Australia’s short-term rental sector grew by more than 10 per cent between December 2022 and December 2024, reaching 174,558 listings nationwide, and the impacts on long-term rental supply are becoming increasingly apparent.
In Hobart, whole-property short-term rental listings outnumbered long-term rental vacancies 36 to one in December 2024.
On the NSW South Coast, Shoalhaven had more than 25 short-term rentals for every rental vacancy.
At the time of the research, Hobart’s vacancy rate had fallen to just 0.48 per cent, and rents were rising at around 10 per cent per year.
“Understanding motives is important for policy setting, as restricting short-term rentals may not be sufficient to convert holiday homes into long-term rentals,” Professor Nicole Gurran from the University of Sydney said, who led the AHURI investigation into the size, makeup and regulation of Australia’s short-term rental sector.
The returns myth
The research upended a widely held assumption about why landlords choose short-term letting.
When based on actual achieved occupancy rates, most property types in most locations return less than long-term rental.
Only three-bedroom houses in inner Sydney and larger dwellings in Hobart generated greater returns through short-term letting.
A one-bedroom Sydney unit would need to be booked for more than 180 days per year to outperform the long-term market, a threshold most listings don’t reach.
Short-term rentals also carry significantly higher operating costs due to ongoing management, cleaning and guest turnover.
Despite this, owners continue to list, often for non-financial reasons.
Many regional providers use short-term letting to offset costs on a second property they intend to retire to, or want to retain access to for personal use.
Some reported reluctance to take on long-term tenants after bad past experiences.
Negative gearing was also identified as a significant factor.
With gross returns on holiday rentals as low as 3 to 4 per cent, the ability to offset losses against other taxable income kept many investors in the sector.
Restricting negative gearing to long-term rental properties was flagged by some interviewees as likely having more impact than night caps or levies.
A professionalised sector
In December 2023, only 43 per cent of Australia’s 171,416 Airbnb listings belonged to single-property hosts.
The remaining 98,384 listings were controlled by just 18,187 entities. About 84 per cent of all listings were for whole properties, with the largest growth in un-hosted properties.
Client types varied by location.
Coastal properties attracted mainly tourists, while urban properties housed students, project-based workers, hospital visitors and people relocating.
The sector also served as emergency accommodation after natural disasters, but without coordinated systems to mobilise it efficiently.
After the 2019–20 bushfires destroyed more than 500 homes in Shoalhaven, the council wrote to 44,000 ratepayers asking owners to consider releasing properties to the long-term market.
Only four ultimately offered their homes to an affordable housing provider.
Slow regulation
The report notes that Australia has been slow to respond compared to Europe and North America, and recent interventions have had mixed results.
There is a clear contrast with Europe.
Under rules now in effect across the EU, platforms must provide local governments with monthly address-level data on short-term rental units, including nights rented, number of guests and registration details.
Australia has no equivalent, leaving councils to rely on third-party scraped data of varying quality.
In Hobart, despite a permit system, mandatory platform reporting and conversion incentives, the number of non-primary residence short-term rentals nearly doubled between late 2020 and late 2023.
Repeated council attempts to introduce planning restrictions were blocked by state planning directives, with changes now unlikely before mid-2026.
In NSW, a 180-night limit on un-hosted rentals has significant loopholes as stays of 21 days or more don’t count toward the cap, and granny flats are treated as “hosted” if the owner lives on the same property.
By comparison, Amsterdam limits whole-home rentals to 30 days per year.
Victoria’s 7.5 per cent levy on short stays, introduced in January 2025, drew scepticism from operators who told researchers it was simply passed on to guests through higher nightly rates rather than deterring listings.
What works
The research identified five elements for effective regulation, including reliable data sharing from platforms, registration and compliance mechanisms, protecting long-term rental supply by restricting conversions or offsetting losses, recognising tourism locations where short-term rentals may be appropriate, and applying financial tools equally across all accommodation providers.
The report cautioned against blanket approaches.
Large coastal homes or remote properties are unlikely to transition to the long-term market regardless of restrictions, and poorly targeted regulation risks pushing second-home owners to simply leave properties vacant.
“The Federal Government can reduce rental market impacts through national housing policy, taxation and housing assistance,” Professor Gurran said.
“State and territory governments can support registration, land use regulations and renter protections, while enabling local governments to respond to specific community and market impacts.”