Short-stay taxes may soon move beyond councils

The City of Hobart Council’s decision to double the rates on short-stay rentals may soon become standard across Australia, as local, state and federal governments face increasing pressure to solve the housing crisis.

City of Hobart Lord Mayor Anna Reynolds said the decision to double rates for short-stay accommodation during Monday night’s council meeting was a “signal to the market to say this is more like a commercial business”.

“Some of these properties are making $100,000 a year. It might send a signal. It certainly sends a message that the council does have concerns about these dwellings in our residential zones and we think they should be treated differently and regulated differently,” she said.

“Whether it is going to be a complete disincentive I’m not sure, but councils around the country are basically looking for any mechanism they can to have a bit more control over short-stays.”

The City of Hobart Council isn’t the first local government to target accommodation sites like Airbnb with increased rates or taxes. In 2022, Brisbane City Council increased rates by 50 per cent on properties rented out for more than 60 days a year.

Byron Council also legislated a new framework throughout 2022, including a 90-day-a-year cap on short-stay renting, only for the former coalition New South Wales government to intervene to prevent it from being introduced.

With the state’s Independent Planning Commission recently recommending the introduction of a maximum of 60 days of short-stay renting per property in Byron and a change in government, the council is looking to revisit the policy in the near future.

Noosa Council, home to another holiday destination, introduced new laws in February 2022 featuring minimum safety standards and a special rate category for short-stay accommodation after the council found 86 per cent of short-stay operators in the area were based outside the seaside resort area.

Internationally, tax solutions aren’t new. Italy introduced laws in 2017 requiring Airbnb to collect a flat 21 per cent flat-rate tax after it saw a decrease in its already-in-place tourist tax revenue, following a rise in the popularity of short-stay accommodation.

Airbnb sued, however, the European Union’s highest court ruled in favour of Italy in 2022.

Tax options

Michael Fotheringham, managing director of the Australian Housing and Urban Research Institute, told The New Daily there were two ways councils could directly tax short-stay rentals.

“One is to adjust the rates so that rather than paying residential rates for what is clearly commercial use, they’re charging closer to a commercial hotel,” Dr Fotheringham said.

“The other is to put a tax on the number of nights.”

He said he wouldn’t be surprised if measures like Hobart’s were replicated by state and federal governments in the near future.

“Pre-pandemic, short-stays were largely restricted to regional centres, often coastal centres and particular suburbs of major cities,” Dr Fotheringham said.

“Increasingly we are seeing this right across suburbs, including nowhere near tourist areas and that has an impact.”

The Guardian reported on Tuesday that the Victorian government is also considering a statewide tax on Airbnb and short-stay rentals.

A task force being led by Deputy Premier Jacinta Allen is examining how to boost housing supply, and will consider regulation or taxation of the short-stay industry.

Ms Reynolds said despite Hobart City Council increasing rates on short-stays, she had previously embraced Airbnb as a property owner and during holidays.

“All those types of visitor economy and share-housing, we’re very supportive of,” she said.

“We certainly anticipate and expect there to be more visitorial accommodation, but it has gone too far in terms of the number of homes and regular houses in our suburbs being converted into short-stays.”

She said research revealed that 9 per cent of the rental market in Hobart was now short-stay accommodation, and up to 400 properties previously recently available as long-term rentals in the city of about 55,000 people were no longer available.

“It does mean the city is less accessible to students and people on regular, average wages and those who have rented their entire lives,” Ms Reynolds said.

“The character of the place and the workability of the city just isn’t as good when you’ve got such a large percentage of short-stays.”

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