How will the new short-term rental levy impact rent rolls?

Victoria is set to implement an additional levy for the owners of short-term rental properties leased. This change may affect local rental property trends. 

Airbnb has been operating for over fifteen years, giving travellers the option to lease entire homes or apartments rather than staying in a hotel. 

As what began as a cheaper option for accommodation took off around the world, many investors realised they could make more money from short-term rentals than full-time tenants. Reports say it is possible to earn a year’s worth of rental income over the course of 100 nights by leasing to Airbnb guests.  

Thanks to Airbnb, many rental properties have become holiday homes. However, because of this, the platform has been accused of contributing to Australia’s rental shortage problem. To add to the challenges faced by Airbnb owners, many residents of strata buildings find it frustrating to have so many different people coming and going from their building. 

In Victoria, the Government has now announced Airbnb operators will be required to pay a short-stay levy of 7.5% of their annual revenue, starting from 1 January 2025. This will apply to bookings of less than 28 days. 

As reported by reb, some of the revenue raised from the fee will go to Homes Victoria to help the organisation build and maintain social and affordable housing across the state. Approximately 25% of the levy’s revenue will be invested into regional Victoria.

The tax won’t apply to hotels, motels and caravan parks, or to people who lease a room in the home they live in to Airbnb guests. 

As part of the update, owners’ corporations and local councils will be given the power to ban or limit short-stay accommodation. 

What will happen to rental availability in Victoria? 

This change is all in the name of restoring balance to the rental market and potentially giving tenants access to homes which spend the majority of time sitting empty. However, while reports say there are over 60,000 short-term rental properties in Victoria, it’s not known how many of these homes will transition to be leased full-time because of the levy. 

Critics of the plan say they are disappointed because the cost is too high. Meanwhile, some reports claim it’s not always easy to transition a property from short to long-term rental, particularly in regional areas where tourism is the focus. However, supporters of the new levy and powers given to councils and strata committees say the bill has the potential to help those regional areas attract more workers, who will now be able to find accommodation. 

For investors who currently list their properties on Airbnb as short-term rentals, decisions about the future will come down to numbers. Some may decide they can still make enough money with an Airbnb despite the levy, while others will have to try raising their prices to achieve the income they need. Others may choose to sell because of this change. 

As a property manager, now is a good time to reach out to local Airbnb owners. Sharing a cost-benefit analysis of leasing to full-time tenants vs short-term tenants in 2025 may serve to bring you a new client. 

On the other hand, if property investors decide to sell because of the changes, your agency can also be well-positioned to help them join the investors who are moving on from being rental property owners in Victoria at the moment (over 40,000 investment properties were sold between July 2023 and July 2024). 

An influx of new rental properties in the area could be great news for your agency’s rent roll. Consider how you can be proactive in supporting the transition to a full-time leasing model for existing Airbnb property owners.