Survive the Airbnb crackdown

Short-term rentals face tougher restrictions and higher costs. So is it still worth renting out your spare space?

It isn’t surprising that Australians are interested in sharing their space with travellers. With rising living costs and growing mortgages, they need the extra cash. But short-term renting has been facing headwinds, depending on the sort of property and its location. “It is tougher for my property now than pre-Covid,” says Isabella, a 68-year-old retiree who has an investment property in the Sydney suburb of Randwick. The NSW government has cut the days she can rent out her Airbnb from 365 to 180.

Government-imposed caps on the number of days a property can be rented, steeper council rates and increased competition from hotels are some of the challenges for hosts. Some short-term rental markets are saturated as more properties are listed. Fees from portals such as Airbnb have increased for guests. Then there are unpopular cleaning fees that an increasing number of Airbnb hosts charge.

Short-term rentals are being blamed for lack of affordable housing in tourist hotspots and even big cities. “Short-term rental accommodation has significant impacts on permanent rental housing supply, amenity, local character and community,” says the mayor of Byron Shire, Michael Lyon. Byron council moved to cut the number of allowable days for non-hosted accommodation from 180 to 90 days, but this was prevented by the NSW planning department.

For Airbnb hosts such as Geoffrey, who has two highly rated Airbnbs in Hepburn in regional Victoria, travel bookings aren’t the same as in pre-pandemic times.

“What we are seeing now is something altogether different. Bookings are steady but not filling as quickly, potential guests are now choosing to spend their travel dollars in other ways – be it on cruise ships or in other countries – but we have just started to see the return of the international traveller to our short-stay properties here, so that looks very promising.”

As people shake off Covid concerns, there is a wave of travellers on the move.

Domestic travel is forecast to return to pre-pandemic levels later this year, while international tourists are taking more time to return to Australia and are expected to reach pre-Covid levels by 2025, according to tourism forecasts by the government-run Australian Trade and Investment Commission.

Australians are feeling more comfortable about occasionally sharing their space – whatever the size – with strangers who have been vetted and reviewed. Airbnb says private rooms listings added to its platform in Australia were up 95% between the third quarter of 2021 and the third quarter of 2022.

Using your home as a cashbox is leading to a new wave of people considering hosting for the first time, according to research by Airbnb in Australia. After all, Airbnb was born in the 2007 recession by design students who couldn’t pay their San Francisco rent. Since then, it has attracted more than four million hosts who have hosted more than a billion guests.

While the typical host on Airbnb in Australia earned $11,464 or more in the pandemic year 2021, that is rising sharply globally, with total host earnings up by more than 30% in the third quarter of 2022, compared with the same time last year.

Forty percent of Australian hosts say their short-term rental has helped them stay in their homes and 7% say it has meant they avoided

eviction. Another 41% say they’ve used the extra money to pay for food and other items that have become more expensive.

Geoffrey has been renting out his two properties for more than a decade, beginning before Airbnb set up shop in Australia in 2012. He uses several platforms such as Stayz, Vrbo and Expedia. He also uses Booking.com and Riparide, which cover NSW and Victoria. He has had more than 2000 bookings over that time. “Overall, 86% of all my bookings come from Airbnb. So, I am a very satisfied Airbnb host,” he says.

Airbnb gets plenty of bad press for renting out to partygoers who damage properties.

But Geoffrey says: “Contrary to popular media, I can count on one hand the number of problem Airbnb guest stays I have had out of over 2000 bookings.”

“Sadly, it’s not consistently the same with guests who book via Booking.com and the Expedia brands. The difference I think is that Airbnb guests genuinely want an interactive experience and so bring a more caring attitude to someone else’s house.”

State or local government caps on how long hosts can rent out their short-term rentals in some areas is a blow for Airbnb, too. Some local governments charge short-term rentals higher council rates.

For Geoffrey, in a regional area of Victoria that relies largely on tourism, short-term rentals have escaped any caps. But this is changing. “Our local authority is just looking at housing and rental affordability issues in the region. Most hosts are open to regulation of the industry to some extent and don’t disagree with short-stay registration. These are all issues that my region will face over the next 12 to 18 months.”

Isabella took some money out of her superannuation four years ago to fix up her one-bedroom investment property and list it on Airbnb to give her a retirement income. She did her sums and found that a short-term rental was potentially 40% more lucrative than renting it out for the long term.

Over 2019 and the early part of 2020, Isabella’s good reviews were building. Her bookings, particularly from family members catching up with each other, were solid.

Then Covid hit. Bookings dried up but the location of her apartment near a hospital meant she continued to attract guests, who accompany and visit family members in hospital.

Then in November 2021, the NSW government placed a 180-day cap on short-term rental accommodation properties such as Isabella’s where the host is not present – referred to as unhosted. Where guests stay on their premises, hosts can rent out their Airbnb for the entire year. Outside of the greater Sydney area, councils in NSW have the power to cut the 365-day limit to no less than 180 days a year.

Isabella is worried that the body corporate may also crack down. Currently it accommodates short-term rentals but owners’ corporations in some states can adopt by-laws that limit short-term rental accommodation in their strata scheme, by banning it in lots that are not the host’s principal place of residence.

In NSW, for example, if someone lives in a strata property as their principal place of residence, they will still be able to rent out their home or rooms while they live there, or while they are temporarily away.

Recently her local council announced it is looking into charging Airbnb higher rates because counsellors believe it is exacerbating a shortage of long-term rental accommodation. Rents in the area rose by 24% over the past 12 months. Her local government area has almost 1750 short-term rentals listed across different platforms.

Airbnb is busy working with state governments on caps on short-term rentals, trying to stop radical cuts to the number of days. For example, Western Australia is looking at capping the number of nights of unhosted short-term rental accommodation at 60 nights, which would be the harshest in Australia. Hobart is also looking at introducing a cap as long-term rentals are scarce.

Brisbane City Council in June announced a 50% increase in council rates for landlords who rent out their entire property for more than 60 days a year. Noosa Shire Council charges a $950 registration fee for short-term rental accommodation properties.

To attract hosts and make Airbnb the short-term listing of choice, Airbnb has added sweeteners such as the soon-to-be-expanded guest identity verification and higher rates of insurance cover, up to $3 million damage protection, including coverage for art, cars, boats and valuables. It has improved the set-up for new hosts, linking them to an experienced “super host” for one-on-one guidance. Aiming to be inspirational for travellers, Airbnb has added new categories such as “play” for homes with basketball courts, game rooms and water slides, as well as wheelchair access.

In a recent presentation to Airbnb hosts, Brian Chesky, one of the founders of Airbnb, said that hosts in 2023 will face more pressures, such as the resurgence of hotels, as well as a more price-sensitive market. Advertising and media promotion costs are higher, too.

Hosts can take heart that Australia continues to be on travellers’ hit lists as a go-to destination for 2023, with three cities – Sydney, Melbourne and Perth – appearing in the top trending travel spots for 2023 international travel.

Airbnb’s research says more young people and families will use Airbnb in 2023. Travellers to Australia know what they want and expect certain amenities to be available at their guest accommodation (see breakout, left).

Susan Hely is an Airbnb host and a regular user of Airbnb properties.