Thursday, September 21, 2017

How do you solve a problem like Airbnb?

With the deadline for comments on the Government's options paper around short-term holiday letting in New South Wales drawing near - they're due at the end of October - we're starting to see a resurgence of articles and musings about the impact of short-term holiday listing companies on Australia's fragile housing system. We thought we'd weigh in with some early thoughts.


The week kicked off with a comment from Stephen Goddard, strata lawyer and spokesperson for the Owners Corporation Network, in Domain. The OCN advocates that strata lot owners should be given the right to make rules about short-term letting at the micro-level - that is, owners within each individual apartment block should be able to decide for themselves whether they will allow short-term lettings in their building, and under what conditions. Goddard makes some strong points, and it's hard to disagree with the notion of short-term lettings being regulated at that very local level as far as strata is concerned.

It's worth pulling out a couple of items for further discussion. The first is that strata laws in New South Wales don't allow tenants to have any meaningful representation on strata committees, which is where by-laws that would include rules about short-term lettings would be made. Once a by-law is made, tenants can't really challenge them - only the owner of a lot can do that. This presents a problem for the "local democracy" model: those residents who do not want their building to allow short-term letting, and who rent, would be excluded from any discussions or decision around the relevant by-laws. On the other hand their landlords - who may not reside in the same town or city, let alone within the strata complex - would be invited to contribute. That means decisions about short-term lettings would be influenced by people who have no direct interest in the day-to-day concerns of their strata community. The issue could be fixed with a few tweaks of the Strata Schemes Management Act 2015, along the lines argued by the Tenants' Union prior to the Act's implementation, to allow tenants greater say on the management of their strata schemes.

The second is Goddard's comments about the impact of short-term letting on housing affordability more generally. On this he cites research from the University of Sydney's Urban Housing Lab which he says "recently found that short-term letting platforms have removed 6,000 properties from the long-term rental market throughout NSW". He links to an earlier article in which the research was discussed - it quotes the Housing Lab researcher and provides further context around the findings - but we'll have to wait until the research is published before we can get a clear look at what it tells us. Given the fluidity of Australia's housing markets, where properties are traded back and forth between owner-occupiers and investors with relative frequency, the growth of short-term letting raises some interesting questions around the interplay between existing and emerging residential property uses.

The journalist who wrote the earlier story also sought comment from the Tenants' Union prior to publication. Our remarks were not included in the piece, but reference was made to our own research into the impact of Airbnb on Sydney's rental market. This research found no clear correlation between rising rents and an increase in listings in Sydney's Airbnb hot spots, suggesting that deteriorating rental affordability across the city is not necessarily down to Airbnb. This is in keeping with other analysis we've presented about declining rental affordability and the changing shape of the private rental market.

Not surprisingly, vocal opponents of short-term letting are unimpressed with our report, and we've been accused as recently as last week of "cosying up to Airbnb". To be fair, Airbnb Australia has taken to citing our report as part of their arsenal in fending off claims about their company's negative impact on housing affordability - and well they might. But let's be clear, where short-term lettings are concerned the impact on rental affordability is not the only game in town. Far more concerning is the impact on housing security for people who rent, and who can be evicted without grounds by landlords who might consider themselves simply experimenting with a new investment strategy by trying their luck with short-term letting. To be fair again, our "cosying up" accuser has agreed with us on this point.

As our report highlighted, listings for short-term lettings tend to spike during peak tourist times, and many listings do not result in numerous or frequent bookings. This is in keeping with Airbnb's repeated claims that the majority of people listing on their platform are just ordinary folk looking to cover their own costs while taking time away from home. Available data doesn't tell us how many listings are made by owner-occupiers or renters, and how many are made by investors, so we're only able to guess as to the specific impact of landlords turning away residential tenants over the summer in order to take on short-term holiday makers. But there can be no doubt such an impact has long been felt in popular tourist areas across New South Wales, and there can similarly be no doubt the increased ease by which property owners can solicit short-term lettings by using Airbnb is making this worse. Reforming the Residential Tenancies Act 2010 to ensure tenants can't be evicted "without grounds" to allow experimentation with short-term lettings will be critical to solving this problem.

Even with the above-mentioned reforms in mind, there will still be a need to regulate the short-term letting sector. Findings in our report suggest landlords would need to operate on a more-or-less commercial basis if they are to make short-term letting a viable financial alternative to simply renting a place out, but of course there are some who are already doing that. With various examples of third-parties offering their services to manage such operations there is a huge risk this practice will grow, particularly in high demand tourist areas that are already struggling with affordability issues. This is clearly a problem. A commercially operated short-term letting business should only be allowed subject to local government approval, and there should be clear guidelines as to what constitutes a "commercial operation" and the conditions under which it will be approved.

We'll return here to Airbnb's oft quoted claim that the majority of their hosts are not commercial operators, but everyday people simply sharing a spare room for extra cash or keeping their homes lived in and looked after while taking some time away - all part of the global "sharing economy" that some are even calling a financial lifeline. As far as a corporate narrative goes, it's not a bad one, but it clearly sidesteps some of the problems that are created or exacerbated by this highly profitable business. If they were genuine about the claim, they could very easily make it true by limiting the number of bookings a host could solicit via their online platform. There is no doubt they'd lose listings, as the commercial operators would take their business elsewhere, but they'd recover some credibility and perhaps even restore a little faith in their so-called sharing economy. They could trade a bit of money for some moral high-ground. But they don't.

Make sure you get your response to the Government's short-term holiday letting options paper by October 31st.

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