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NSW Govt invites public submissions on Airbnb style short-term holiday letting policy

July 25, 2017 Headline News, Travel Law No Comments Email Email

Since 2015, the NSW Government has been working on developing a policy framework for short-term holiday letting in response to the growing popularity of Airbnb style short-term holiday letting (STHL) online booking services.  It has been slow going.

In July 2017, it issued an Options Paper, to start community consultation.

The NSW Government’s Options Paper will explore approaches to implement a whole of Government framework, addressing land use and planning concerns, strata managed buildings and the amenity of existing residents

This article will provide an overview of the Options Paper, with comments.

Background

Options Paper: SHTL takes four forms in NSW:

  • Rental of one or more rooms (including room sharing) with the host presenthttp://www.tourismlegal.com.au/
  • Rental of a whole dwelling (principal residence) with the host away (mainly in holiday periods)
  • Rental of a holiday dwelling (non-principal residence) with the host away (holiday rentals)
  • Rental of a dwelling solely reserved for STHL (investment properties)

In 2014, an estimated 216,000 premises were STHL in NSW/ACT. In 2015, 75% of visitor nights were managed through local real estate agents or tourism agencies, and 25% through online advertising platforms and booking services.

In NSW, in non-metropolitan areas (mainly coastal), houses rented in holiday periods represent one-third of the supply, and in metropolitan areas, mostly apartments which are rented year round represent the rest.

Comment: Home owners and investors have embraced STHL in New South Wales. In Sydney alone, in 2017 there are 30,000 properties listed with Airbnb, which is an exponential increase upon the 1,600 listed in 2013. The majority are rented for less than 90 days. Source: Airdna.co

Entrepreneurs are not waiting for the Government to decide upon a regulatory framework. They are leasing entire apartments from a landlord, furnishing them and using them for short-term rentals (with the landlord’s consent). They know that short stay visitors will pay from 50% to 100% more than the market rent for long-term leases. Even after cleaning and property management expenses, this yields a good profit.

And traditional holiday letting agents and rental property managers are providing management services: setting rents, vetting guests, and organising keys, laundry and cleaning.

Regulation of STHL

Options Paper: The SHTL tourist and business accommodation sector provides significant economic benefits. Nationally, it is an estimated $31.3 billion, and upwards of 238,000 jobs. Against this, amenity and safety impacts, especially in strata buildings, need to be considered.

Currently, STHL is regulated in a piecemeal manner through the planning system. There are variable rules for tourist and visitor accommodation (including bed and breakfast, serviced apartments) that need to be standardised across all Local Councils.

Comment: STHL is operating in a legal grey area. The NSW Govt is providing 4 Policy Options.

Impacts Associated with STHL

Options Paper: There are three broad impacts:

  • General Environmental and Amenity Impacts – Noise, especially short-term one off noise incidents such as Party Houses; Waste, both higher waste generation and unfamiliarity as to when and how it is collected; Traffic and Parking, both greater demand and unfamiliarity with local parking arrangements; Hazards and Evacuation, in apartment complexes for fire and gas leaks, and houses in regional areas for bushfire and flood; BCA Classification, if a building is reclassified from home occupations, fire safety, health and amenity and disabled access requirements will require building upgrades.
  • Impacts with Strata Properties – strata complexes need separate consideration – they have unique needs because of proximity of neighbours, reliance on shared facilities, and a high proportion of whole premise STHLs.
  • Broader Industry and Housing Policy Considerations – Crossover with Other Short-term Accommodation Providers, traditional accommodation providers such as bed and breakfasts who directly compete with SHTL operators are complaining that STHL operators have an unfair advantage because of lower establishment and compliance costs; Concentration of STHL Ownership, with 25% of hosts of entire home listings having more than one listing, resulting in complaints that STHL could create ‘virtual hotels’ where the ‘rooms’ are disbursed; Rental and Affordable Housing Stock, the current evidence is the impact of SHTL on rental availability is negligible.

Comment: The impacts are the reasons why policy options are raised for consideration.

Policy Option 1: Self-regulation

Options Paper: Most hosts operate without incident, and provided there is effective, accountable and transparent self-regulation by industry, the Government sees no need for regulatory intervention. For self-regulation, there must be:

  • A Code of conduct, such as the Holiday Rental Code of Conduct or the Airbnb Friendly Buildings Program which is available in the United States;
  • Complaints management;
  • Education;
  • Ongoing monitoring and reporting.

Comment: Airbnb has a code of conduct called ‘Hosting Standards’. It includes verified information from both hosts and guests, and a two-way review process in which host and guest rate each other (for cleanliness, personal safety, security of belongings, quality of décor). Airbnb will penalize hosts and guests for bad reviews.

Policy Option 2: STHL in Strata Properties

Options Paper: The Options Paper is looking for a way to manage the impacts of STHL, not to ban it, in strata complexes. It notes that section 136(2) of the Strata Schemes Management Act 2015 prohibits by-laws that ban leases or restrict the use of a lot if the use is permitted under the planning laws is an important right for strata property owners, and should not be changed.

Therefore its approach is to give an owners corporation greater powers to manage impacts:

  • By-laws to make the owner/occupants jointly and severally liable for breaches of by-laws unless they take reasonable steps;
  • Streamline enforcement processes for breaching by-laws;
  • Allowing owners corporations to levy extra for maintenance of the common property;
  • Enabling the Tribunal to order the breaches to cease, to pay compensation, impose a civil penalty or order the use of the lot as an STHL to cease for a specified period.

Comment: The NSW Government recognizes that regulation by the owners corporation might work well for impacts on amenity, strata costs and individual safety.

Policy Option 3: Regulation through the Planning System

Options Paper: The NSW Government considers that STHL is acceptable in a residence up to a point that it becomes a more intensive commercial type of use (i.e. tourist and visitor accommodation). At that point, it is no longer an Exempt Development, and needs either a simplified approval (a Complying Development) or Council Consent (a Development Approval).

Options for when that point is reached include: the length of the stay (the number of days per stay or days per year for the use); the number of bedrooms; and the presence of the host.

Comment: The NSW Government is looking for a holistic approach to planning laws, unlike some cities around the world which focus on number of days or presence of a host, such as: New York City – to advertise a stay of less than 30 days, a host must be present; Berlin – a permit is required to let more than 50% of an apartment on a short-term basis; San Francisco – registration is required to rent primary residence units for less than 30 days, and the host must be present; Paris – an authorization is required if the short-term letting is for more than 120 days in a year; London – planning permission is required for short-term letting exceeds 90 days in a calendar year.

Policy Option 4: Registration or Licensing

Options Paper: In some jurisdictions, registration of STHL is a planning requirement. Licensing is similarly a planning issue. The NSW Government is not keen on either, as it would result in broader regulatory costs.

Invitation for Short-term Holiday Letting Options Submissions

The NSW Government has issued a general invitation to stakeholders, the general public and the industry to make submissions upon the four options set out in the Options Paper. The submissions form can be replies to a questionnaire. Submissions will be accepted until 31 October 2017.

Comment: The NSW Government prefers to build a policy framework by consensus. It is to be commended for its willingness to consult extensively with the public and the industry, just as it did with the Strata Title Law Reforms.

The downside is that the fast growing short stay industry will not wait 12 + months for Government policy formulation, it will continue to operate in the legal grey area.

Anthony J Cordato

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