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Melbourne city moves towards limiting short-stay rentals such as Airbnb

Melbourne is inching towards a crackdown on short-stay rentals such as Airbnb to tackle the housing affordability crisis, despite experts saying it will only have a minor impact on freeing up more rental properties.

The City of Melbourne council on Tuesday night voted in-principle fornew regulations on short-stay rental accommodation, including a days-per-year cap and an annual registration fee by February.

The council push is designed to free up more homes for the long-term rental market.

Dr Michael Fotheringham, managing director at the Australian Housing and Urban Research Institute, said the proposed reform was a “toe in the water”.

“Anything we do that encourages property owners to put their investment properties into the actual residential rental market, rather than the tourism market, is a positive thing,” he said.

“But it’s a small step being proposed.”

Sally Capp, the lord mayor of Melbourne, last week flagged an annual 180-night cap and a $350 registration fee as the preferred regulation. Capp argued it would not impact tourism due to the high number of hotel options available in inner Melbourne. But the Victorian chamber of commerce and industry argued it was a “nonsensical” idea that would disincentive tourists.

Fotheringham said limiting short-stay rentals at 180 nights a year was a “soft cap.”

“Australia’s regulation of short term lending is much softer than many other countries,” he said.

Prof Nicole Gurran, an urban planner and policy analyst at the University of Sydney, warned setting a cap at 180 nights a year would “not preserve housing stock”.

“I doubt a $350 fee would be enough of a disincentive if you really wanted to rent to tourists rather than to local residents,” she said.

But Gurran backed councils taking action to control the loss of properties being turned into short-term rentals.

“It is our worry that we can lose that housing stock to this short term rental market and it’s appropriate for local governments to look at how they can correct that,” she said.

But Grattan Institute economist Brendan Coates said the crackdown would lead to an ineffective use of existing housing stock.

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“The approach they are adopting is the wrong approach. The caps means those properties will be used less intensively,” he said.

Coates said a better approach would be to tax short-stay accommodation to encourage landlords to rent out properties on the long-term market. The Age previously reported the state government was considering a levy for properties listed on short-term stay platforms as part of its upcoming housing reform.

Some Victorian councils already charge short-term accommodation hosts, ranging from $150 to $400. But Melbourne city council could be the first to place a cap on how many nights a property could be rented for a short-stay.

According to the council, rental properties make up 60% of available accommodation in the City of Melbourne and the rental vacancy rate sits at 0.8% – below a “healthy” rate of 3%. The council said there is a current shortfall of about 5,500 affordable housing units in the City of Melbourne. Open-source database website Inside Airbnb shows there are more than 5,300 entire homes and apartments listed on the short-term stay site in the council area.

In 2021, the former NSW Coalition government implemented a 180-night cap for short-stay rentals that applies to Sydney and some local government areas. Sydney’s lord mayor, Clover Moore, previously said the cap was too long and a state government register on short-term accommodation was inaccurate, making it challenging for councils to enforce.

The Victorian Greens have urged the Victorian government to regulate short-stay rental accommodation to help free up more long-term rental properties.

The government is due to reveal a major housing and planning reform policy later this year in an effort to boost housing supply.

The premier, Daniel Andrews, has previously flagged the government will strip back local council’s planning powers in a move to expedite approvals for multi-dwelling housing.

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