Global city councils put the squeeze on Airbnbs

It’d been barely two months since we last reported that short-term rentals platforms were feeling the walls closing in, something like neighbours of a party flat rented for a bucks weekend.

Last week City of Melbourne council voted to consider imposing a $350 registration fee and a limit of 180 nights a year on holiday lets in its bailiwick. 

To be fair, Melbourne’s city fathers (and mothers) never liked the idea of Airbnb and its ilk turning their streets into holiday resorts and their high-rise apartment blocks into holiday hotels.

Back in 1965 it supported apartment owners who went to the Supreme Court to establish a right to ban or limit short-term lets in their buildings.

They lost in a verdict issued the following year and the floodgates opened; some blocks in the Docklands area are said to have 30 percent or more of their homes given over to holiday lets.

But the worm has turned and there’s a spreading consensus among policy makers that the income from budget-accommodation seeking tourists is outweighed by the economic and social cost of driving renters out of the areas that tourists frequent.

Or to put it another way, there’s something seriously wrong when it’s the tourists who are living in apartments while local residents are reduced to living in tents and caravan parks.

The squealing from the short-term rental lobby was at fire siren level even before the vote.  This will cost jobs, they said, “Mum and Dad” investors will suffer, and there’s no proof that holiday lets that become financially unviable will be returned to the residential rental market.

I don’t want to encourage them, but it’s time Airbnb and Stays tried a new tack. Restaurants and cafes in tourist areas across Australia are desperate for workers. Everybody knows, or should by now, that  the majority of holiday let properties are owned, rented or operated by a small number of people or companies. 

And as for there being no guarantees that former Short Term Holiday Lets (STHLs) will be returned to the parlously under-provisioned residential rental market, you can guarantee that they won’t if they’ve got tourists in them.

Melbourne is not the first municipality in Australia to attempt to impose restrictions on STHLs. Councils in Victoria, NSW and Queensland are discovering they have the power – and always have had – to regulate short term lets.

Councils could not ban STHLs completely, and we can’t assume they wanted to, but they retained the power to regulate them. However, they didn’t have the budgets or sophisticated knowledge of the holiday let market required to police them.

Now, registration fees will raise the revenue required and local authorities can at last see what unrestricted holiday lets do to their local housing markets.

According to a story in The Age last week, a report prepared by City of Melbourne council officers ahead of Tuesday’s meeting stated that the costs of short-term rentals probably outweighed the benefits.

“These costs include rising housing costs, less-reliable payment of city taxes compared to hotels, negative impact on employment, and a worsening of the affordable housing crisis,” it read.

The STHL platforms really don’t like individual local authorities making their own rules to suit their individual circumstances.  They want one-size-fits all, state-based policies such as a tourism tax. 

The danger with local policies and regulations is that they are devised by people who can see the impact of STHLs on their communities, rather than remote politicians making decisions based on ideology and often dubious economic modelling.

And while those registration fees are relatively modest, less than $10 a week on average, they provide revenue to allow the councils to enforce their rules. 

On top of that, the registration process exposes that the units are being used as holiday lets, to owners corporations, the tax authorities and maybe even the owners of the properties. It also renders STHLs subject to enforceable safety regulations.

It is understandable that STHL platforms are concerned by this localising of controls on self-catered accommodation.  In Scotland, local authorities have recently been granted the right to impose tourist taxes, registration and safety regulations on holiday lets.

In Edinburgh – the hottest of holiday hotspots – the City Council predicts its proposed caps, taxes and registration could see 80 per cent of Airbnb-style properties forced out of business.

The upside, the majority of councillors believe, is that the new regulations will raise revenue and push apartments back into the city’s crippled residential rental market.

This move by cities across the world to rein in unfettered holiday rentals is spreading for fairly obvious reasons.

“We don’t control much in this space around the housing supply, but the bits that we do, we’re giving it a red-hot go,” City of Melbourne Mayor Sally Capp told The Age.