AUSTRALIA IS GRIPPED BY AN UNPRECEDENTED housing crisis, and ARAMA is calling on local councils around the country to ban the use of detached homes for short-term rentals.
In a staggering statistic, 1,043,776 Australian dwellings were listed as empty on census night 2021.
Some of these million-plus homes were vacant because they were being sold and awaiting new owners, but the latest data tells us that there were 251,000 short-term rental properties registered across Australia in September 2022. Most of these homes are empty most of the time.
Meanwhile, in Queensland alone there are more than 50,000 people waiting on the social housing register and struggling to find a roof over their heads. Because of the short supply of properties, rents have gone through the roof, vacancy rates are at all-time lows and the competition for properties is fiercer than ever.
ARAMA believes that the current housing crisis is largely caused by a combination of the sophistication of overseas-owned Online Travel Agencies (OTA`s) taking family homes out of the long-term rental and/or owner occupation mix plus harsh new rental tenancy laws.
These OTA platforms are very user friendly and consumer friendly, and we have nothing against them when used to provide traditional holiday letting. Some of our ARAMA members actually use these OTAs in marketing their holiday apartments.
But it is a vastly different story when the ease of use of these portals are turning traditional suburban family homes into largely vacant short-term cash cows designed to only benefit investors seeking a return from the short-term rental market.
These detached houses were originally designed specifically for families to live in either as long-term residential tenants on a rental tenancy basis or by owner occupiers and their families.
Most local government authorities refer to these detached multi bedroom dwellings as a class 1 dwelling. The more we see these Class 1 properties being converted to short-term holiday letting, the more we see a dramatic reduction in available stock to house Australian families on a long-term basis.
In addition to the appetite created for investors to achieve big returns from short-term rentals by the OTA`s, Governments, sadly, have created an environment that drives the wrong behaviour from owner/investors through unbalanced, unfair and inappropriate tenancy laws.
What I mean by this is that it is becoming harder and harder for Australian owner/investors to rent out their properties to long-term residential tenants as they have done for decades because of new laws in different states swinging all the power towards the tenant.
While this has been happening, sophisticated overseas-owned OTAs have created great incentives for property owners to enter the short-term rental market. They are spending millions in marketing to fill people’s heads about how much they can make from the short-term rental market, even as the housing crisis and homelessness worsens around them every day.
With great frequency, detached houses that would otherwise be available for long-term residential rental are being turned into weekend party houses.
In my street alone on the Gold Coast, there are four of them out of a total of 25 houses with most occupied only a couple of nights a week and quite often only 2 people staying for a couple of nights in a 4 bedroom house. That’s four homes that could each house a large family, being taken out of the equation. That’s four families who have to join the long queues for an increasingly short supply of homes. And it’s a pattern being repeated around Australia.
One of the investor owners in my street tells me he can make $5000 a week some weeks and that it is more profitable for him to have his house largely vacant for much of the year than to have long-term tenants living in them. Plus, he says the new residential tenancy laws make it harder and harder to control tenant behaviour, collect the rent, end the tenancy (if necessary) and raise the rent if required.
While many Australian families can’t find a place to live, the levels of multiple home ownership in this country have never been higher. More than 20 per cent of Australia’s 11.4 million taxpayers own investment properties. That means that around 2.22 million taxpayers in Australia are property investors, and together they own 3.25 million investment properties. Ten per cent of investors hold 3-5 investment properties and almost 1 per cent six homes or more.
One of the Online Travel Agencies is now advertising on television, actively pushing for people to turn their investment properties into short-term rentals and away from long term residential rentals. This at a time when so many families are desperate for a place to live. The marketing gurus of these platforms have convinced people, including the governments, into believing that they are providing a modern social advantage with a “sharing” economy.
Suburban long-term residential family homes are now being used as holiday letting and party houses because governments have been seduced into allowing it under the guise of this sharing economy. There is nothing sharing about it at all. In fact, taking houses away from the long-term residential housing rental market at a time of a housing crisis is actually extremely selfish.
