Solving the Rental Crisis: Capping Short-Stay Accommodations

The nationwide rental crisis has raised questions about whether imposing limits on the use of short-stay accommodations could offer a solution. However, statistics suggest this may not be the answer.

The Statistics

According to the Real Estate Institute of Australia (REIA), in the March 2023 quarter, Western Australia had a total of 10,091 short-stay accommodation. Of these, 47.3 percent were in Perth, with the remaining 52.7 percent located in regional WA. This number represents only 0.4 percent of total dwellings in the Perth area.

Further analysis from the REIA reveals that out of these properties, only 8,056 across Perth and regional WA are suitable for long-term rentals. Cath Hart, CEO of REIWA, suggests that to achieve a balanced rental market, we would require an additional 18,000 to 20,000 rental properties.

Considering these statistics, it becomes apparent that while limiting the number of days property owners can use their properties for short-term accommodations might bring more properties into the long-term rental market, not all owners are likely to make this transition. For instance, consider the FIFO worker who leases their property between stays or the family who owns a holiday home who leases it when they aren’t using it. These individuals won't necessarily make the switch regardless of the outcome.

Moreover, the properties made available for long-term renting may not necessarily align with the preferences and budgets of prospective tenants. Short-term rentals, such as those found on Airbnb, often occupy prime tourist destinations, where rental yields are higher. This may not be feasible for tenants seeking more affordable accommodations.

What is the problem?

It's essential to recognise that short-term accommodations are just one facet of a complex issue that has led to the rental crisis. Several factors contribute to low vacancy rates and housing shortages, including: 

• A reduction in government housing
• Building delays
• Population growth
• Decreased investor participation 
• Increased immigration 
• Changes in shared housing dynamics
• Land development delays
• Bureaucratic planning approval processes

Blaming short-term accommodations simplifies a much broader problem.

Solutions

Potential solutions include the Albanese Government's commitment to a $10 billion Housing Australia Future Fund, aimed at funding social and affordable rental housing. While this is a step in the right direction, in the short term this is only 30,000 homes over the next five years. These homes will likely only scratch the surface while the issue continues to escalate.

Incentivising investors back into the market is likely to have the largest impact. However, it's essential to acknowledge that with limited property availability, constructing new dwellings might become the only viable solution. This could exacerbate issues in the already strained construction industry, causing further delays.

Unfortunately, there are no quick or straightforward solutions to the rental crisis plaguing our nation. With record-low vacancy rates, the market may deteriorate further before improving. Addressing this crisis necessitates a multifaceted approach that considers the various factors at play and combines short-term measures with long-term planning.