Strata versus Airbnb

With Airbnb’s growing fan base, it is time for strata groups to analyse their options, and the scope of their jurisdiction, to ensure that strata living remains peaceful for everyone.  We explore the regulatory instruments being used to address issues such as property damage and noise from short-term stayers.

Since its Australian launch in November 2012, Airbnb has successfully proven itself as an industry disruptor who is here to stay. It is also part of a broader trend known as the “sharing economy”, where we see consumers choosing to share assets and services via digital platforms – think Uber and Airtasker.

For those hosts who choose to rent out a spare bed, private room or whole house through Airbnb, the financial rewards are significant. According to the Deloitte Access Economics Report commissioned by Airbnb, each of the 115,000 properties listed across Australia in 800 towns and cities, averaged 15 bookings a year – worth an average $4920 in annual income for the hosts.

The majority of these properties were in New South Wales, closely followed by Victoria which hosted 651,600 guests over 1.1 million nights in 2015–16.  For holiday makers and short-term visitors renting this type of accommodation, there are substantial cost savings when compared to a standard hotel room especially in our capital cities.

Australia now has the world’s highest penetration rate for Airbnb usage, and Sydney is a top-10 Airbnb city for listings globally.

Impact on Strata Committees

Along with its growing guest list, Airbnb has also attracted its fair share of critics which has posed problems alike for strata bodies, councils, state governments and communities due to concerns over issues such as: party noise, security risks, rubbish, disrespect of property, inappropriate behaviour and other issues that are associated with temporary – usually fun-seeking – visitors.

Government and councils are missing out on fees and rates from residential properties operating like bed and breakfast businesses but not paying their way.

Landlords are also not happy because more and more of their tenants are subletting their properties on the site without their consent or knowledge.

When it comes to rules around short-term letting, it is an area of property law that is still largely unregulated and particularly confusing for strata bodies who would like to protect the interests of their residents. After all, they are the ones fronting the bill and increased strata levies for repairs and wear-and-tear from increased traffic in such areas as lifts and foyer furnishings/flooring.

A study released this month by the City of Sydney council, reported that 64 per cent of respondents said strata committees should have more power to manage impacts, such as antisocial behaviour and damage to property, and a majority margin of just 2 per cent felt that strata committees should be able to ban short-term letting in their buildings.

It also found that 52 per cent of people who live in apartments where short-term letting occurs said they were negatively impacted by it through noise, safety concerns (due to strangers in their buildings), rubbish, damage to property, overuse of communal facilities, drinking, parties, and recreational drug use.

Warnings about its long-term impact have also been raised with some suggesting that if more investment properties are bought specifically for short-term tenants, it could lead to less rental properties available for long-term residential renters and therefore result in higher rental prices across our capital cities.

Current Rulings and Proposed Changes

There have already been many rulings tipping the scales in favour of the short-term rental market. According to news reports, a Victorian Civil Administration Tribunal ruled that tenants renting out their entire home on Airbnb were not subletting and were not in breach of their rental contract.

Another Victorian ruling in the Supreme Court, found owners corporations such as body corporates could not make rules to ban short-stay operators.

Strata building by-laws restricting short-stay letting, including Airbnb, have been declared ‘invalid’ by NSW Fair Trading. Section 139 (2) of the Strata Schemes Management Act 2015 states that no by-law can prohibit or restrict the devolution of a lot or a transfer, lease, mortgage or other dealing relating to a lot.

The only way short-term letting can be restricted is by council planning regulations.

A news report by Domain earlier this year quoted Sydney councils as saying they had limited complaints about short-term letting, usually about late night noise or misuse of waste bins. Only Waverley Council – which covers Bondi Beach – is averaging about 10 complaints about holiday letting a month.

NSW Government Options Paper

An inquiry into holiday letting legislation was launched a few years ago, prompted by Airbnb hosts being threatened with $1 million-plus local council fines for running unauthorised businesses (i.e. bed and breakfasts) in their homes.

Following the inquiry the NSW Government released a public paper in July this year outlining options for regulating short-term holiday letting across the state, intending to take over what is currently an ad-hoc process from council to council.

Some of the options being considered include:

  • Short-term hosts will have to acquire a license and pay extra strata fund and compensation to neighbours to cover, for example, the costs of providing extra security and maintaining shared amenities used by their guests
  • The Government may limit the number of days that a property can be let.

The proposed changes will be open to public and industry consultation until October 31, 2017, while the Government develops a framework to control the short-term rental industry.

After the release of this options paper, Airbnb’s Australian head of Public Policy Brent Thomas released a statement taking aim at some of the proposals in the report: “These heavy-handed options would unfairly punish everyday people who rely on Airbnb, rob people of their right to share their homes in a respectful way, cost local jobs, and make it more expensive for people and families to travel”.

Airbnb has directly addressed some of the security, damage and noise concerns by introducing the Friendly Buildings Program, which has been piloted in the US and promises to redirect a recommended 5 to 15 per cent of an Airbnb booking fee back to the strata body.

The program requires Airbnb hosts and their owners’ corporation to sign an agreement, which includes a “rule book” for home sharing in the building, as well as insurance of $1 million for every booking.

Valid Option for Investors and Property Owners

Just as Cohen Handler has disrupted the property sector in Australia, we love seeing new ideas and believe there is certainly a place for short term rentals like Airbnb.

Airbnb has changed the face of property and for both investors and owner occupiers of strata properties, which is why it’s more important than ever to consider whether short-term letting could be a viable option for you.

Whether you are in favour of short-term letting or not – a professional buyer’s agent can help you identify a property that will suit your individual needs to ensure you end up on top.

Cohen Handler buyer’s agents can help you find the right property at the right price. Contact us now.

 

 

 

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