ARAMA is calling on councils around Australia to ban the use of detached housing aka Class 1 dwellings – for short term rentals. Local Councils might need the support of their respective state government to achieve legislative change or enforce existing legislative protections and we are calling on both tiers of government to work together to achieve that outcome.
That means that in my street alone those four houses would not be allowed to be used for short-term rental at all (e.g., for less than 90 days). That restriction would immediately put those homes back on the long-term rental market or make it unappealing to invest in expecting a return from the short term rental market.
Those current investors of party houses in the suburbs might then be incentivised to list the house for sale to owner occupiers thereby further de-stressing the housing crisis.
A ban on short-term letting on detached houses would still give investor owners the chance to make good money from the long term rental market and would result in more opportunities for more families to find more places to live.
It may require a tweak to the legislation, but we believe it would go a long way to alleviating this national housing crisis which governments have allowed to worsen in part because of new long-term tenancy laws that put landlords at a severe disadvantage.
Many landlords simply no longer want to be in the long-term rental market because it’s become too difficult, highly stressful, and unrewarding for them even with weekly rents soaring.
New tenancy laws have created an environment for short-term online platforms to flourish, because the laws deter investment in long-term rentals. Think unintended consequences.
For many investor/owners it is becoming almost impossible to evict a tenant even if they don’t pay rent.
In Victoria for instance, the non-payment of rent is not sufficient reason to evict a tenant and this situation is close to being accepted in Queensland, too.
Tenants can bring a pet, they can smoke, they can paint the walls without permission, and they can decide not to move out if the owner doesn’t have just cause or a defined date to exit a fixed term lease and then even if they do the tenant will cry “housing crisis” and stay longer – again creating disincentives for the landlord.
If the rent becomes too high under the new legislation a tenant can say “I can’t pay – but you can’t evict me.”
In most states including Queensland a landlord on a periodical tenancy can’t ask a tenant to leave unless you’re going to move in there yourself. If you don’t move in, the new rental laws say you can’t offer the property for rent for a defined period – it`s like a sin bin.
In Queensland a private members bill has been circulating that effectively says a landlord cannot increase the rent by more than 2% in any two-year period no matter what the reason. Do they not understand CPI and interest rates have risen and will probably continue to do so at least in the short term?
So, these short-term rental platforms have encouraged people wanting to avoid those hassles to keep their houses vacant for much of the year and pick up high daily tariffs every now and then. Short-term guests don’t give landlords headaches by refusing to pay the rent until maintenance is improved. They simply move on, give a bad rating and vow never to stay there again which is fair enough.
Long-term leases can immediately be broken if there’s a domestic violence issue and the victim can move out without penalty for breaking the lease or causing damage to the property. Fair enough DV is a huge problem in our society but why should the landlord of the residential tenancy pick up the tab for costs associated with DV ?
If a short-term renter damages a property, the owner has their credit card details or they can quickly take them to court. Even more reasons why it is easier to manage a house on a short-term rental basis compared with a long-term rental basis.
ARAMA believes that if Government were to restrict the use of Class 1 houses so they were used as long-term rentals only it would create much more housing stock and soften the high price of rents in the suburbs which is where most families want to live.
During COVID many of our members converted their short-term holiday apartments into long-term residential tenancies and some have never converted them back which has helped alleviate the housing crisis to some extent in some areas – however given the choice most young families would much prefer to live in a detached home in the suburbs with multiple bedrooms and a backyard instead of being forced into living in high rise apartments.
Most high-rise apartments (which are defined as class 2 dwellings) are perfect for short term letting and/or long term letting and can segway between the two types depending on market demands.
Most families with children want to live in a house.
Taking Class 1 houses out of short-term rentals would not impact the tourism market or cost tourism jobs because our ARAMA members are perfectly placed to take up the slack. And we can host those holidaymakers in properties that were designed for a combination of short-term accommodation and/or long-term accommodation if that is what the market is demanding.
Many Australian families would be grateful to see those detached party houses available again to rent long-term. And it would certainly help to alleviate the housing crisis.
This article was contributed by ARAMA.
You can find more information at: https://www.arama.com.au/
Original article source: https://www.arama.com.au/news-item/12350/arama-press-release-march-2023