In a significant move aimed at addressing the housing crisis, the Victorian government has announced the Short Stay Levy Bill 2024, a new levy on short-term rental properties, including popular platforms like Airbnb. Starting from 2025, this new tax will impose a 7.5% levy on short-stay accommodation bookings made from 1st January 2025. While the policy aims to alleviate housing shortages, it has raised concerns among property owners. Here’s a closer look at what it means for hosts and strategies they can use to minimise its impact.
Why Is the Levy Being Introduced?
Victoria, like many regions worldwide, is grappling with a growing housing affordability crisis. Short-term rental platforms have been criticised for reducing the supply of long-term rental properties, driving up rents, and exacerbating housing scarcity in key areas. The 7.5% tax is designed to discourage the overuse of properties for short-term stays while generating additional revenue to fund social and affordable housing projects.
What Does the Levy Mean for Hosts?
For property owners renting out their homes on platforms like Airbnb, the new tax will directly affect their revenue. Hosts will now need to factor the 7.5% levy into their pricing strategies. Here are some key points to consider:
- Higher Operating Costs: Hosts will likely have to raise their nightly rates to offset the levy, which could make their listings less competitive.
- Increased Compliance: Hosts will be required to register their properties and adhere to new reporting obligations to ensure transparency.
- Impact on Profit Margins: Particularly for casual hosts or those managing one property, the levy might reduce the profitability of short-term rentals.
How Can Hosts Minimise or Avoid the Tax?
While the levy is mandatory for short-term rental properties, hosts can explore strategies to reduce its impact or avoid paying it altogether:
- Transition to Long-Term Leasing:
- Switching from short-term to long-term rentals can exempt hosts from the levy, as the tax applies only to short-term stays. Long-term leasing also offers more stable income and reduces the need for frequent property management.
- Operate Within Exemptions:
- The government may provide exemptions or reduced rates for certain types of rentals, such as primary residences rented out for a limited number of days per year. Check if your property qualifies for these exemptions.
- Optimise Pricing Strategies:
- Adjust your nightly rates to account for the levy while maintaining competitiveness. Highlight unique features of your property, such as location, amenities, or personalised experiences, to justify higher prices. Peak & Flow’s Revenue Management Service can assist implementing this for your property or portfolio
- Focus on Direct Bookings:
- Platforms like Airbnb typically charge service fees in addition to taxes. Building your own website or using other booking tools to attract direct bookings could save costs and offer more flexibility.
- Diversify Income Streams:
- Consider offering additional services such as guided tours, equipment rentals, or meal packages to increase overall revenue and offset the tax burden.
- Stay Updated on Local Policies:
- Regulations often evolve, and new opportunities or loopholes might arise. Keeping informed about local government announcements can help you adapt your strategy.
Broader Implications for the Housing Market
Housing advocates have welcomed the levy, arguing that it’s a step toward prioritising housing for local residents over tourists. By making short-term rentals less lucrative, the policy could encourage property owners to transition back to long-term leasing, increasing the supply of rental homes.
However, critics argue that the tax doesn’t address underlying issues like zoning laws, planning regulations, or the lack of new housing developments. Some fear that the levy might simply push short-term rental activity underground, making it harder to regulate.
Final Thoughts
Victoria’s new Airbnb tax reflects a growing trend of governments stepping in to balance tourism and housing needs. While it’s too early to predict its full impact, hosts should proactively explore strategies to navigate the levy’s financial implications. From transitioning to long-term leasing to optimising pricing and exploring exemptions, there are ways to mitigate the burden.
For hosts, this policy marks a shift in how short-term rentals are managed in the state. Staying informed and adaptable will be key to thriving in this changing landscape.