Short-Term Rental Regulation Silver Linings

The Australian state of Victoria this week moved to give its local governments the power to limit short-term rentals in their regions.

It comes as the state moves to implement a 7.5% tax on all short-term rental listings – set to take effect Jan. 1, 2025.

It’s just the latest example of the global pushback to platforms like Airbnb, Vrbo and Booking.com, as a wave of cities have in recent years implemented a range of regulations seeking to curb the growth of short-term rentals.

The Spanish city of Valencia just this month instituted strict new regulations on short-term rentals. That follows Barcelona’s announced crackdown earlier this year, which would eliminate all short-term rentals in the city by 2029. New York City last year imposed new regulations so strict, Airbnb has called it a “de facto ban.”

Prompted by concerns over affordable housing and overtourism, new efforts to regulate or curb major platforms appear to create new setbacks for the growing short-term rental industry. But some experts say the reality is more nuanced: regulation isn’t inherently a death knell for the industry, and in some cases can actually help short-term rental operators.

What Type of Regulations

It all depends on the kinds of regulations, according to Pam Knudsen, a short-term rental industry expert and the senior director of compliance operations at Avalara MyLodgeTax.

“New York City’s regulations are so restrictive that it has basically shut down that market to a large extent,” Knudsen told Skift. “But a number of other ones have continued to see growth because they’re doing sensible and thoughtful regulations.”

Not all regulations need be as restrictive as New York’s, which limit the number of guests, require hosts to be on-site during stays and require hosts to register with the city before advertising, Knudsen said. Regulations that instead focus on things like noise control or conduct can help short-term rental hosts understand what’s expected of them within a given community.

“There’s a wide gamut of regulations that are in play and a lot of them really do work on helping those short-term rentals become good neighbors,” Knudsen said.

Some regulations are aimed at addressing challenges within a community. Some cities, for instance, might require short-term rental hosts to get licenses or pay fees that help a city fund affordable housing efforts or infrastructure improvements. Those efforts come as many worry the proliferation of short-term rentals might be contributing to rent increases by gobbling up local housing supply. Those measures may bring some real benefits to communities at large.

Building Affordable Housing

In Australia, for instance, Victoria’s 7.5% tax would fund the construction of social and affordable housing, according to local news reports. Indeed, Airbnb has argued that 7.5% is too high, but it has also pushed for some sort of smaller tax paid by guests to help fund affordable housing in Australia, according to the Guardian.

Some cities might seek to put in a moratorium or cap on the number of short-term rentals allowed to operate – indeed, local councils would be given that power under Victoria’s newly announced restrictions. But that could have benefits for operators, too. Limiting the number of available short-term rental licenses restricts the rental supply, helping license-holding hosts better compete in their local market, according to research from AirDNA.

“It’s in one way a good thing because you get some consolidation in the market,” said Bart-Jan Leyts, CEO and founder of Otamiser, a Belgium-based listing optimization firm. “It’s making sure that property managers that are in business, they can focus on growth instead of survival.”

Overtourism in Bruges

Still, some worry that hard stops on listings might go too far in some cases, and may not solve the problems cities are hoping to solve. Take Bruges for instance – the popular tourist destination in Belgium.It implemented a holiday rental stop within the city center 2002 and in 2020 expanded its strict restrictions to the sub-municipalities outside the city center walls.

The city is currently working on its new tourism policy for 2025, according to officials from Visit Bruges, the city’s official tourism website. The city has also restricted the construction of new hotels, reports say.

Bruges has sought to restrict short-term rentals due to concerns about overtourism, with more than 8.3 million tourists visiting the city in 2023. The medieval city has only 120,000 residents.

But Leyts, who grew up in Bruges, argues that the city’s restrictions on short-term rentals would do little to curb the problem of overtourism, arguing tourism in Bruges is driven largely by daytrippers who don’t seek accommodations in the city.

“That’s way worse for Bruges than controlling the STRs,” Leyts said. “In Bruges, in all honesty, the regulations came to protect hotels.”

Indeed, Knudsen of Avalara noted that some cities implement limitations in hopes of providing an immediate response to a broader problem.

“What I really encourage everybody to do, both short-term rental hosts and communities and everybody else is to really come to the table and talk about what’s the problem that we’re trying to fix and what’s the best way to fix it,” Knudsen said.

Ultimately, regulations don’t have a uniform impact on the short-term rental industry at large. But as more and more cities seek out some level of regulation, it does create one significant challenge: Hosts and platforms have to be aware of the wide array of regulations that may change from market to market.

“It is making things more complex,” Knudsen said. “You can’t just go decide that you’re going to rent out your house on a week-by-week basis. Staying in compliance is a critical factor in all of this.”