Why overtaxing short-term rentals is a pointless plan

State governments across Australia have no meaningful policies for easing the chronic undersupply of rental properties - but they do have a talent for using the rental shortage as an excuse to raise extra revenue from the housing market.

One of the primary tactics politicians of any party or persuasion have is that they tend to scapegoat a section of the community and blame them for the problem that they (the politicians) have created.

In the case of residential real estate, they hit them with new taxes and announce to all what a great initiative it is to fix the housing and rental shortage.

It makes for great headlines, but does it actually make a difference?

I think if we look at what is happening in Victoria at the moment the answer is definitely no.

Victoria, which has the highest property taxes in the nation, is by far the worst place in Australia to own an investment property – and the State Government there continues to work hard to confirm that reputation.

It blames the rental shortage on property owners who use short-term letting platforms like Airbnb, rather than have permanent tenants and as a result, charges those offering their properties for rent on these platforms extra taxes.

Aside from the fact that investors should be able to make a decision based on their own circumstances on what they would like to do with their property, choosing to use short-term letting is a perfectly reasonable and legal thing to do.

There is considerable public demand for houses and apartments made available for holiday letting, as an alternative to expensive hotel rooms.

Airbnb didn’t cause the rental shortage in Victoria or elsewhere in Australia – it’s a very minor part of a much larger problem and curtailing it won’t create higher vacancies and lower rents for permanent tenants.

It’s not just my opinion, research by the The University of Queensland has found that banning short-term letting would not make any significant difference to the rental shortage.

What we are already hearing and seeing from investment property owners in Melbourne is that many have had enough of being overtaxed and are getting out of the game in that state completely.

The result is fewer properties for both short and long-term renters.

Addressing and improving the housing crisis was always going to take some clever thinking and strong initiative, unfortunately taxing investors who decide to list their properties through short-term rental platforms is an example of neither.