The short-term stay that tax reform may make permanent

The federal government’s overhaul of property taxes will force investors in short-term rentals to rethink their plans and could free up homes in the nation’s major capital cities, with Anthony Albanese arguing outlets like Airbnb have become a factor in the property market.

Amid expectations that house prices will ease over the next year because of the government’s planned changes to capital gains tax and negative gearing, property analysts believe there will be a flow-on impact to the holiday rental sector.

Albanese was pressed by a caller on ABC radio on Wednesday about how his government’s planned negative gearing reforms, which will limit negative gearing to new builds, would affect the supply of new long-term rentals when so many homes had been turned into short-term holiday rentals.

There are an estimated 175,000 short-term rentals in Australia, or 1-2 per cent of the rental market, with the majority in capital cities and major tourist centres. There was a drop in these properties during the early stages of the pandemic as the international border was closed, but there has been a sharp increase since 2022.

That has coincided with a fall in the nation’s rental vacancy rate and an explosion in rents. The vacancy rate has more than halved since 2020, falling to just above 1 per cent. Rents have jumped by more than 22 per cent since mid-2023.

Albanese told reporters that short-term rentals were a factor in the tight rental market, and that the government’s changes were aimed at giving young Australians a chance of buying their own home.

“Everyone knows it’s broken. Everyone knows that young people are not getting a fair crack at a roof over their head, which is why we’re pursuing reform. Reform is always hard when it comes to tax reform, but it’s the right thing to do,” he said.

The government’s modelling of its changes suggests house prices will be 2 per cent lower than they would have been without the reforms, while it has estimated rents may climb by less than $2 a week.

University of Sydney professor of urban and regional planning Nicole Gurran, who recently co-authored a report into the impact of short-term rentals, said a number of factors had contributed to the nation’s tight rental market.

She said it was clear short-term rentals contributed to the squeeze, particularly in and around central business districts.

According to Gurran, while current negatively geared rentals were protected under the government’s reforms, there was likely to be an impact on investors who may have been seeking to buy an existing property to turn into a shor