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Despite the fact the search for new legislation on holiday lets was sparked by massive fines threatened against free-standing house owners letting rooms on Airbnb, it’s apartment blocks that are the main battleground for proposed short-term letting laws.
In a nutshell, many people who bought or rented apartments to establish a home don’t see why they should tolerate their buildings being turned into de facto hotels.
On the other hand, some owners and renters don’t see why they shouldn’t have the same rights as free-standing house residents to do exactly as they wish with the property they have paid for.
D-Day is approaching for holiday let legislation to be tabled in the NSW parliament. Photo: Michele Mossop
The stakes are high. The areas where most tourists want to stay are also the parts of Sydney with the highest proportion of apartment blocks.
That’s why online agency Airbnb has pumped up its efforts, including advertising on TV, online and in print, to persuade NSW MPs that they are a benign and beneficial presence in the Sydney property market whose access to strata units should be increased rather than restricted.
What’s actually going to be presented to Parliament next month is anyone’s guess. But this has very little to do with the highly publicised “party flats” that can be dealt with in strata law anyway, or holiday houses in coastal resort towns that deserved their own separate inquiry.
Apartment blocks are the main battleground for proposed short-term letting laws. Photo: Jessica Shapiro
So here are the most likely possibilities, the first three of which, our spies tell us, have been actively considered by government ministers.
1. The Coure option
The proposal:
The public inquiry chaired by MP Mark Coure recommended that holiday lets should be complying developments (not restricted by residential-only zoning) and that this should apply to apartments and houses equally.
The areas where most tourists want to stay – such as inner city suburbs like The Rocks – are also the parts of Sydney with the highest proportion of apartment blocks.
In the case of strata blocks, that would invalidate any by-laws that restrict short-stay lets by supporting local zoning (the only legally enforceable by-laws they can have on holiday lets).
However, undefined additional powers for apartment owners corporations to deal with badly behaved hosts and guests, and an unspecified limit on the number of nights a year homes could be let, are both proposed.
The winners:
The public inquiry chaired by MP Mark Coure recommended holiday lets should be complying developments and that this should apply to apartments and houses equally. Photo: John Veage
Airbnb and its hosts, as well as foreign or interstate travellers who would for the first time get access to some of Sydney’s best-run and best-located buildings.
The losers:
Apartment residents who thought they were buying or renting a residential home, who would have to pay higher levies for additional wear and tear as well as expending time and effort to check the number of nights apartments were let and then pursue miscreants.
The worst-case scenario:
The people who have built communities in some of our best buildings sell up and move out while the going’s good, leaving the buildings to deteriorate in the hands of opportunist investors.
A secret war could break out – and already has in some buildings – where committees cut off access to communal facilities such as pools, parking and gyms on dubious security grounds, forcing holiday lets out of their blocks.
Tenants could find that they are on nine-month leases (or 365 days minus the as-yet undefined holiday let limit) so that short-stay letting hosts can move them out and maximise their income in the high season around Christmas, then move medium-term tenants back in when the tourists are gone.
2. The super by-law
The proposal:
One of the reasons given by the Coure report for not differentiating between houses and apartments is a clause in our strata laws – Section 139 (2) – that prevents owners corporations from interfering with “dealing” with apartments, in terms of leases or sales.
However, another law was brought after the report was tabled, allowing 75 per cent of owners to force the other 25 per cent to sell. What value “not interfering with dealing” now?
With that in mind, there’s a view that a “super by-law”, like the collective sale rules, requiring the support of 75 per cent of all owners (rather than just those voting at a meeting) could be an acceptable compromise.
There might also be provisions for a “friends and family” allowance so that house-sits and home-swaps wouldn’t be affected.
The winners:
Owners and residents in exceptionally well-run buildings where they are organised and involved, have a strong sense of community and could galvanise the required 75 per cent of all owners.
The losers:
Airbnb and other online rental agencies, and their high-rolling hosts, who would be kept out of the very best buildings. However, anti-holiday let residents in buildings with a high number of investors or apathetic owners would also lose as they could never organise 75 per cent of all owners to say no.
The worst-case scenario:
A select elite of better-run buildings would be immune from the spread of short-stay letting while investors snapped up enough apartments in vulnerable buildings in good locations to block efforts to limit holiday lets.
