Short-Term Rental Cap Under Scrutiny
The City of Sydney council is actively investigating a significant reduction in the permitted duration for un-hosted short-term rental properties. The current proposal seeks to slash the cap from 180 days per year down to 60 days, a move aimed at reclaiming a portion of the estimated 5,000-plus homes currently locked out of the long-term rental market. This reconsideration follows sustained resident and councilor concerns that such properties are actively hollowing out neighborhoods, turning residential areas into what some describe as "one giant resort."
This investigation comes after the council passed a motion to examine such a cap, drawing inspiration from the Byron Shire Council's implementation of a similar 60-day limit in specific areas. While the Byron model has shown some positive signs, its success is noted as partial, with the cap removed entirely from prime tourist zones. The City of Sydney's move also coincides with its own prior attempts to address the issue, including correspondence from the Lord Mayor to the NSW Government in April 2025, reiterating concerns and urging reform. The state government, through ministers for Better Regulation, Planning, and Housing, has previously indicated that local councils can lodge their own planning proposals to adjust these limits, akin to the Byron approach.
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Neighborhoods Feel the Squeeze
Specific areas within the City of Sydney, including Millers Point, Dawes Point, Darlinghurst, and Paddington, are cited as experiencing a "pernicious effect" from the proliferation of non-hosted short-term rentals. Residents in Millers Point, in particular, report that a substantial portion of housing stock has transitioned to short-term accommodation, with anecdotal evidence suggesting more than half the homes on some streets are listed on rental platforms. Some councilors, like Jess Miller, have gone further, proposing a complete ban on new un-hosted rentals until vacancy rates reach a minimum of 2.5%, arguing that current regulations have loopholes exploited by commercial operators managing multiple properties.
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Broader Policy Landscape and State Government Role
The City of Sydney's deliberations occur against a backdrop of broader discussions about short-term rental regulation at the state level. The NSW Government has acknowledged concerns and is reportedly reviewing the sector, having received communications from the City of Sydney about incentivizing long-term rentals and potential tax reforms. However, a consistent theme emerging is that the effectiveness of any local day cap may be contingent on NSW Government action to address integrity issues within the Short-Term Rental Accommodation (STRA) Register. Furthermore, the council acknowledges that reducing day caps alone might not directly and significantly alter rental affordability or vacancy levels, suggesting a need for a more comprehensive suite of measures. These could include restrictions targeting non-primary residences, levies, special rates, and other planning controls. The council is also reportedly seeking insights from short-term rental platforms themselves regarding potential regulatory options.
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Historical Context and Previous Efforts
This current push to investigate stricter caps on short-term rentals is not an isolated event. Previous reviews and council discussions dating back to at least June 2020 have highlighted the impact of short-term rentals on housing affordability and availability within the City of Sydney. A study commissioned in May 2023 specifically aimed to analyze these impacts, leading to the identification of various policy options. Similarly, other local councils, such as Randwick City Council, have also voiced concerns and argued for greater power to set limits on non-hosted STRA, noting that 7.7% of metropolitan Sydney's STRA listings were in their area as of December 2024.
The NSW Department of Planning's discussion paper on short- and long-term accommodation has also been a catalyst for local government input. While the state government has considered stricter rules and charges on holiday homes used for short-term rentals, concrete legislative changes have yet to materialize, leaving local authorities to explore their own avenues.
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