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Restricting short-stay accommodation won’t ease the WA rental crisis

Short-stay accommodation in Western Australia has increased 16.2 per cent in the past 12 months, but adding restrictions won’t help ease the rental crisis ,according to the industry.

The Real Estate Institute of Australia (REIA) recently reviewed the short-stay market across WA and found that while there were increasing numbers of short-term accommodation, they make up a very small percentage of the overall market.

Currently, there are 10,091 short-stay accommodation places in WA, however, only 8056 were entire dwellings that could be suitable for use as long-term rentals.

Across Perth, the ratio of short-term rentals to long-term is around one in every 50, while the numbers are higher in regional locations.

REIWA Chief Executive Officer Cath Hart said fixing the rental crisis was not as simple as adding restrictions, given the small percentage of homes that they represent.

“It’s a nice idea but unrealistic,” Ms Hart said.

“Supply is the key issue facing the rental market, and there are frequently suggestions that if short-stay accommodation providers were ‘encouraged’ to switch to the long-term market, the problem would be solved.

“Regardless of whatever incentives or disincentives are put in place, not every entire short-stay dwelling is able to be transferred to the private rental market.”

She said there are different groups of people who offer short-stay accommodation.

“There are people who own holiday homes and place them on the short-stay market in between their own use,” she said.

“And then we have fly-in, fly-out workers who may let their property for a bit of extra money while they are away on a shift.

“In addition, we need significantly more than 8000 properties to bridge the gap between supply and demand in WA.”

Ms Hart said the state needed a further 18,000 to 20,000 additional rental properties to see WA return to a balanced market.

She said that some areas do have a higher concentration of short-term accommodation.

“In Perth, the City of Stirling had the highest number of short-stay entire dwellings at 441, when you compare that to the number of rented dwellings – nearly 30,000 according to ABS Census data – it’s a very small portion,” she said.

“Admittedly it is a more challenging situation in some high tourism regional areas. For example, Busselton had the highest number of short-stay entire dwellings at 1320, compared to over 3500 occupied rented dwellings.”

The report also found that typically a landlord can make more money with a short-term rental.

In the March 2023 quarter in Perth, the gross annual income on a two-bedroom dwelling in the private rental market was $25,800.

On average, it would take 132 days of successful hosting to make the same income in the short-stay accommodation market.

In regional WA, it would take around 107 days of hosting the same size dwelling in the short-stay accommodation market.

It is frequently suggested implementing a cap on the number of days a property can be used for short-stay accommodation would encourage property owners to reconsider using their property as a long-term rental.

Ms Hart said that limiting the number of days a property can be rented for short stay is an “impractical solution”.

“Capping usage to 120 days, or four months a year, doesn’t mean the home could be available as a long-term rental for the remainder of that 12 months,” she said.

“Very few short-stay dwellings are let for 120 days in a row, in general they are used during holiday periods throughout the year. They would be unable to be used as a long-term rental in between stays.

“Secondly, if you wanted to make short-stay financially non-viable, based on the data from the report, you would have to implement a very low cap.

“This could impact tourist areas where short-stay accommodation provides a necessary service and supports local businesses.”

Ms Hart said REIWA supported a registration scheme, which would provide for improved regulation and an overview of the entire market; support residents living in tourist areas; and help create greater uniformity in how the short-term rental accommodation sector is managed throughout WA.

“A registration scheme is already in place in the City of Busselton where a strict code of conduct applies to owners, managers and tenants,” she said.

“This ensures an appropriate standard of management and minimises the risk of such accommodation causing a nuisance to neighbours.

“The rules place a limit on the number of guests after 10pm, nominate a maximum number of cars to be parked at the property and require managers to have their contact details visible from the street so people know who to contact when there is an issue.”

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Rowan Crosby

Rowan Crosby is a senior journalist at Elite Agent specialising in finance and real estate.