The New South Wales government recently exhibited the draft Short-Term Rental Accommodation (‘STRA’) regulatory framework. The framework is a response to the growing STRA industry, which is estimated to be worth more than $30bn nationally, and seeks to achieve consistency in the regulation of STRA across New South Wales.

The key elements of the policy framework include:

  • a draft State Environmental Planning Policy (Short-term Rental Accommodation) 2019 (‘draft SEPP’) to provide a state-wide planning framework for the STRA industry; and
  • a mandatory Code of Conduct (‘Code’) to apply to all industry participants including online booking platforms, letting agents, hosts and guests, along with new regulations to give effect to the Code.

Draft SEPP

The draft SEPP prevails over inconsistent provisions in other planning instruments, including provisions in local environmental plans relating to STRA and enables development for the purposes of STRA to be carried out as exempt and complying development, provided certain criteria are met, for a maximum number of days per annum.

The draft SEPP applies to the use of all dwelling houses, units and secondary dwellings for STRA. However it does not apply to boarding houses, group homes, hostels, seniors housing, tourist and eco-tourist facilities, and caravan parks.

The draft SEPP regulates STRA according to:

  • whether or not the owner of the dwelling resides on the premises during the term of the accommodation (‘hosted’ or ‘non-hosted’ accommodation);
  • the location of the dwelling (its zoning, flood and bush fire status); and
  • the number and identity of persons staying in the dwelling.

In short, hosted STRA will be exempt development where:

  • it is carried out on land in a zone where residential accommodation of a type corresponding to the dwelling is permitted with or without development consent;
  • no more than 2 persons per bedroom , or 12 persons in total, are staying in the dwelling;
  • the dwelling meets some general fire safety and other criteria under the draft SEPP.

In such circumstances, STRA can be carried out, without consent, 365 days of the year.

Non-hosted STRA will be exempt development in similar circumstances, except that:

  • the dwelling must not be on flood prone or bush fire prone land; and
  • where the dwelling is located in the Greater Sydney Region (and four other designated areas in NSW), the STRA must be carried out for not more than 180 days of the year.

In calculating the 180 day restriction, any period of 21 or more consecutive days where the dwelling is let to the same person is to be disregarded. This is apparently in recognition of the fact that longer term stays are considered to have fewer amenity impacts.

Where non-hosted STRA is carried out on bushfire or flood prone land, it will be complying development and a range of additional development criteria will apply.

The draft SEPP proposed by the NSW Government can be viewed here.

The implementation of the draft SEPP will be supported by amendments to the Environmental Planning and Assessment Regulation 2000, including the introduction of a Short-term Rental Accommodation Fire Safety Standard.

The primary purpose of the EPA Regulation is to ensure the safety of industry participants by imposing safety standards to be met by STRA dwellings in respect of maximum numbers of guests, installation of smoke alarms and the implementation of evacuation plans.

The draft EPA Regulation proposed by the NSW Government can be viewed here.

Introduction of a mandatory Code of Conduct

The Fair Trading Amendment (Short-term Rental Accommodation) Act 2018 (‘Act’), which was passed by the NSW Parliament in August 2018 (but has not yet commenced), provided for the introduction of a mandatory Code of Conduct for industry participants.

The new Code will apply statewide across all levels of the STRA industry, including online booking platforms, letting agents, hosts and guests.

The Code:

  • imposes obligations on all industry participants, with specific obligations for different industry participants (Part 5 of the draft Code);
  • provides for a complaints handling process (Part 6 of the draft Code); and
  • outlines circumstances where the Commissioner of Fair Trading may take disciplinary action against an industry participant for contravention of the Code (Part 7 of the draft Code). This includes investigatory powers as well as offence and civil penalty provisions.

The Code will also provide for an ‘exclusion register’ of hosts and guests about whom complaints have been made and upheld and who are prohibited from participating in the STRA industry.

The proposed draft Code is available here and the draft Amendment Regulation can be viewed here.

Other

The government is also considering introducing a new STRA property register which would contain data on all STRA properties, including complaints, information regarding their compliance with local council regulations and their status on the ‘exclusion register’ established under the draft SEPP.

Changes to strata laws are also proposed, to enable strata schemes to adopt by-laws prohibiting STRA where a property is not a host’s principal place of residence.

Timing

The exhibition period for the framework has closed and submissions are being considered by the Department of Planning, Industry and Environment. It is not yet known if all components of the framework will be implemented concurrently. If the complete framework is to be introduced together, it is likely that implementation will not take place until 2020, to allow time for the establishment of the proposed property register.

Alternatively, under a staged implementation, commencement of the draft SEPP, Code, and legislative amendments would be introduced towards the end of 2019, with a view to establishment of the register by 2020.