3. The regular by-law
The proposal:
Some strata insiders take the view that section 139 (2) should be scrapped or greatly modified, allowing owners to vote on issues such as short-stay letting by the same methods they are allowed to establish other by-laws, such as limits on the number of people allowed to stay in apartments (another legal anomaly).
Again, there would be a “friends and family” allowance and owners corporations would be able to allow holiday letting, if they wanted, but on their own terms which would be set out in the by-laws.
This would not require 75 per cent of all owners to pass – just 75 per cent of those attending a general meeting in person or by proxy. In theory a handful of owners in a largely apathetic building could pass this and, likewise, a relatively small group of determined pro or anti-Airbnb owners could block the specific by-laws.
The winners:
Residents in buildings where a large majority of actively engaged owners wanted to limit or completely ban short-stay lets.
Alternatively, pro-holiday let owners who were able to muster enough votes to block any limit or ban.
The losers:
Holiday letting landlords, Airbnb, Stayz and other online agencies in buildings where they are not wanted. But also permanent residents in residential buildings where there is no strong sense of community or where the strata committee is dominated by absentee investors.
Residential tenants, especially, could suffer if by-laws were written to allow unfettered holiday letting, as studies have shown that rents rise faster in areas where holiday lets are more common.
The worst-case scenario:
For permanent residents, if investors rushed through laissez-faire bylaws that would then be difficult to undo as it only takes 25 per cent of votes at a meeting to block by-law changes.
For holiday letting landlords, obviously, if short-stay lets were banned completely from their buildings.
4. The strata exemption
The proposal:
Parliament could pass the Coure proposals, but with the specific exclusion of whole homes in strata schemes. In other words, if you are in a residential-only building you could only let a room in your flat, not the whole apartment, to short-stay guests.
Houses, however, would be free to be let partly or in their entirety, regardless of the zoning, with limits on the number of nights set by the council.
Now, if you believe the Airbnb mantra that they are all about ordinary people letting a room in their homes, then you’d think they would embrace this whole-heartedly.
But they and we know that almost two-thirds of their lets are for whole homes and, in their most popular city areas, that means apartments.
The winners:
Permanent residents in apartment buildings, including those who want to be part of genuine Airbnb home-sharing but not to let their whole flat.
The losers:
Airbnb, Stayz, the other online agencies, and their hosts, who make most of their money from the large numbers of apartments that are let as whole homes.
The worst-case scenario:
Strata committees would be constantly having to check that the room lets weren’t actually for the whole apartment. But they are doing that anyway so it’s not a huge issue.
5. The ‘do nothing’ option
The proposal:
There is a sense around the Airbnb issue that this may be a solution in search of a problem. Generally speaking, in buildings where the majority of owners don’t want short-stay letting, they are able to exclude it. In other buildings where it is tolerated, they seem to be able to manage it.
Deal with room lets in houses and there really isn’t much of a problem – apart from the hemorrhaging of rental accommodation into the short-stay letting market. The answer to that problem certainly isn’t to open the floodgates to unfettered holiday rentals
So the “if it ain’t broke, don’t fix it” principle may well apply here and you have to wonder how much harm would be done if the government decided to defer or dump the Coure report. The Liberals catch-phrase is, after all, “let the market decide”. Maybe they should.
The winners:
Everybody, to some extent. Short-stay letting is increasing anyway but buildings that don’t want it are able to keep it out.
House dwelling MPs who can’t see what all the fuss is about as there are no votes in it in their constituencies.
The losers:
The online agencies that desperately want increased access to our best inner-city apartment blocks – which, ironically, are those best equipped to keep them out.
The wannabe hosts who have bought apartments in buildings that ban holiday lets in the hope that the law would change in their favour.
And tenants who find they are competing with overseas holidaymakers who are paying twice the going rate to stay in flats that would otherwise be residential.
The worst-case scenario:
No change to the law could see whole buildings turned into de facto hotels as permanent residents moved out to better-managed schemes.
With fewer owners and long-term tenants living there, standards would drop very far, very quickly and the spectre of hostel fires, over-crowding and high-rise slums could come back to haunt us.
Jimmy Thomson writes the Flat Chat column in the Sydney Morning Herald and edits the advice website flat-chat.com.au.