Media releases

Stricter controls on short-term rentals needed

Published 14 June 2024

The City of Sydney has called on the NSW Government introduce a number of measures to curb the growth of residential short-term rental accommodation, after carrying out a review of short-term rentals in the city.

Lord Mayor of Sydney, Clover Moore AO said every measure needed to be taken to rectify the housing crisis in Sydney.

“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,” the Lord Mayor 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.”

A review by the City of Sydney found short-term rental numbers had dropped during the pandemic, when lockdowns and travel restrictions significantly reduced the need for this type of accommodation. The review found that the strong reduction in properties was likely to be temporary.

“With tourists and other visitors returning, we may well see an increase in the short-term accommodation numbers,” the Lord Mayor said.

“Any increase could place significant pressure on a rental market already in crisis. A return to pre-Covid levels will see those short-term let numbers triple, as investors try to cash in.

“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. 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.”

The report showed investors made better financial returns using their assets to provide short-term accommodation than making these dwellings available for long-term rent by residents.

The City carried out a survey of people who both use and supply property available for short-term rental accommodation as part of the review.

Respondents who supply short-term rental accommodation cited increased earnings and flexibility to use the property for personal reasons as two key reasons for entering the market.

The report also outlined potential measures to reduce commercialisation in the sector.

Measures include restrictions for owners with multiple short-term rental properties, mandating that only an owner’s principal place of residence could be used and a cap on the maximum number of days a property can be used in this manner.

“The City supports a regulatory framework that acknowledges the benefits of the sharing economy, while minimising the impact on housing affordability, safety and amenity in high density and high housing demand communities. We are calling on the NSW Government to disincentivise the use of private housing for short-term rentals,” the Lord Mayor said.

“I have written to both Minister for Planning Paul Scully and Minister for Housing Rose Jackson to call for better regulation in the sector. Our submission asked the state government to work with the City of Sydney, including on localised day caps and revenue measures.”

Currently properties can be used as short-term rentals for a total of 180 days a year.

Properties that provide short-term accommodation above this limit, such as hotels, are classified as commercial operations and are subject to a different set of regulations and fees.

“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.

“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.”

A series of recommendations have been submitted to the NSW Government as part of the state’s broader review of short-term rental accommodation.

The state government is now considering submissions from stakeholders and investigating policy changes as part of moves to address the housing affordability crisis in NSW.

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