific number of available options). On the cheaper end of the spectrum are a handful of house share arrangements for less than a hundred bucks a weekend, and on the other sprawling mansions for well over $1,000 a night. About one in six of the total properties in Lorne are estimated to be short-term rentals, according to researchers.

The solution for Merivale was to put up staff in former hotel rooms — a suitable stop-gap, but not an ideal situation for those hoping to stay long-term. Over the past few years, other smaller businesses have taken a similar approach, including “accommodation provided” on job ads stuck in shop windows.

Like a dog chasing its tail, what’s happening in Lorne is emblematic of the crisis facing summer holiday hotspots all over Australia. Small towns want tourists to spend money at local businesses; these businesses need workers to serve the tourists; the workers need homes to rent, but partly because of an epidemic of Airbnbs and other short-term rentals, which exist due to tourist demand, there’s nowhere for them to live.

“It’s a double-edged sword really,” says Leon Walker, a local cafe owner and president of the Lorne Business Traders Association. “There’s no point being a hospitality worker if you’ve got to pay $600-$700 a week in rent, you’re not going to make anything out of it.”

Meanwhile, across the country, the debate over exactly how much blame for the ongoing national housing crisis falls on the shoulders of Airbnb and its ilk continues to rage. For the many fed-up Australians locked out of the market or struggling to afford record-high rents, short-term rentals are easy to scapegoat as the cause of their woes.

But is that the reality? The answer, just like the problem, isn’t straightforward.

Airbnb’s footprint in Australia

Like most new tech platforms, Airbnb’s rise in Australia started relatively slowly. When it launched in 2012 — the same year Uber arrived on our shores — it was another facet of the emerging “sharing economy”, allowing home owners to rent out their spare room for a little cash on the side.

But just like Uber would go on to revolutionise how we get around and, later, how we eat, Airbnb has completely changed how we travel, growing into a flourishing economy that rivals the long-reigning dominance of traditional hotels.

National data on short-term rentals, compiled by data analytics company AirDNA and provided exclusively to ABC News by the University of Queensland, gives some insight into the speed of that shift (the data also includes other short-term rental platforms like Stayz).

In October 2014, there were about 8,261 active listings (meaning they had been rented at least once in the previous month) for short-term rentals across the country. By the end of 2019, just five years later, that number had grown to more than 220,000. Had the COVID pandemic not hit weeks later, this number may have continued on its upward trajectory. Instead, data from July last year, shows approximately 168,789 active listings, up slightly from a COVID-era low of around 142,000.

Associate Professor Thomas Sigler, an urban geographer at the University of Queensland, estimates that this represents about 2 per cent of Australia’s total housing stock, or as he puts it, a “pretty insignificant” drop in the housing bucket.

There are about 10.9 million homes in Australia, according to the Australian Bureau of Statistics’ most recent release, more than a million of which were empty on Census night. At the most recent budget, the federal government set a target of another million new homes over five years from mid-2024 — an ambitious undertaking by any measure. This is how Sigler comes to his percentage calculation, but he concedes that it’s not a precise science: for one, the number of active listings fluctuates month-to-month, and the short-term rental data does not differentiate between properties with multiple listings, or where the listing is a house or room share.

Getting a grip on the true spread of short-term rentals is further complicated by the fact that the major providers don’t publicly release their own data, leaving researchers to scrape the websites themselves or rely on third-party providers. (The platforms do provide data on listings to governments in New South Wales and Tasmania, where state-wide registration systems are in place).

This ambiguity informs Sigler’s mission, which is as he describes it, “trying to understand the Australian short-term rental market as deeply as possible”. So far, he says, that has involved dispelling a lot of myths.

“There’s a lot of assumptions, particularly in the popular media, that short-term rentals cater exclusively to tourists, that short-term rentals explicitly take properties off the long-term market, and that short-term rentals invariably create a nuisance for the community,” he says. “There’s some partial truth to all of that … [but] modelling the relationship between long-term and short-term rentals is almost impossible.”

Thomas Sigler, an urban geographer at the University of Queensland, describes his mission as “trying to understand the Australian short-term rental market as deeply as possible”.(Supplied)

There are a few reasons for this. As mentioned above, listings aren’t always for an entire property, many are only rented out part of the time, others for a brief moment, and some Airbnb’s are holiday homes that would otherwise sit empty. The market also behaves differently depending on the area, Sigler says, and “it’s a moving target” as regulation is introduced, rents go up and owners constantly weigh up the benefits of short versus long-term letting.

“Host behaviour is unpredictable — you could regulate short-term rentals for 180 days or 90 days, but you can’t predict the response of the owner,” he says. “It completely depends on the nature of the property. If it’s a $4 million beachside house, they’re very unlikely to rent it out long-term because they might say … ‘I want to use it on weekends, I want to use it at Christmas’.”

Despite this, the topic of short-term rentals is repeatedly raised in debates over how to best solve the housing crisis. Sigler says this is a bit of a “red herring” that distracts from supply issues.

