You may have heard about the new 7.5% short stay tax or “Airbnb tax”, but there is more to this than just a new tax.
From 1st January 2025, the Victorian Government will charge 7.5% tax on any income generated via short stay rentals. If investors are weighing up short stay vs long stay, this may tip them towards long term rental.
Additionally, the Victorian Government is also enabling tighter restrictions on short stay in the hope it frees up more housing for longer term renters. In addition to the 7.5% tax, the new rules will allow both councils and owners corporations to restrict or ban short stay rentals all together. I discussed this exact issue on 3AW
This means an owner corporation (OC) or body corporate could decide (75% vote) to ban or limit short stay rentals. It would be difficult for an OC to monitor short stay days so a total building ban is more likely. However, many owners are disengaged with their OC committee and rarely attend (let along vote) on OC issues. However, if they fell strongly enough about Airbnb rentals in their building, owners may be motivated jump on a committee meeting zoom call to cast their vote or nominate a proxy.
These changes raise an interesting question. Is an apartment worth more if the building has banned short stay rentals? What do you think?
If you were looking to buy an apartment to live in, would you prefer to buy in a building that bans short stay rentals? I think most people would say yes. However, if you move out and wish to rent out your apartment in the future, you may like the flexibility of short stay rental.
Let’s look at this another way. Why would an OC want to ban short stay rentals? It’s not so much the very occasional disruption a short stay guest may cause, its more the extra security risk it creates, as well as the frequency of different people and cleaners coming and going through the corridors, lifts and car parks. Residents report feeling less safe.
Then there is the unsightly littering of lockboxes at the front door hanging off fences, gates and poles. If there is a lot of short stay rentals in a building it can feel like a boarding house and be damaging to the presentation and amenity of that apartment building.
Some owners corporations already make it difficult for owners to rent their apartment for short stay. Lockboxes can be removed from common areas. There are existing measures available to OCs to control use of common areas or breach owners and their guest who don’t follow the building rules.
If you own an apartment that is rented for short stay, what will you do? Assuming your OC and council don’t ban it, you are going to be hit with an extra tax of 7.5%. If other short stay owners withdraw their property due to the extra cost and restrictions, maybe the price of short stay rentals will increase more than the 7.5% tax. So, you could be back in business.
The answer to what each specific short stay rental owner will do will depend on how suitable their apartment is for short stay. It may also depend on how reliant they are on platforms such as Airbnb, bookings.com and stayz for new guests. If they have a loyal list of guests, who book directly with them they may already dodge many of the normal costs.
Councils are unlikely to ban short stay entirely, but they do make some “interesting” decisions so who knows. They could choose to manage or control short stay rentals in some way. Many cities around the world have put in place controls or restrictions with fines on short stay rentals. Cities such as Barcelona, Paris, New York, Berlin, Amsterdam, London, San Francisco and many others have controls to either manage the amenity of the city or protect the supply of longer-term accommodation.
The high tourist cities have been most impacted by short stay rental use. Some cities have implemented a registration or permit system to limit short stay rentals.
This tax and restrictions will be a blow to the tourism industry generally as well as many regional areas who rely on people visiting the areas. The tourists bring a valuable economic benefit.
All these changes are part of Bill being introduced to the Victorian Government with the backing of the Greens.
One Response
I have 4 children which are now grown up, however, because we were 6 of us when we went away, we found booking a hotel for 6 overnight or 2 nights, we had to book 2 hotel rooms, and if we wanted to stay there for 1 weeks holiday, it would be quite expensive, as all of our meals and drinks needed to be eaten in restaurants. Airbnb properties, give families like I had with young children to be able to book a place by the beach, cook at home to save costs, and enjoy having a proper home to enjoy and space. You take that away, and Australia will fall like you don’t know what hit it, as the tourism is what keeps the country going, take that away and the retail and restaurants will suffer as well as the families that would like to take their family away, it is much cheaper now to travel to Bali with a family, than what it is in Australia, and by this new action by the government tightening on Airbnb properties, it is Ludacris and Australia will be in more debt than ever, with no tourism coming in, what is wrong with the government and the council, have a heart and open up the country to tourism, look at Europe, it is full of tourists, and we have booked so many airbnb properties in Europe, as that is the only way we can travel. Please think about the families that have children and their affordability to take their family away, as times at the moment are hard enough to live.