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A lack of affordable housing to buy or rent is fuelling a global housing crisis, which is estimated to impact 1.6 billion people worldwide, according to the World Bank. In Asia Pacific, where some of the world’s costliest and fastest-growing housing markets are located, much blame has been assigned to the short-term rental (STR) market, with regulators, including some Australian state governments, moving to restrict the sector’s growth, and in some cases, its existence. This may be short-sighted.
While leaders in the region should be concerned about the housing crisis, STRs are not the primary cause amid a global inflationary wave. Housing developers play a critical role, with the high cost of production and expensive land choke creating scarcity. Furthermore, sticky wages have caused a mismatch of income and rising living costs, making it increasingly difficult for citizens to afford to rent or purchase properties.
STRs significantly benefit the tourism sector and can help shape the digital economy. Imposing strict regulations on industry can stifle its growth and its many benefits to the tourism sector. The Asia-Pacific region is expected to become the most promising STR market with a projected market volume of US$35.55 billion by 2027. The strength of the STR market can boost the tourism industry and provide a new channel for government tax revenue. To date, Airbnb has remitted more than US$7 billion in tourism taxes worldwide.
In Australia, a 2020 Oxford Economics report, commissioned by Airbnb, found that the platform contributed US$10.38 billion to gross domestic product and supported almost 90,000 Aussie jobs in 2019 alone, representing some US$3.92 billion in wages paid that year. The report also highlighted the powerful multiplier effect Airbnb guest spending has within local communities. In 2019, Airbnb guests spent a total of US$8.67 billion in Australia; domestic Airbnb guest spending totalled US$5.86 billion.
The STR market also provides opportunities for citizens to participate in the digital economy by using digital platforms to create new income streams. This is particularly valuable in countries that are just beginning to open up after months of slow growth, inflation, and rising living costs in the post-pandemic world.
Flexible regulations are required to ensure the continuous growth of the STR industry
Instead of policies that could restrict the number of tourists accommodated, lower tax revenues for state and local governments, and deny STR hosts income from vacant properties, the Australian state governments should consider forward-looking policy frameworks that are consistent with international best practices and provide the flexibility needed in a constantly evolving industry. The following considerations should be factored:
- Digital registration of STRs can allow policymakers to develop data-driven and bespoke regulations that address local matters in a targeted manner, benefiting tourism and housing demand planning. These processes must be easy for hosts to implement, to avoid forcing the industry underground or killing it off entirely. When developing these systems, regulators can look to best practices from Portugal’s national portal for STR licence registration and online portals for host registration in French cities.
- Regulators should leverage compulsory “Code of Conduct” style frameworks, such as the one adopted by NSW in Australia. These can provide the assurance to platforms, hosts, regulators and the communities in which STR operates that the sector is run responsibly.
- Quantitative restrictions can address concerns such as loss of privacy and overuse of common amenities. By preventing government subsidised residential areas from offering STR services, and allowing private accommodations the flexibility to do so, policymakers can still provide economic opportunities for STRs hosts and platforms to offer their services.
STRs can bring a positive economic impact to cities and countries. They can bolster the tourism sector, expand participation in the digital economy, and establish new income channels for governments. With no proof that stringent STR policies can successfully address severe housing scarcity, effective and innovative strategies are needed instead to accommodate the growth and evolution of the STR market.
Governments need to work closely with the STR industry to ensure that any policy approach does not inadvertently dampen the potential of STRs to drive the growth of the country’s tourism industry and economy as a whole.
Jeff Paine is the managing director of the Asia Internet Coalition
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