‘Cap and trade’ for Airbnb rentals proposed to win housing back for living and save tourist towns at the same time

‘Cap and trade’ for Airbnb rentals proposed to win housing back for living and save tourist towns at the same time
  • PublishedJune 26, 2024

Massive windfalls being made by landowners, the swathes of rental properties being taken away from local residents and the impact of the bed-based gold rush are revealed in a new Grounded report.

Popular tourist areas across the nation know that calling their housing situation a “crisis” barely covers how severe it is.

Mary-Faeth Chenery in Daylesford, a wildly popular town about 1.5 hours’ drive from Melbourne, says the inability to secure a place to stay is driving away long-time residents, families and essential workers.

“Get a get long-term rental? You just can’t,” she said.

“Don’t even think about it.”

“If one comes up, the real estate agent has filled it because he’s got a list of 20 or 30 people who want it. You just don’t expect to find one here.”

The lack of housing is causing real problems in how the community functions because it can not attract and retain the people it needs to keep going.

“The community health service used to get 50 applications for a job for somebody in health care that’s going to help the whole community,” Dr Chenery said.

“They get two now, because there’s no place for them to stay.”

An older woman in a pink puffer jacket, smiling.
Mary-Faeth Chenery says its a “crime” that most of the new housing in Daylesford is being built for short-term stays.(ABC News: Peter Drought)

Global problem

Cities from Hobart to Byron Bay are struggling to balance a conflict: the profits available to property owners through short-term rental platforms like Airbnb and the need for long-term rentals to house local workers and families.

It is not just an Australian problem.

Barcelona will ban renting apartments to tourists as it tries to deal with a lack of affordable housing for residents.

The new report, from property reform advocacy group Grounded, offers a solution, a “cap and trade” system for short-term rental permits.

The scheme could slowly return hundreds of thousands of properties to the long-term rental market and still retain the profitability of short-term rentals like Airbnb and Stayz.

Houses under construction on a bright, sunny day
Owners in popular tourist areas are earning massive profits on the short-stay market.(ABC News: Keana Naughton)

Big money

The problem, and the solution, is profits.

The report analysed the impact of short-term rentals in 13 white-hot tourism markets across Australia like Byron Bay, Fremantle and Victor Harbour.

“Across 12,000 units, we saw that for returns of short-term rentals, operators were earning 81 per cent more than they could in the traditional rental market,” Grounded managing director Karl Fitzgerald said.

“So in a world where 4 or 5 per cent can make a difference to an investment decision, this is what is really driving the growth in Airbnbs.”

“This is a seismic shift really in terms of investment returns.”

A bald man with a white beard standing outside shops.
Karl Fitzgerald wants to see a system where licences for short-term rentals are capped and controlled at a local level.(ABC News: Peter Drought)

It’s a simple equation: with bigger profits, more owners are switching long-term rentals to the short-term market.

“Because as supply has been hoovered up, from both first-home buyers and renters, the opportunities are going to where the highest return is delivered, and that’s short-term rental,” Mr Fitzgerald said.

The real-world impact is obvious in tourist towns, isolated from population centres.

It is particularly clear in places like Hepburn Springs and Daylesford north of Melbourne, where visitors come for the natural beauty, mineral springs and regional food and wine scene.

“It’s a world of precarity. There are people sleeping in caravans. They’re making do in sheds. We’re here at record low temperatures, and people are trying to live through this scenario while there’s thousands of properties that are vacant during the week.”

A historic building in a main street.
Daylesford is now a hotspot for queer travellers, arts lovers and Melbourne day-trippers.(Supplied: Hepburn Shire Council)

Epic scale

Emeritus professor of the University of Sydney’s urban planning program Peter Phibbs has studied how to make housing more affordable.

While the explosion of short-term rentals like Airbnb is far from the only element fuelling unaffordability, that impact is particularly pronounced in the tourist towns examined in the study.

“It just really highlights the scale of the problem,” Professor Phibbs said.

“You can see why so many landlords are preferring short-term rental because of the difference in returns they can make compared to long-term rental.”

That potential profit is also distorting decisions about new housing.

According to the report, in the Hepburn Shire area that includes Daylesford, 74.2 per cent of new housing supply in the past decade was consumed by short-term rentals.

The average new housing supply in Apollo Bay was 24 dwellings per year, but the growth of short-term rentals, including those taken out of the long-term rental market, was nearly double at 42 homes.

“The problem isn’t so much the rental price, it’s just the fact there are no properties available to rent,” Professor Phibbs said.

“So even if you’re on a decent income, you’re a key worker, you couldn’t actually find a place because so many places have transferred into the short-term rental market.”

“The market in some of those towns is more or less non-existent.”

What’s needed is a way to slow down and reverse the explosion of short-term rentals so there’s a better balance of long-term rentals to meet community needs, according to Professor Phibbs.

