The areas being impacted the most by short-term rentals

The oversupply of short-term rentals is often touted as one of the leading causes of the rental crunch, but new data reveals some areas suffer more than others.

Urban geographer Thomas Sigler from The University of Queensland crunched the numbers on the amount of available short-term properties on sites like Airbnb and booking.com to determine just how much they contribue to the rental crisis.

Mr Sigler’s results defy much of the perception of the cause of the current rental crunch.

Short-term rentals aren’t solely to blame

Despite the common belief that the boom in short-term rentals over recent years is one of the leading causes of the rental crunch, Mr Sigler said many markets aren’t significantly impacted.

“There is little evidence that short-term rentals contribute to the current rental crunch we are facing,” he said.

“Nationwide, we’re talking about less than 3% of the housing stock. If you then subtract those that are made to be short-stay apartments, such as beachside units, we’re talking about 1% of the nation’s housing stock.”

Data shows that the number of short-term rentals in Australia continues to drop, having peaked at approximately 400,000 in December 2019.

But since then, the supply of short-term properties has dropped by roughly 30% to about 260,000.

There are some areas where a large proportion of short-term rentals is having an impact.

Some regions hit particularly hard

Australia’s biggest holiday destinations are populated with the most short-term rentals.

Popular beachside hotspots like Byron Bay, the New South Wales Central Coast, and the Gold Coast are hardest hit.

In those locations, short-term rentals can make up as much as 15% of the total housing stock, according to Mr Sigler.

Landlords in these locations could potentially make more money renting out their properties by the night rather than committing to a conventional lease.

“Depending on where your property is located, having an investment property in short-term accommodation rather than long-term can be even more lucrative for landlords,” Cameron Kusher, director of economic research at PropTrack, explained.

“The types of areas where short-term accommodation offer superior returns tend to be highly sought-after capital city and coastal areas. So, the more properties there are in short-term markets, the fewer there are in the long-term rental market.

“As a result, it can drive shortages of supply and contribute to ongoing increases in rents.”

The war on short-term rentals continues to brew

Authorities have been trying to reduce the number of dwellings in the short-term rental market in an bid to increase long-term rental supply.

Some of these measures include:

• A 180-day cap is in place in Greater Sydney and Newcastle
• In Brisbane, landlords who rent out their entire property for more than 60 days per year will pay 50% more in council rates
• In Hobart, a law was passed in March 2022 that put a halt on any new permits for homes being purpose-built for short-term stays
• In Byron Bay, the local council came close to putting in place a 90-day cap on short-term rentals. Late last month, the policy was controversially blocked by the NSW Government, which felt the existing 180-day cap was sufficient.

“The fundamental principle is that we want homes for people to live in,” Greens MP Tamara Smith said.

“The current situation represents a complete loss of the right for homes to live in.”

Ms Smith said the council was vetoed at the 11th hour after massive lobbying of the State Government by vested interests, including international corporations and short-term landlords who mostly don’t live in the region.

The real causes of the rental crisis

There are several factors that contribute to the rental crisis, which is seeing would-be tenants battle to find available properties and rapidly forcing up costs.

1. An under-supply of available rental properties

Mr Kusher said the main cause in simplistic terms is demand outstripping supply. In a number of areas, there are simply not enough homes for the number of tenants looking.

2. The pandemic saw a decline in sharehouses and an increase in single dwellers

“The pandemic complicated things because although there was no additional demand coming from overseas arrivals, people were leaving sharehouses,” Mr Kusher explained.

“This saw household sizes shrink and created more overall demand.”

Those who were living with a larger group of people chose to move out, either finding their own rental or choosing to live with a smaller number of people, therefore taking up a larger number of available properties, he said.

3. The Covid-related surge in regional migration

The pandemic, which allowed more people than ever to work from home, inspired many Australians to pack up their city lives in favour of relocating to regional centres.

People in capital cities, where there was relatively ample supply, inundated regional areas where there tended to be comparatively low supply, Mr Kusher explained.

“So, it didn’t take much additional rental demand to exacerbate the rental shortages,” he added.

4. Property investors getting cold feet in the current lending climate

To make things worse, investor activity in the market has collapsed. Private landlords make up the bulk of the rental market.