Stayz of goes? Sydney seeks to saw short-term rental caps in half

Paul Eyers
By Paul Eyers
8 Min Read

Sydney councillors have called on the NSW government to rebuild the city’s short-term accommodation rules in the hope of alleviating the region’s ongoing rental crisis. 

Currently, unhosted short-term rentals such as Stayz or Airbnb can be occupied to a maximum of 180 days per year. 

But the City of Sydney Council wants that cap sawed in half and has asked the NSW government to construct stricter short-term rental rules similar to the state’s holiday hotspots. 

Alongside reducing the cap on annual short-term occupancies to just 90 days, the harbour city wants to introduce a number of restrictions for owners with multiple short-term rental properties, which would restrict them to just one short-term rental. 

Politicians think the change in policies would help alleviate the city’s ongoing rental crisis, with national figures showing active unhosted short-term rentals remove 166,500 homes from Australia’s rental market at any given time. 

The latest property data shows Sydney’s rental vacancy rates are just 1.2 per cent, with only 10,133 rental dwellings vacant, forcing short-term property owners to relist their properties for either sale or long-term rent, which could help boost those figures. 

Lord Mayor of Sydney, Clover Moore AO, says the city council is leaving no stone unturned in its attempts to fix Sydney’s housing crisis.

“The availability of rental accommodation has been steadily shrinking since 2020, resulting in historically low vacancy rates and unaffordable rentals. The situation needs to be addressed urgently,” he said. 

“One of the factors impacting rental affordability cities all over the globe is the loss of supply to short-term accommodation.”

“While short-term letting helps facilitate local tourism and can help people earn a bit of extra cash, we need tighter regulation to stop homes being wholly converted into short-term lets, contributing to an overall lack of supply for long-term housing.”

The request came after a recent review by the city’s council found short-term rental numbers were beginning to return to pre-pandemic levels now the tourism industry was showing signs of a full recovery. 

Their report claims a return to pre-pandemic numbers would see the number of properties currently on the short-term rental market triple across the harbour city, further squeezing supply. 

And, with owners admitting they make better financial returns by placing their properties as short-term accommodations, they currently have little incentive to shift these homes to the long-term rental market. 

“180 days is simply too long. Investors are making more money renting out their property for short periods, so there is no incentive to make those properties available as homes on the long-term rental market,” Lord Mayor Clove Moore said. 

“Given the acute housing affordability crisis in the inner city, the City of Sydney has consistently advocated for this to be lowered to a maximum of 90 days per year, which would prioritise long-term residential tenancies.”

However, the Lord Mayor did hint that short-term rents within owner-occupied properties were unlikely to be affected by any of the proposed changes, allowing homeowners to still rent out individual rooms or granny flats as short-term accommodation. 

“Our concern is not hosted properties where someone might rent out their spare room occasionally or properties that are leased out while the resident has gone on holiday,” he said.

“A balanced approach that distinguishes occasional short-term letting from commercial tourist accommodation is required to allow short-term letting under circumstances that don’t detrimentally impact rental accommodation supply.”

Short-term rentals a short-sighted solution? 

However, the City of Sydney’s self-conducted review has already been met with scepticism by leading short-term rental experts who believe the changes will just place further cost-of-living pressures on hard-working homeowners rather than impactfully improve rental property availability. 

Crown Realty International Short-Term Rental Property Manager Juan Cangelosi told Build-it that placing harsh restrictions on the sector would do more harm than good, especially in tourist-dependent regions.

“Short-term rentals provide vital holiday accommodation to tourism and the local economy,” he said.

“The majority of these short-term properties are focused on specific suburbs such as Bondi, and their existence does not correlate with the rise in long-term rent prices in most Greater Sydney suburbs.”

Mr Cangelosi says he had doubts over the accuracy of the City of Sydney’s unreleased short-term rental review, which claims the number of short-term rentals is once again on the rise. 

Figures show that short-stay listings in Australia are down more than 15% compared to the pre-pandemic period.

juan cangelosi
Short-term property expert Juan Cangelosi says the likes of Airbnb or Stayz are having less impact on long-term rentals than before the pandemic.

The latest data from short-term rental data agency AirDNA show 278,788 unique short-term rentals were listed in Australia in December 2023, down from roughly 330,000 on the eve of the pandemic.

Less than 70 per cent of those were rented out at least once per month and considered active short-term properties, a further 13 per cent fall on early 2020 numbers. 

Mr Cangelosi told Build-it the rental crisis itself was responsible for this reduction as the average property owner can now make more money than ever via long-term rental income. 

“Higher rents and property prices in our capital cities have been making short-term rentals less attractive for owners and investors than they were pre-Covid,” he told Build-it. 

“Nowadays, lessors who are making their property available for short-term rent are just as likely doing so because they’re in a tourist hot spot or because they want the flexibility to use the property themselves for larger portions of the year.” 

“Housing market conditions and short-term rental impacts vary from place to place, there is no one-size-fits-all solution.” 

University experts also agree that a short-term letting cap would fail to alleviate the ongoing rental crisis noticeably. 

Urban and economic geography professor Thomas Sigler from the University of Queensland says the strategy of introducing rental caps to reduce rental market pressures currently needs more evidence. 

“We are unconvinced at this stage that caps and levies significantly move the needle on housing supply or affordability in Australia,” he said. 

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Paul Eyers has worked as a journalist for a range of media publishers including News Corp and Network Ten. He has also worked outside of Australia, including time spent with ABS-CBN in the Philippines. Stepping away from the media, Paul spent five years sharpening his tools in construction - building his skill set and expertise within the trade industry. His diverse experiences and unique journey have equipped him with an insider view of Australia’s construction game to dig deep into the big stories.