“The last thing you’re trying to do is crunch the market,” he said.

That’s because a large part of the economy in places like The Whitsundays and Warburton is the selling of accommodation and the money that flows from servicing the needs of visitors.

“These are tourist towns. But you might just slowly reduce the number of short-term rentals over time.”

A man wearing glasses and a suit with the city of Hobart in the background.
Housing researcher Peter Phibbs says short-term rentals have soaked up properties in key tourist areas.(ABC News: Luke Bowden)

Could be worse

The areas examined in the report were Hepburn Shire, Mornington Peninsula, Warburton and Apollo Bay in Victoria, Byron Bay in New South Wales, Fremantle in Western Australia, Victor Harbor in South Australia, Hobart in Tasmania, and Noosa Heads, Coolum Beach, Port Douglas and the Whitsundays in Queensland.

The report likely underestimates the impact of short-term rental, because it uses a conservative way of working out (what’s called “methodology”) that shrinks the net of what is being looked at.

So-called “active listings” were used, rather than total listings. This knocked out about a quarter of the total and would exclude many traditional “bed and breakfast” operators.

Figures from global data agency AirDNA were used, even when there were more listings on Airbnb. For example, Airbnb lists 708 dwellings in Warburton but AirDNA only 143 — the report used the smaller figure.

In Hobart, a recent Shelter Tasmania report found 1,258 properties listed as short-term rentals while AirDNA has 981.

The fix?

But the report, Airbnb: from a housing problem to solution, suggests a potential solution: a “cap and trade” system for short-term rental permits.

The scheme could slowly return hundreds of thousands of properties to the long-term rental market and still retain the profitability of short-term rentals like Airbnb and Stayz.

“We’re advocating for a cap on the number of Airbnbs and creating a licensing system that provides some sort of regulation,” Mr Fitzgerald said.

Once the system was established, the licences could be auctioned.

If the number was kept stable or reduced over time, the value of the licences would theoretically rise.

“This would bring some sort of order to this runaway market … it’ll be a signal that the growth in this sector is not going to be so extreme.”

In turn, any system that increases the cost of running a short-term rental would mean less attractive returns, particularly for marginal and more affordable properties.

Mr Fitzgerald estimates that in the Hepburn Shire where he lives, there are around 1,400 short-term rentals but only 1,100 of them are active.

“So the beauty of the ‘cap and trade’ system is that it works most effectively on marginal sites,” he said.

“Those excess 300 sites that aren’t so active would probably head back onto the market.”

Airbnb disputes the figures used in the report.

“This report is deeply flawed — it’s not based on facts and uses unreliable data showing limited understanding of the short-term rental market,” Michael Crosby, Head of Public Policy, Australia and New Zealand, said in a statement.

“Something needs to be done about housing, more homes need to be built, and a small levy, paid for by the guest, that funds affordable housing, is a way to address the issue.”

Mr Crosby says there is no evidence of caps or bans working.

“Airbnb has long advocated for evidence-based regulation of the short-term rental sector,” he said.


Different local councils have been trialling permit systems and fees for registering short-stay properties in their areas.

State governments have also been considering levies on short-stay bookings or higher land taxes on properties that are sparsely occupied.

The NSW government is proposing a 60-day cap on some short-term properties in Byron Bay, to encourage them to return to the long-term rental market.

The proposals are not as drastic as what’s proposed in Barcelona, so will they make a difference?

Home is here

Beyond government, community members in places like Daylesford are working to find solutions.

They have different ideas about the best way to make it work.

Two women in their 70s holding tea cups laugh while looking at each other.
Maria Bamford (left) and Mary-Faeth Chenery at their home in Daylesford.(ABC News: Ashleigh Barraclough)

Dr Chenery is a leader of Safe Place, a voluntary community organisation that is working with the local council on expanding access to tiny homes and co-housing, and increasing the use of existing unoccupied buildings.

She is more than aware that the way property combines the human need for housing, scarcity and the potential for profit makes it difficult to find simple solutions.

“I think there are plenty of people who understand that we’re just not sure exactly how to move ahead,” she says.

But doing nothing is not an option either, particularly after Dr Chenery learned how almost all new housing supply in her town would never hit the market — destined only for visitors.

“That’s a crime to me. That is a shame.”

That visitor economy drives the area.

Trevor Shard hosts short-stay visitors in a building on his property.

He’s also a director of local not-for-profit foundation Homeward Housing, which is trying to unlock access to underused council land, allowing the charity to develop affordable dwellings on it.

An older man.
Trevor Shard is trying unlock more land to build affordable housing.(ABC News: Peter Drought)

Mr Shard wants more people to be able to live — full-time — in the area.

“We’d like to see people be able to accommodate themselves within the town itself, rather than having to go elsewhere,” he says.

“It’s a lovely community here. And we would like to see more people able to actually share the community.”


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