Victoria to introduce short-stay levy

As part of the Victorian government’s Housing Statement – The Decade Ahead 2024–2034, operators of short-term rental accommodation (STRA) in the state will be slugged 7.5 per cent of their annual revenue from 1 January 2025.

You can read more about the other aspects of the state's new Housing Statement here.

The government explained the revenue raised from the fee, dubbed the “Short Stay Levy”, will go to Homes Victoria to support the organisation as it builds and maintains social and affordable housing across the state. Approximately 25 per cent of the levy’s revenue will be invested into regional Victoria, meaning other local council charges on STRA will be removed.

According to the Housing Statement document, short-term accommodation has “become a popular feature of Victoria’s visitor economy” in recent years, causing a reduced number of properties to be leased on the traditional, long-term market.

The Andrews government revealed around 36,000 short-stay rentals exist in Victoria – 29,000 of which are full houses. It added that nearly half these properties are in regional Victoria.

“These are places that cannot be used for longer-term accommodation or rented out on fixed agreements – so it makes sense that they should provide some benefit towards the places that can,” the Housing Statement read.

In a press conference announcing the housing package, Mr Andrews labelled the levy as “modest”.

“$7.50 per $100 is a modest charge,” he reaffirmed.

“People need somewhere to live. Everyone needs somewhere to live,” Mr Andrews continued. “And this strategy, this plan [the Housing Statement], has got 30 different initiatives that are all about building 800,000 homes over the next 10 years.”

Mr Andrews pledged: “Every single dollar raised will go to Homes Victoria to make sure the people that are the most vulnerable have somewhere to live.”

It is hoped the levy, along with the other measures included in the Housing Statement, will provide long-term fixes to the state’s housing and rental crises which, in the words of the Premier, has left the state’s most vulnerable with “nowhere to live” or forcing them to “live in rental accommodation that should be available for other people”.

In a report on the matter by the ABC, Airbnb Australia and New Zealand public policy head Michael Crosby confirmed the organisation welcomed a similar levy but expressed concerns “a rate this high could have a negative impact on the appeal of Victoria as a tourism destination”.

“We believe a levy somewhere between 3–5 per cent, which is in line with international policies, is appropriate,” he added.

The Victorian government is not the first to introduce fees against short-term rental operation. In November 2021, the NSW government introduced legislation requiring STRA operators to register their property and pay a registration fee, while certain councils around the country have introduced their own schemes and charges targeting reduced STRA numbers in their jurisdiction.

Short-term rentals have grown in popularity in recent years, with nearly 134,000 Australian properties available for short-term leasing over the March quarter, with this increase driven by the superior financial rewards on offer.

According to research from Per Capita’s Centre for Equitable Housing, STRA properties are recouping the equivalent of a year’s rent in under one-third of the time, with this disparity far greater in regional pockets of the country.

A recent Queensland inquiry into short-term rental accommodation up in Queensland found that the likes of Airbnb and Stayz were not to blame for rising rents. The review found short-term rentals have a "limited impact on rental affordability" - and that a lack of supply was more to blame for decreasing rental affordability across the state.

'A short-term hit'

The Real Estate Institute of Victoria (REIV) CEO Quentin Kilian said that the industry body "welcomes - in principle - government efforts to ensure the long-term sustainability and growth of Victoria's housing supply", adding that they applaud "the focus on improving the availability and quality of social and affordable housing."

Despite this, they believe that the Housing Statement falls "well short of addressing the short to medium term reform that all Victorians are crying out for."

The CEO said the statement from the goverment "fails to articulate a plan for attracting and retaining existing residential real estate investors - the overwhelming majority of whom are average Victorians - to bring it to fruition."

Pitcher Partners Melbourne partner Craig Whatman has agreed with Mr Kilian's sentiment that "there is still no genuine incentive for people to put their properties into the long-term rental market and keep them there."

Calling the 7.5 per cent tax a "short-term hit", he conceded that all the scheme will do is "make a night in an Airbnb or other short-stay accommodation more expensive."

And while it may deliver a few extra long-term rentals to the market, he does not believe it will go any way in solving the long-term rental problem.

He argues: “A better approach would be to offer a land tax discount if the dwelling is leased or is available for rent for a certain period each year."

He also proposed that the government "should consider re-introducing the off-the-plan stamp duty concession for investment properties as well as revamping the foreign buyer’s surcharge."

“Given the extreme shortage of rental properties, a growing population, and a generation that will struggle to ever buy their own homes, we need a system that encourages investors to provide a range of quality short and long-term accommodation," he stated, conceding that the announcement did not offer "any tax policy changes to incentivise local and international capital to flow into the property development sector, so that the government’s ambitious target in terms of new homes can be met."

'Injecting more fairness'

While many property professionals have been left scratching their heads by the policy, the Council to Homeless Persons (CHP) has welcomed the accommodation levy, calling for the proceeds to be "funnelled into public and community housing."

CHP CEO Deborah Di Natale said "a levy like this would be an important step in injecting more fairness into Victoria’s housing system which is in dire need of major reform."

While she acknowledged the levy's potential to raise more than $30 million a year to house people without homes, she did concede that "ending the housing crisis will require billions, not millions, in new investment."

“The short-stay levy can’t occur in a vacuum. It must be accompanied by a firm commitment to build at least 60,000 public and community homes over the next decade.

She stressed that building public and community housing is the critical piece of solving this crisis, commenting that "without that we risk missing an enormous opportunity."