A bunch of houses on a hill.

There are about 10.9 million homes in Australia, according to the Australian Bureau of Statistics’ most recent release, more than a million of which were empty on Census night.(
ABC News: Maren Preuss
)

“Airbnb is an easy thing to blame because it’s the rich fighting the rich — there aren’t a lot of Airbnbs in Blacktown and Bankstown,” he says. “It’s people who are upper middle class who say ‘I’ve been able to afford Potts Point for the last 10 years, all of a sudden the prices are going up, I’ve observed a lot of Airbnbs in Potts Point, therefore they must be connected’. It’s that logic, but if you look at the big picture, it’s not what’s causing the rental affordability crisis.”

Both Airbnb and Stayz told ABC News that housing and rental affordability was a complex issue, that existed long before the rise of short-term rentals. “Long-term solutions are required especially when you consider that short-term rentals across the country make up between 1-2 per cent of housing stock,” says Susan Wheeldon, Airbnb’s country manager for Australia and New Zealand.

Nicole Gurran, a Professor of Urban and Regional Planning at the University of Sydney, agrees that the impact of short-term rentals on the long-term rental market is tricky to measure at a national level, adding that “short-term rentals are just one of the many things that drive rental demand”.

“But in terms of its impact on particular local markets, that’s unambiguous,” she says.

The hotspots

The picture that starts to emerge is one of two realities: while at a national level, short-term rentals may only be a small piece of the housing crisis puzzle, in many tourist towns outside the major cities, they’re clearly having an impact.

In an article published by the University of Sydney, Gurran writes: “The international research on the impact of these [short-term] rentals is clear — when landlords ‘host’ tourists rather than residents, housing supply is depleted, rents rise and neighbourhoods change.”

This is exacerbated in regional communities with little housing supply to begin with — and an endless stream of visitors looking to move in over summer. Take the picturesque Byron Bay on NSW’s north coast, which has long been among Australia’s hottest tourist destinations and one of the most high-profile battlegrounds for the debate over short-term rentals. Previous surveys have estimated that up to 35 per cent of the area’s housing stock is listed on sites like Airbnb and Stayz.

“There’ll be a lot of local communities that will say ‘look our visitor economy depends on residential accommodations being part of the tourism accommodation infrastructure’, and that’s important, we should continue that,” Gurran says.

“That’s why it’s really important to allow local governments to enact the types of regulations they think are best in response to their local housing market conditions.”

Comparing the AirDNA data from July 2019, before the COVID pandemic, and July last year it appears that many of these coastal hotspots saw a drop in active short-term listings. Lorne and Angelsea lost an estimated 690 listings over the four years — a decrease of 36 per cent. Port Nepean on Victoria’s Mornington Peninsula saw a drop of around 30 per cent.

The biggest decrease can be seen in the Nelson Bay peninsula, a popular holiday destination about an hour north of Newcastle, where the number of active short-term rental listings is more than 60 per cent lower than at the same time in 2019. Byron Bay also saw the number of advertised short-term rentals drop by around 35 per cent, from 2,612 in 2019 to 1,697 last year.

Of the 20 areas with the largest reduction in advertised properties, however, 10 are in Sydney — including the beachside suburbs of Bondi, Tamarama, Bronte, Coogee, Clovelly, Manly, Avalon and Palm Beach as well as inner-city neighbourhoods, like Surry Hills, Potts Point, Darlinghurst, Pyrmont, Redfern and Glebe.

New South Wales was the first state to impose limits on the number of nights short-term rentals could be let each year, applying a 180-night cap on otherwise empty properties across Greater Sydney (excluding the Central Coast), Ballina, and parts of the Clarence Valley and Muswellbrook in 2021. Last year, the government approved a stricter 60-night limit in the Byron Shire, which includes Byron Bay and Mullumbimby, which is set to commence in September.

Sigler suggests the apparent drops across Sydney could be early evidence of regulation working to weed out short-term rentals. “In the 10 years of working with this data, this is the first time I’ve ever seen the impact of legislation so clearly,” he says.

A woman sitting in front of a desk.

Nicole Gurran, Professor of Urban and Regional Planning at Sydney University, says the impact of short-term rentals on some local markets is unambiguous. (ABC News: Michael Nudl)

But Gurran’s view is that it’s too early to say whether New South Wales’ “very light” regulation has tipped some short-term rental operators into giving it up. “Of course, the big shift between 2019 and 2023 was COVID,” she says.

The pandemic, she says, likely had a bigger impact on short-term rentals in the inner-city as they were more likely frequented by international tourists, whereas the regions tend to rely more heavily on domestic travel.

Areas that appear to have gained short-term rentals since 2019 are mainly remote and regional destinations. The number of active listings in Darwin, for example, increased by around 87 per cent, from 315 in 2019 to 590 last year. Active listings in Yeppoon, a coastal town on the southern end of the Great Barrier Reef, more than doubled, and Townsville further north along the coast saw an increase of about 50 per cent. In NSW, Mudgee, Wollongong and Cessnock also experienced significant jumps.

