Sydney is Airbnb’s Australian hotspot and is 10th in the top cities worldwide for availability of short stay accommodation.

Since 2015, the NSW Government has been working on developing a policy framework for short-term holiday letting (STHL). It is looking to address the growing popularity of the sharing economy for tourist and business accommodation, typified by Airbnb style online booking services for short stays.

In July 2017, it issued an Options Paper, for community consultation.

The NSW Government’s Options Paper will explore approaches to implement a whole of Government framework, addressing land use and planning concerns, strata managed buildings and the amenity of existing residents

The Options Paper contains four policy options, and invites public comment. This article provides an overview of the policy options, with the writer’s comments.

Background

Options Paper: SHTL takes four forms in NSW:

  • Rental of one or more rooms (including room sharing) with the host present
  • Rental of a whole dwelling (principal residence) with the host away (mainly in holiday periods)
  • Rental of a holiday dwelling (non-principal residence) with the host away (holiday rentals)
  • Rental of a dwelling solely reserved for STHL (investment properties)

In 2014, an estimated 216,000 premises were STHL in NSW/ACT. In 2015, 75% of visitor nights were managed through local real estate agents or tourism agencies, and 25% were owner managed through online advertising platforms and booking services.

In NSW, in non-metropolitan areas (mainly coastal), houses rented in holiday periods represent one-third of the supply, and in metropolitan areas, mostly apartments rented all year round represent the other two-thirds of the supply.

Comment: Home owners and investors have embraced STHL in New South Wales. In Sydney alone, in 2017 there are 30,000 properties listed with Airbnb, which is an exponential increase upon the 1,600 listed in 2013. The majority are rented for less than 90 days. Source: Airdna.co

Entrepreneurs are not waiting for the Government to decide upon a regulatory framework. They are leasing entire apartments from a landlord, furnishing them and using them for short-term rentals (with the landlord’s consent). They know that short stay visitors will pay from 50% to 100% more than the market rent for long-term leases. Even after cleaning and property management expenses, this yields a good profit.

And traditional holiday letting agents and local rental property managers have joined in managing Airbnb listings. They provide management services: setting rents, vetting guests, and organising keys, laundry and cleaning.

Regulation of STHL

Options Paper: The STHL tourist and business accommodation sector provides significant economic benefits. Nationally, it is an estimated $31.3 billion, and upwards of 238,000 jobs. Against this, amenity and safety impacts, especially in strata buildings, need to be considered.

Currently, STHL is regulated in a piecemeal manner through the planning system. There are variable rules for tourist and visitor accommodation (such as bed and breakfasts, serviced apartments) that need to be standardised across all Local Councils.

Comment: STHL is currently operating in a legal grey area.

Impacts Associated with STHL

Options Paper: There are three broad impacts:

  • General Environmental and Amenity Impacts – Noise, especially short-term one off noise incidents such as Party Houses; Waste, both higher waste generation and unfamiliarity as to when and how it is collected; Traffic and Parking, both greater demand and unfamiliarity with local parking arrangements; Hazards and Evacuation, in apartment complexes for fire and gas leaks, and houses in regional areas for bushfire and flood; BCA Classification, if a building is reclassified from home occupations, then fire safety, health and amenity and disabled access requirements will require building upgrades.

 

  • Impacts with Strata Properties – strata complexes need separate consideration - they have unique needs because of proximity of neighbours, reliance on shared facilities, and a high proportion of whole premise STHLs.

 

  • Broader Industry and Housing Policy Considerations – Crossover with Other Short-term Accommodation Providers, traditional accommodation providers such as bed and breakfasts who directly compete with SHTL operators are complaining that STHL operators have an unfair advantage because of lower establishment and compliance costs; Concentration of STHL Ownership, with 25% of hosts of entire home listings having more than one listing, generating concerns that STHL could create ‘virtual hotels’ where the ‘rooms’ are disbursed; Rental and Affordable Housing Stock, the current evidence is the impact of STHL on reducing rental availability is anecdotal and is considered negligible.

Comment: The impacts are the reason why the NSW Govt has provided policy options.

Policy Option 1: Self-regulation

Options Paper: Most hosts operate without incident. Provided there is effective, accountable and transparent self-regulation by industry, the Government sees no need for regulatory intervention. For self-regulation, there must be:

  • A Code of conduct, such as the Holiday Rental Code of Conduct;
  • Complaints management;
  • Education;
  • Ongoing monitoring and reporting.

Comment: Airbnb has a well-drafted code of conduct called ‘Hosting Standards’. It covers Availability, Communication, Commitment, Check-in, Accuracy, Cleanliness and Overall experience. It has a two-way review process in which host and guest rate each other (for cleanliness, personal safety, security of belongings, quality of décor). Airbnb will penalise hosts and guests if they receive bad reviews.

Policy Option 2: STHL in Strata Properties

Options Paper: The Options Paper is looking for a way to manage the impact of STHL, not to ban it, in strata complexes.

It notes that section 136(2) of the Strata Schemes Management Act 2015 prohibits by-laws that ban leases or restrict the use of a lot (if the use is permitted under the planning laws). This freedom to lease is an important right for strata property owners, and should not be changed.

Therefore its approach is to give an owners corporation greater powers to manage impact:

  • By-laws to make the owner/occupants jointly and severally liable for breaches of by-laws unless they take reasonable steps;
  • Streamline enforcement processes for breaching by-laws;
  • Allow owners corporations to levy extra for maintenance of the common property;
  • Enable the Tribunal to order the breaches to cease, to order compensation be paid, to impose a civil penalty, or order the use of the lot as an STHL cease for a specified period.

Comment: The NSW Government recognizes that an owners corporation has a useful role to play for impacts on amenity, strata costs and individual safety.

Policy Option 3: Regulation through the Planning System

Options Paper: The NSW Government considers that STHL is acceptable in a residence without planning approval up to the point that it becomes a more intensive commercial type of use (i.e. tourist and visitor accommodation). At that point, it is no longer an Exempt Development, and needs either a simplified approval (a Complying Development) or Council Consent (a Development Approval).

Options to decide when that point is reached include: the length of the stay (the number of days per stay or days per year for the use); the number of bedrooms; and the presence of the host.

Comment: The NSW Government is looking for a holistic approach to planning laws, unlike some cities around the world which focus on number of days or presence of a host, such as: New York City – to advertise a stay of less than 30 days, a host must be present; Berlin – a permit is required to let more than 50% of an apartment on a short-term basis; San Francisco – registration is required to rent primary residence units for less than 30 days, and the host must be present; Paris – an authorization is required if the short-term letting is for more than 120 days in a year; London – planning permission is required if the short-term letting exceeds 90 days in a calendar year.

Policy Option 4: Registration or Licensing

Options Paper: In some jurisdictions, registration of STHL is a planning requirement. Licensing is similarly a planning issue. The NSW Government is not keen on either, as it would result in broader regulatory costs.

Invitation for Short-term Holiday Letting Options Submissions

The NSW Government has issued a general invitation to stakeholders, the general public and the industry to make submissions upon the four options set out in the Options Paper. The submissions form can be to reply to a questionnaire. Submissions will be accepted until 31 October 2017.

Comment: The NSW Government prefers to build a policy framework by consensus. It is to be commended for its willingness to consult extensively with the public and the industry, just as it did with the Strata Titles Law Reforms.

The downside is that the fast growing short stay industry will not be waiting 12 + months for Government policy formulation. It will continue to operate in the legal grey area.

 

For more information on the legal grey area, click my earlier article There is welcome clarification to the laws on short-term letting for Airbnb hosts in Australia