The plan to return hundreds of homes to inner Sydney’s rental market

Councils are intensifying pressure on the NSW government to toughen restrictions on short-term rentals in Sydney’s inner city, as the state’s housing minister says all options will be considered to increase the supply of longer-term rental homes.

The government is weighing up tougher rules for short-term rental properties, such as tightening a cap on the number of days they may be let out and imposing a levy on holiday homes used as short-term rentals, but it has yet to propose any changes.

High Street in Millers Point, a suburb identified as a short-term rental accommodation ‘hotspot’. Credit: Wolter Peeters

The City of Sydney council will on Monday consider a motion from Councillor Jess Miller urging swift action on commercial investors who operate multiple short-term rentals, which she said could return more than 1000 homes to the long-term rental market.

Miller will point to a report, commissioned by the council, which last year showed 68 per cent of short-term rental hosts in the City of Sydney had multiple listings, and many had 10 or more sites.

Miller’s motion said loopholes in the regulations had led to a booming market, in which professional operators hosted multiple properties and that they had encouraged absent owners to rent out their homes on short-term leases.

“The report’s financial analysis found short-term rental accommodation was more profitable than long-term rentals in many City of Sydney suburbs, despite the 180-day cap on non-hosted rental properties,” Miller said.

“This is not just a fun way to share your house, this is a commercial undertaking.” Suburbs including Millers Point, Potts Point and Waterloo were among the areas most affected, she said.

“NSW government data showed there were 2468 active and registered short-term rentals in the city in 2023, but figures from data analytics company AirDNA found there were 5454,” said Miller, who is a member of Clover Moore’s independents.

She said poor data made it impossible to enforce the cap, and difficult to work out how many of the short-term rental properties were the owners’ principal home.

The motion recommends linking the government’s short-term rental accommodation register, where hosts or letting agents must report the number of days booked in each property, to Service NSW, to improve record-keeping.

Councillor Jess Miller says the 180-day cap on short-term rentals is unenforceable without better records.Credit: Wolter Peeters

It also urges the government to crack down on breaches of the cap by issuing fines.

“The main thing we want the government to focus on is closing these regulatory loopholes that make Sydney the place to make money,” Miller said.

Sydney MP Alex Greenwich said better regulation of short-term rentals to stop “the current manipulation of commercial operators will be the fastest way to unlock much-needed rental housing in the inner city”.

Greens councillor Sylvie Ellsmore said councils should be able to ban short-term rentals run by investors, and to impose vacant property taxes. If the cap was reduced now, modelling showed there would be more long-term rentals within three months.

“The City’s own research shows the 180-day cap on short-term rentals isn’t working,” she said.
Not only aren’t the rules being followed, they don’t work when they are.

Short-term accommodation industry operators have strongly opposed the caps. They say limiting the number of days a property can be let out has failed to boost housing supply.

The council’s 2024 report, prepared by Mecone and Atlas Economics, found short-term rentals, which made up about 3.5 per cent of dwellings, were not a major contributor to housing woes.

However, should supply surge to pre-COVID levels, there was “significant risk for further reduction in traditional rental stock, potentially creating more pressure on vacancy levels and rents”.

Housing Minister Rose Jackson said the government had heard the calls to act, and all options remained on the table, but she did not provide a timeframe of when the government would respond.

She said potential measures the government would consider included day cap restrictions on short-term rentals, a levy on properties to help fund social and affordable housing and stricter reporting to improve transparency and planning.

“We’re not pre-empting the outcome, but we’re working closely with stakeholders to ensure meaningful change,” Jackson said.

“This alone won’t fix the housing market, but it’s an important step in tackling structural issues.”

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