So, is regulation the solution?

The rental crisis, meanwhile, has continued unabated. Last week Australia’s median rent hit another record high at $601 per week, up from $437 in August 2020, according to property analytics company CoreLogic. Sydney remains the most expensive capital city to rent in, with a median weekly rent of $745, followed by Canberra at $651, Perth at $630, and Brisbane at $627.

But are short-term rentals driving up rent prices? Some international research has found that increases in short-term rentals in an area — what’s been coined the “Airbnb effect” — lead to higher rent and house prices.

According to Sigler, in some cases, higher rents could actually lead to fewer short-term rentals: in areas where rents go up, people may be more likely to scrap Airbnb and instead put their property on the rental market. “Because they can get more money on the long-term market, hosts are rational actors,” he says. “They’re saying, if I can get $700 a week on the long-term market but only $800 on Airbnb, why would I put it on Airbnb if I have to wash the sheets, hand over the key, and change the soap and towels.”

There’s also the question of availability, with the national rental vacancy rate sitting at just 1.1 per cent in September. “We can’t blame short-term rentals for population growth [in particular regions], but when we’ve got a housing crisis, it’s a real irony when a high proportion of that housing stock is not available to meet the housing need,” Gurran says.

In response, state governments have taken steps to limit how short-term rentals can operate. New South Wales has brought in a suite of short-term rental rules, which include a government register of short-term rentals and the previously mentioned 180-night cap in Sydney and some other regions, which means properties can still be rented out every weekend and over Christmas.

Victoria will introduce a 7.5 per cent levy on revenue from short-term rental platforms from 2025 as part of an attempt to boost housing supply, the first time such a tax has been proposed in Australia. Western Australia will require all short-term rentals to be registered with the government by 2025, with a $10,000 incentive to be offered to hosts who make their properties available for long-term tenants. In Tasmania, hosts may require a planning permit from their local council. 

Gurran believes we need a rethink of how we regulate the market. “We’ve got a national debate and commitment to deliver 1.2 million homes over the next five years,” she says. “But we can’t say that on the one hand, while on the other hand be content to see those homes being lost onto the tourist rental market.”

One option for popular tourist locations, she says, would be allowing unrestricted short-term rentals in areas popular with visitors, but putting guardrails in place elsewhere in the area to ensure workers have a place to live.

“It’s not a matter of saying you can either have accommodation for tourists or you can protect your housing stock, it’s a matter of saying there might be some locations for them,” Gurran says.

Sigler agrees that the current approach to regulation isn’t ideal. “Right now, we have a bunch of arbitrary lines in the sad, like 180 days, 90 days, 30 days, and there’s nothing scientific about those numbers,” he says. “They’re just our best guesses in terms of what makes good regulation.”

Meanwhile, short-term rental platforms have been critical of previous moves to regulate the industry. In response to Victoria’s 7.5 per cent levy, an Airbnb spokesperson said a “tax that unfairly benefits the hotel industry over everyday Victorians is not the right approach”.

Man wearing a navy suit sitting in a living room.

Stayz corporate affairs director Eacham Curry believes more needs to be done to understand the scope of the problem before further regulation is introduced.(ABC News: Bradley Wade)

Stayz corporate affairs director Eacham Curry says the first step before any regulation needs to be “understanding where the problem is” through state-wide registers that collect data on short-term rentals. “If you arbitrarily regulate, you’re going to damage the very thing that brings prosperity to many of these towns,” he says, pointing to a report commissioned by Stayz that found short-term rentals contributed $5.8 billion and 35,000 full-time equivalent jobs to the economy in 2017-18. “Those things are at risk if you don’t get the regulation right.”

Susan Wheeldon, from Airbnb, agrees with the need to get the balance right.Airbnb guests spent over $12.3 billion and supported almost 95,000 jobs in communities across Australia in 2022,” she says. “We’re committed to working with state and local governments to develop appropriate local plans that do not jeopardise the benefits that flow from tourism.”

Meanwhile, back in Lorne, the cycle continues. Walker worries that the town’s permanent population is ageing, partly because of the lack of long-term housing. In other words, it’s an existential problem. “If you look at that keep going it’s almost ghost town … We get a strong influx of backpacker workers, which are great for summer, but you got to house them, you want them to have somewhere nice to live,” he says.

The conundrum led the town to launch the “adopt a worker” initiative in 2021, which called on locals to open up their spare rooms, bungalows, and caravans to workers who “make our coffee and beds, stack our shelves and pancakes”. 

“To put it simply, if you’ve got 500 Airbnbs here, and you take 5 per cent, that’s 25 houses, put them back into the permanent rental market and that makes a big difference for the town,” Walker says. 

This post was originally published on this site

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