We risk losing the charm of our nation’s most cherished towns
A report in Grounded*, by Karl Fitzgerald**
Introduction
The rising concern that Short Term Rentals (STRs) are causing detrimental harm to local communities led to this independent analysis of 13 tourism markets across Australia. These are markets where the growth in STRs has had significant local impacts.
The study covers Hepburn Shire, Mornington Peninsula, Byron Bay, Fremantle, Victor Harbor, Hobart, Noosa Heads, Coolum Beach, Port Douglas, the Whitsundays, Warburton, and Apollo Bay.
At current market rates, STR earnings are 80.9% above Long Term Rentals (LTR). Any
investor aware of the significantly higher return is bound to prioritise the STR market.
Such a disparity may be playing a role in the exit of investors from the LTR market.
Locals can expect future rental supply to head towards the higher returns in STR. This
crimps both affordable rentals and the potential for that housing supply to trickle down to
first home buyers.
Housing affordability policy across all levels of government is almost entirely focused on
housing supply. This research shows that within tourism areas, new supply is
overwhelmingly directed towards the STR market, which is amplifying pressure on the LTR
market.
Read the full report:
Conclusion
STRs, alongside Build to Rent, are further concentrations of housing opportunities to the
detriment of those without market power. This power can be seen most dramatically in the
rollout of land supply in master planned communities, where drip feeding techniques
enabled by poor public oversight exist alongside incredible developer insight (algorithms).
It is urgent that government recognise that housing investment will head towards the
market with the greatest rate of return. That includes STR. This is compounded when the
market is largely unregulated.
Future research must include improved data sources, the need to identify how many LTR
operators switch to the STR market, the percentage of STR’s locally owned and how many
STR sites are being flipped as a going concern.
Local councils must see this as a core part of their management of local communities. As
we have demonstrated, they could find a useful revenue source under the Locals First
system.
Best practices would see communities determining what an appropriate concentration of
STRs in their region would be. An audit of median STR rents versus LTR rents is also
necessary. Developing a data scraping tool into Airtable could be a valuable local
governance apparatus to ensure oversight occurs, tracking the data presented in this
report.
The 81% higher return for STR over LTR investment suggests the movement towards
precarity will continue for locals. The global STR phenomenon is pushing the towns we
love to a breaking point. Deep thought must be given to why our economic system
encourages us to treat some of the nation’s most cherished towns in this manner.
The closure of kindergartens and primary schools due to key worker shortages, alongside
cash-strapped councils selling public land are byproducts of the failure of our public
finance system. If we chose to, we could tax property-based wealth whilst simultaneously
solving problems derived from Airbnb concentrations.
It is a testament to the profits inherent in the STR product that the equivalent of 74.3% of
new housing supply has been directed towards the tourism industry over a decade. The
battle for affordable houses to rent or buy is a huge challenge for locals. It is imperative
they understand the economic forces working against them. It is not simply bad luck.
With effective policy, we could change this.
The Airbnb Cap ‘n Trade policy provides clear pathways for STRs, housing supply and
rentals to rebalance towards long term stability. Better than that, it can also fund
perpetually affordable housing via the Community Land Trust model, closing the loop
between problem and solution. By engaging in this process, Airbnb operators could in
effect rescue their social licence.
We look forward to a future where both rental and ownership prices more closely align to
the reality of wage growth. To get there we must recognise that affordable housing is the
frontier to our freedoms.
*Grounded is a not-for-profit organisation established to advocate, incubate and accelerate
the development of Community Land Trusts in Australia. We do this by engaging with
communities, ethical landholders and government. Grounded produces innovative
analysis to the nation’s most difficult housing problems.
@grounded_au
**Karl Fitzgerald is a land economist with 20 years experience raising awareness about the
commodification of property. His work has questioned auction clearance rates (ghost
auctions), vacancy rates (speculative vacancies) and critiqued the omnipresent housing
supply issue with detailed analysis of the drip feeding of sites in ‘master planned
communities’. Karl’s commitment to deep seated economic justice has played a part in a
number of affordable housing tax reforms, including the Vacant Residential Land Tax, the
Rezoning Windfall Gains Tax and closing damaging loopholes in Victoria’s land tax system.
He is passionate about Community Land Trusts as the gold standard in shared equity
models. Karl lives in the shire of Hepburn (Victoria).
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