The Victorian Government has introduced new legislation to the State Parliament designed to create more social and affordable housing and increase availability of long-term rentals.
Announced as part of the Housing Statement, the Short Stay Levy Bill 2024 has been informed by consultation with local councils, industry and tourism bodies.
The legislation introduces a 7.5 per cent levy from 1 January 2025 on short stay accommodation bookings, including bookings made through platforms such as Airbnb and Stayz.
Short stay rentals reduce the number of properties available for longer term accommodation for families who need a place to live. In Victoria, there are around 63,000 short stay accommodation places – with nearly half of these in regional Victoria. Almost 50,000 of those places are entire homes which are not available for long-term rental.
Expected to raise around $60 million a year, all revenue will go to Homes Victoria to support the building and maintenance of social and affordable housing – with 25 per cent of funds to be invested in regional Victoria.
The levy will not apply to a homeowner leasing out all or part of their principal place of residence for a short stay. When a homeowner goes on holiday and someone else stays there temporarily, the levy does not apply.
Commercial accommodation such as hotels, motels and caravan parks are also exempt. The levy will also only apply to stays less than 28 days.
Transitional arrangements will be in place, and the levy will not apply to bookings made prior to 1 January 2025.
The State Government is also giving local communities the ability to respond to local concerns – with owners’ corporations now able to ban short stays in their developments if approved by 75 per cent of owners. There will also be changes to the planning system to give local councils the power to regulate short-stay accommodation.
Victorian Treasurer, Tim Pallas, said, “We’re unlocking more homes for real rentals and unlocking more funding for social housing.
“This is an important step towards making more properties available for long-term rental – and we’ve consulted with the sector to make sure we’ve got the balance right.”
Victorian Minister for Housing, Harriet Shing, said, “The demand for housing has never been greater around Australia, and the Victorian short stay levy will support the delivery of more social housing and encourage more people to use their properties for permanent rental accommodation across the state.”
Industry response
Housing Industry Association Chief Economist, Tim Reardon, said that the newly introduced legislation will not improve housing supply or reduce pressure on public housing stock.
“The contention is that taxing short stay accommodation will see more homes be made available for long term rentals and raise revenue to fund public housing,” Mr Reardon said.
“No one supports landlords withholding homes from market. But the proposition that another tax on short-stay accommodation will increase housing supply or make more homes available for rent, in the long-term, lacks logic.
“The ‘first order effect’ of a tax on short-term rentals may see some rental properties become available for long-term accommodation. The second order effects will negate this benefit. Fewer short-term rentals, and growing demand, will see the rent on these properties continue to rise attracting landlords back out of the long-term rental market.
“Taxing short stay accommodation does not increase housing supply. In the long run, it will increase rental prices in short and long stay rental properties.”
Mr Reardon warned that this will be just another tax on housing that will reduce the supply of homes further and exacerbate the problem.
According to Mr Reardon, this tax comes on top of other new taxes and costs on housing in recent years including:
- A windfall gains tax, whereby when land is re-zoned, any subsequent uplift in the value of that land more than $100,000 is taxed at a rate of up to 62.5 per cent
- A land tax surcharge for Victorians with more than one home, up to a $975 flat surcharge plus a 0.1 per cent increased rate of land tax
- An absentee owner surcharge of four per cent, up from 0.5 per cent in 2016
- A vacant residential land tax of up to three per cent on the capital improved value of taxable land
- The latest changes to the National Construction Code, which add tens of thousands of dollars to the cost of construction of a new home
“Governments cannot increase the supply of housing by taxing them more, even if the revenue is allocated to new public housing stock. This is an own goal that will further reduce housing supply and place more pressure on public housing stock.
“A lack of public housing is not the cause of the housing crisis, and it is therefore not the solution. It is a symptom of higher government taxes and costs on housing.”
Mr Reardon said that Victoria requires more public housing stock, and that this is the right time in the cycle to build more public housing.
“But public housing is a public good and should be paid for by all Victorians, not a tax on a narrow cohort of renters or households.
“Burdening new home buyers and renters with the cost of providing public or subsidised housing is part of the cause of this housing shortage, not the solution.
“Up to 50 per cent of the cost of a house and land package is taxes, fees and charges. Housing is the most heavily taxed item in the economy other than fuel, alcohol and tobacco.
“It is these taxes and government regulations that are the cause of the housing shortage and removing them is the solution.”
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