Did you know that despite being one of Airbnb’s top 10 destinations, rent-sharing is yet to be legalised in Sydney? In fact, only 12 local councils have rules covering the growing industry, while others either don’t have regulatory provisions or like the City of Sydney Council, have rules that make the practice of short-term accommodation sharing in residential areas illegal. In comparison to Queensland and Victoria which have clear rules that allow people to rent out homes for any period of time, New South Wales currently lacks consistent state wide provisions.

Background

Established in 2008 as an online peer-to-peer accommodation marketplace that connects hosts and travelers, Airbnb has developed into a global phenomenon with Sydney being the company’s 10th largest global market. This disruptive innovation has shaken up the hospitality industry dramatically, deregulating the market and causing unprecedented change. While it has provided households with the ability to earn additional income and travellers with extra accommodation options, the concept has often been deemed the root-cause of inflating housing prices and diminishing demands for hotel accommodation.

Report Recommendations

In response to calls for greater clarity regarding the regulation of short-term letting, the NSW government commissioned the Legislative Assembly Committee on Environment and Planning to conduct research and present their findings. The Final Report on the Adequacy of the Regulation of Short-term Holiday Letting in NSW outlined the following recommendations:

  1. Home-owners should be given the green light to let out spare rooms for cash on Airbnb and other “sharing economy” platforms without risking fines from local councils.
  2. Hosts renting out their principal place of residence won’t need to seek council permission.
  3. Investors who rent out empty property for short stays will need to abide by a code of conduct and seek council approval as a complying development.
  4. A threshold for when empty property may be exempt from approval should be defined to differentiate commercial operators from families generating extra income.

Winners

Three big winners have been identified after the recommendations put forward by the Committee. Firstly, although investment property owners will be regulated lightly to differentiate commercial hosts from families wanting to subsidise their income, both private and investment property owners will be legally permitted to rent out their properties to short-term guests to supplement their income. According to Airbnb’s submission to the inquiry, 31 percent of Airbnb hosts in Sydney say that they rely on the income generated from home sharing to make ends meet while 48 percent of hosts who spend on average 47 percent of their Airbnb income on essential living expenses such as rent, mortgage payments, household bills and groceries, claim that Airbnb has helped them to stay in their home. Legal certainty and clarity is expected to strengthen the provision of such services which will generate additional spending capacity in the economy.

Secondly, travellers are expected to benefit from genuine increases in supply. Greater competition should result in improved services and innovation as suppliers seek differentiation, providing consumers with greater choice and lower prices.

Finally, the greatest beneficiary is expected to be Airbnb. With many countries like America moving to protect the hospitality industry by regulating Airbnb more harshly, the more lenient and facilitating recommendations in NSW, present a “massive step” in the right direction. Improved consumer and supplier confidence is expected to increase Airbnb’s user base, thereby providing expected increases in revenues.

Losers

However, since the report is about providing certainty, “not everyone is a winner”, with the committee having to find the right balance between consumers, home-owners and the wider community.

Currently, some strata schemes prohibit short-term stays in their apartment complex for a myriad reasons ranging from damage to security concerns. However, the report rejects calls to allow owners’ corporation to restrict Airbnb hosts from strata buildings, with the blanket regulation expected to create “undoubtedly catastrophic” effects for apartment living. Specifically, apartment owners must share the expense of repairing the damage to their complex from tourists treating apartments as hotels and suffer from decreased by market value of up to 30-40 percent as a result of short-term stays in residential buildings.

In addition to Strata management and apartment owners, the hospitality sector is expected to experience the greatest negative impact. The legalising of short-term letting which provides consumers with greater authenticity is expected to deregulate the market, thereby creating intense competition and eroding existing revenue and profits.

The Road Ahead

Although the government has until April next year to respond, early indications suggest some of these recommendation will be implemented. As such, share-renting is expected to be legalised albeit regulated lightly. Whether you are a developer, a unit owner or part of a community association, seek a strata lawyer through Lawpath to understand your rights and responsibilities under your strata scheme.

Let us know your thoughts on the practice of short-term letting by tagging us #lawpath or @lawpath.

Ricky Chan

Ricky is a Paralegal working in our content team which aims to provide free legal guides to facilitate public access to legal resources. With a keen interest in contract law, his primary research focuses on small businesses, and how they can better navigate complex legal procedures.