Holiday lets – the sound and the fury

With a Sydney University report out last week claiming that holiday rentals are having a significant and negative impact on the residential housing market, whether you are a resident owner of an apartment, or an investor, you should be concerned about what is happening with holiday rental laws in Australia.

Both state parliaments in NSW and Victoria have already had one shot at devising legislation on holiday letting and fluffed it. Now they are having another go.

For many MPs, it’s irrelevant. But for a minority in popular holiday areas, it’s the poisoned chalice of pulling in tourists while driving out locals.

And in apartments, it’s about some investor owners boosting rental income while residents wonder who will be living next door from one weekend to the next.

The Sydney University Urban Housing Lab report claims that holiday letting, predominantly though Airbnb, has taken 6000 homes out of the Sydney residential market.

Airbnb disputes the findings – but then, they dispute any figures that stray from their carefully curated and massaged findings.

Meanwhile holiday home letting agency Stayz has called for tighter regulation of holiday lets in the cities (where Airbnb is more active) but not so much in regional and coastal towns where Stayz does most of its business.

These are just the latest shots in a battle that, for some, is about the freedom to make money from your major asset but, for many apartment residents, is about having a sense of home.

Last year, in response to failed efforts by Melbourne’s city council to curb the spread of short-term holiday lets and ‘party flats’ in residential apartment buildings, the Victorian government came up with a simple solution: make it legal.

However, their plans for a less than harsh “three strikes and you might have to move next door” law were scuppered when the Legislative Council bounced the Bill saying it took little account of residents’ needs and demanded further inquiries.

The subsequent Environment and Planning Committee report issued in June, canvassed the radical idea of allowing a majority of owners in apartment buildings to decide whether or not they wanted short-stay letting.

Chairman David Davis’ foreword revealed the real problem: after 108 submissions “there was almost a complete lack of details and reliable information about the scale of the sector and its impact on others.”

In other words, there was a lot of BS, on both sides.

Mr Davis referred admiringly to NSW where the government is now (again) inviting submissions in a bid to come up with laws that mean the best apartment blocks in the most popular areas don’t become de facto hotels, while individual owners aren’t fined by their local council for letting a room to a visitor.

Ironically, the first NSW attempt to devise a law on holiday letting – the ill-fated Coure report – said the state should take a lead from Victoria.  The Victorian Bill was rejected just a week or so later.

But this is a debate full of contradictions, not to mention hypocrisy.  The same people who rail against apartments being bought with the specific intention of being let via online agencies, gush (quietly) about the fabulous apartment they rented in Paris through Airbnb last year.

Of course, in strata there are “informal” ways of getting things done that may be suspect in their permissibility but legal enough to deter all but the most determined holiday letting host.

By-laws that only allow permanent residents access to shared facilities, backed by cancellation of electronic keys,  have a veneer of legality.  And in the absence of laws that specifically forbid that, hosts hounded by angry guests who couldn’t get access to the promised pool, gym, car park and even, we’ve heard, lifts, may give up and set up shop elsewhere rather than try to fight this through the tribunal and courts.

Also, in NSW, owners and head tenants can be fined up to $550 every time they fail to notify the Owners Corporation of a change of tenant or sub-tenant.  Given that fines are now paid to the Owners Corp there, this could be both a deterrent and a nice little earner.

A sensible solution in both states would be to allow the apartment buildings where 75 percent or more of owners don’t want short-stay letting, to ban it via by-laws or rules. Meanwhile, if the owner or tenant is there in the flat, why shouldn’t they let a room to a tourist?

But as an investor, you have to decide whether you want to cash in on the Airbnb boom while it’s booming and deal with the consequences later. Or buy into the idea that communities are worth building.

As they are finding across Europe, the “live like a local” sales pitch becomes a little hollow when all the locals have been forced to move out to make way for visitors.