Why Sydney’s short-term rental cap won’t fix the housing crisis

Op-Ed By Ethan Brown, APAC manager at short-term rental property management software Hospitable

Sydney is once again debating the role of short-term rentals, this time through a proposal to cut the annual limit from 180 days to 60. The idea is being floated at a time when many people are feeling the squeeze of higher rents and limited housing options, so it is easy to see why it gets attention from both the public and policymakers.

On the surface, it sounds like a clear, simple way to free up more homes for long-term tenants. But once you look closely at what the cap is meant to fix, and how short-term rentals actually work in the city, the story becomes a lot less straightforward.

Short-term rentals make up only a very small slice of Sydney’s housing stock. Most estimates put them at around one to two percent, which means their ability to influence affordability is extremely limited. We only need to look at places that have tried similar restrictions to understand this.

Byron Bay introduced a 60-day cap with the hope of easing pressure on renters, but very little changed in the long-term housing market. Housing availability barely improved, yet the impact on tourism and small businesses was felt almost immediately.

A big part of the misunderstanding comes from the assumption that capped short-term rentals will automatically become long-term rentals. That is simply not what happens. Recent research from Airbnb and YouGov found that only about 12 percent of Australian hosts would consider offering their home on the long-term rental market if short-stay caps were tightened.

In other words, 88 percent said they would not.

This is because many of these homes are owner-occupied much of the year, used as family holiday homes or not suitable for long-term tenants due to their layout, location or the owner’s circumstances. A cap does not magically transform them into full-time housing. In most cases, it leaves them empty for longer stretches, which does nothing to help residents and removes spending from local communities.

If the goal is truly to improve housing affordability, the conversation has to move to the real driver of the issue, which is the shortage of new homes. And that problem is not confined to Sydney. It is happening right across the country. Most states are struggling to build enough housing to meet growing demand, and Australia is already on track to fall short of its national target of 1.2 million new homes by 2029.

The challenges are consistent wherever you look. Building is expensive, labour is in short supply, finance is difficult to secure and planning processes slow everything down. Until these structural issues are addressed, housing will remain under pressure, regardless of how many limits individual cities place on short-term rentals.

Only once this reality is recognised does it make sense to look at the wider consequences of a cap. Sydney is not only a place to live but one of the world’s most visited cities. Travellers expect a mix of accommodation options. Hotels serve an important role, but short-term rentals offer something different. They bring visitors into neighbourhoods, allow families and groups to stay together and support a wide range of local jobs. Cleaners, trades, café owners and small hospitality businesses all rely on the activity that short-term rentals generate. Reducing that choice weakens an important part of the city’s economy without delivering real gains in housing supply.

There is also a fairness question that often gets overlooked. Many people have spent years working toward the point where they can afford a second home or investment property. They take on risk, debt, stress and responsibility to get there. They should have control over how that asset is used. Restricting or penalising owners does not create new long-term housing, and it does not solve the challenges renters are facing. It simply adds another layer of frustration without addressing the deeper issues holding back housing supply.

If a 60-day cap is introduced, hosts will respond in predictable and practical ways. Many will concentrate their bookings into the busiest period of the year and close for the rest. This does not increase long-term rental supply.

What it does do is reduce accommodation options for visitors and take income away from the neighbourhood businesses that rely on tourism to stay open year-round. In some cases, it also means holiday homes will sit vacant for months at a time, which benefits no one.

Sydney needs a policy that reflects the full complexity of the issue. Short-term rentals are a convenient target because they are visible and easy to blame, but they are not the cause of the affordability crisis. Real progress will come from increasing housing supply, easing the barriers to construction and supporting growth in a way that benefits both residents and visitors.

A 60-day cap may create the feeling that something is being done, but it does not fix the issue it targets. Sydney, and Australia more broadly, deserves solutions that make a genuine difference and address the root causes of the housing shortage, rather than policies that offer the appearance of progress without the substance.

Read more about the short term rental industry in AccomNews HERE: STRive to Thrive Conference 2025: The future of short term rentals unveiled