It was suggested below that the OC could implement a By-Law imposing a limit on the maximum number of residents. Unfortunately (in the case of tenants) that would contravene Sect. 49 of the Act as it represents a restriction on the lease.
It is an interesting situation though. If such a By-Law was passed it would only apply to owners, not tenants, thanks to Sect. 49.
Methinks the current Government review of the Act needs to look at the situation. Although with the current push for higher and higher housing density maybe they would consider it acceptable for Australia to sink to third-world standards and have ten people sleeping in each bedroom…