Are Short-Term Rentals Really the Villains in Australia’s Housing Crisis?

Every time housing affordability hits the headlines—as it has again this year with surging rents and limited supply—someone inevitably points the finger at property investors.

And lately, there’s been a particular focus on short-term rentals, like those listed on Airbnb, Stayz and other holiday letting platforms.

It’s a neat narrative: investors are allegedly hoarding homes for tourist dollars, keeping them out of the hands of Aussie families.

But like most neat narratives, this one doesn’t hold up to scrutiny.

It’s a simplistic answer to a complex, decades-in-the-making problem—and focusing on short-term rentals won’t solve our housing crisis. In fact, it risks distracting us from the real issues that need urgent attention.

Let’s pull apart the argument and look at the data, the unintended consequences of reactive policymaking, and what truly lies at the heart of our housing woes.

The myth of the short-term rental boogeyman

There are an estimated 170,000 short-term rental listings across Australia, according to CoreLogic, now Cotality, data.

But that number doesn’t tell the full story.

1. Scale matters

Australia has over 11 million residential dwellings.

Even if we take that 170,000 figure at face value (and many of those listings aren’t full-time short-term rentals), we’re talking about less than 2% of the housing stock.

What’s more, many of those properties are not in the suburbs, where housing stress is most acute.

They’re in coastal holiday towns, lifestyle areas, or high-tourism locations where demand for long-term rentals has always been low.

Areas like Byron Bay, the Mornington Peninsula, or Noosa have never been large contributors to mainstream rental stock.

2. They aren’t all “rental-ready”

Not every short-term rental is suitable or intended for long-term tenancy.

A beach shack with no heating or a CBD studio with no parking may work fine for tourists, but it’s not what a family of four or even a single professional is looking for in a long-term lease.

Many hosts also use their properties only part-time—think retirees who rent out their second home during the peak summer season or people who travel for work and lease their home while they’re away.

These homes were never on the permanent rental market and wouldn’t be, even if short-term platforms were banned.

What’s actually driving the housing crisis?

We don’t have a short-term rental problem. We have a housing supply crisis.

And it’s been brewing for over a decade.

1. We haven’t built enough

Australia’s housing construction pipeline has significantly lagged behind population growth.

Between 2012 and 2022, Australia’s population grew by more than 3.7 million people, but dwelling completions simply haven’t kept pace, especially in the areas where people actually want to live: near jobs, schools, transport, and amenities.

Now, with net overseas migration surging again (projected at over 500,000 people in FY24), we’re seeing record demand dumped onto a system that was already strained.

2. Planning bottlenecks

Councils often act as gatekeepers, not facilitators, when it comes to new housing supply.

Red tape, local opposition (NIMBYism), and lengthy approval timelines have made it incredibly difficult to get medium- or high-density developments off the ground in established suburbs.

It’s no surprise that most new supply ends up on the urban fringe, far from transport hubs and employment centres.

But that’s not where rental demand is highest.

3. Build-to-rent and social housing lag behind

Institutional investment in build-to-rent housing, while growing, is still in its infancy in Australia.

Meanwhile, government investment in social and affordable housing has plummeted as a share of total housing stock, from over 6% in the 1990s to just 3.8% today.

Who picked up the slack?

Everyday investors.

Private landlords now provide over 90% of all rental housing in this country, but they’ve been left to carry the burden without much thanks, and often with policy stacked against them.

The policy backlash: well-intentioned, poorly executed

Several state and local governments are now reacting to the headlines with proposals to restrict or heavily regulate short-term rentals:

• Victoria has announced a 7.5% levy on short-stay properties from 2025, the first statewide tax of its kind.

• NSW councils like Byron Shire and City of Sydney have pushed for caps of 180 days or less per year.

• Tasmania and WA have launched registration schemes and public consultation processes, with the aim of limiting Airbnb’s reach.

But here’s the problem: these measures are unlikely to deliver meaningful results in the broader rental market.

Worse still, they could create new distortions.

1. Unintended consequences

Crackdowns on short-stay accommodation may push owners to leave properties empty, convert them into holiday homes not listed anywhere, or even sell out of frustration.

This doesn’t guarantee that those homes will become long-term affordable rentals.

It may just pull more rental stock out of the market altogether.

2. Investor uncertainty

What we’re seeing is a pattern of political volatility—frequent changes to investment rules, new taxes, and shifting goalposts.

This creates risk, and risk drives capital away.

Why would an investor put their money into property, with all its expenses and legislative complexity, when other asset classes offer more stability?

And yet, it’s the private investor that holds the key to rebuilding our rental supply in the near term.

We need more property investors, not fewer

Note: Let me be clear: property investors are not the enemy.

They are, in fact, a big part of the solution to our housing crisis.

In a system where governments are not building enough housing and institutions are only just getting started, it’s the mum-and-dad investors who step up, often risking their own financial comfort to provide homes for others.

But what are we doing?

We’re layering on compliance costs, reducing incentives, increasing land taxes, and now vilifying them for using their properties in ways that suit their lifestyle or income needs.

It’s self-defeating.

What actually needs to change?

We need to stop playing political whack-a-mole and start focusing on structural, long-term solutions.

That means:

1. Accelerating housing approvals – Reduce red tape and push for planning reform to unlock more medium-density housing in existing suburbs.

2. Rewarding supply creation – Use carrots, not sticks. Tax breaks, density bonuses, or infrastructure support can incentivise the right kinds of housing in the right places.

3. Supporting private investors – Stability and predictability in regulation are essential. Without investor confidence, supply dries up.

4. Expanding alternative housing models – Scale up institutional build-to-rent, co-living, and key worker housing.

5. Reinvesting in public housing – The government must lift its share of the burden for low-income Australians, rather than expecting the private market to do it all.

The bottom line

Short-term rentals are an easy target—but they’re not the core problem.

Our housing crisis is the result of years of underbuilding, restrictive planning, and policy uncertainty that have discouraged investment in the supply we desperately need.

Banning or taxing Airbnb might win some headlines, but it won’t build a single new home.

If we truly want to improve housing affordability and availability, we need to stop scapegoating investors and start supporting them.

As always, strategic investors will look beyond the noise.

They’ll focus on supply-demand fundamentals, buy well-located investment-grade assets, and play the long game.

Because when everyone else is chasing headlines, we’re chasing outcomes.

About Joseph Ballota
Joseph is a Property Coach who put hundreds of people on the road towards wiping away their mortgage in under 5 years through expert Property Investment Plans.