Anyone living in an apartment block has probably noticed the increasing numbers of strangers with rolling suitcases who are obviously staying in Airbnb accommodation. Living in a Toowong apartment tower, I am frequently having to help short-term visitors find their way to Toowong Village. Hence I am delighted to publish this guest post from my friend and colleague Dr Stephen Thornton, Principal of BG Economics, on the increasingly important issue of Airbnb in strata. Views expressed are Stephen’s and should not necessarily be attributed to me. GT
Will 2018 be the year for Airbnb certainty in strata?
by Dr Stephen Thornton
Queensland should finally be getting some significant changes to strata law this year, 4.5 years after the former Attorney-General Jarrod Bleijie announced that the QUT Commercial and Property Law Research Centre would undertake a property law review. To be fair, it is a big job. QUT have conducted the review in stages with a number of final recommendations reports having been completed and handed to the government.
However, one of the major contemporary policy issues in strata, how to respond to peer-to-peer short-term rental disruptors like Airbnb, was not part of the review. Having only been in operation for five years, the Californian company did not appear on the policy radar when the review was being considered.
I wrote about the benefits of providing a legislative green light to strata owners in this space last year (here) citing the Deloitte Access Economics report Economic Effects of Airbnb in Australia: Queensland in which they estimated that Airbnb guest expenditure is associated with $217.4 million in value add to the Queensland economy, and supports 2,115 FTE jobs across the state.
Just recently, MadeComfy, a short-term rental management company, used data from a commissioned 2017 study by economics and policy consultancy ACIL Allen and combined it with its own data. MadeComfy reportedly found short-term rental (STR) average weekly revenue outperformed the long-term rental (LTR) average in Sydney, Melbourne and Brisbane, with the Queensland capital registering an LTR average of $370 for apartments and $400 for houses versus a STR average of $447 for apartments and $720 for houses (Figure 1).
On the weekend, stakeholders in NSW attended a ‘Strata Matters’ forum to hear strata policy updates from Matt Kean, NSW Minister for Innovation and Better Regulation. On the agenda was the government’s Short-Term Holiday Letting (STHL) review and upcoming legislative response. According to Flat Chat apartment guru and Financial Review columnist Jimmy Thomson, the Minister advised that the government had not yet settled on a model and is still listening to all parties. Jimmy provides some takeaways from the forum here, one of which will also be relevant to Queensland:
The vast majority of people who like Airbnb and may have even used Airbnb don’t mind the letting of rooms in apartments when the owner or tenant is there (what Airbnb says it’s about) but really, really don’t want the commercial letting of whole apartments (by far the largest part of Airbnb’s business).
Anecdotally, I know that many apartment residents, particularly older folk, like the security of knowing who their neighbours are, even if some do turn over every six months (a typical lease period). Noise and other issues can be addressed over time, either informally by way of a quick chat or formally by notice of contravention of a by-law. Many may be less concerned if it were only a room being let every now and then with the permanent occupier being there. Indeed, some seniors benefit from letting a room, too, according to The Senior, with hosts aged 60-90 accounting for 16 per cent of all active hosts in the country, and a typical host income being $6,228 per year. Around 70 per cent of such hosts are women.
Like many economists, I am typically in favour of less regulation, not more. However, the state government will be required to introduce regulation in this space and there may be a case for restricting, but not banning, apartment owners in some buildings operating Airbnb and other similar services to mitigate some of the negative externalities I mentioned around security, noise and the like.
There are five regulation modules that sit within the Queensland Body Corporate and Community Management Act 1997, each of which have slightly different requirements in terms of how a body corporate may operate (see here for more information). Leaving aside the smaller ‘six packs’ and 2-lot schemes, the two residential modules for larger complexes are:
- Standard Module—highly regulated, suitable for all schemes but especially where most owners live in their own lots.
- Accommodation Module—less regulated, suitable for schemes where most owners let their lots.
A starting point for future discussion in regard to Airbnb and others might be around restricting residents to only letting out a room or rooms if the resident lives in the dwelling, too, in body corporate buildings subject to the Standard Module i.e. where most owners live in their own lots.
For residents living in strata schemes subject to the Accommodation Module i.e. where most owners let their lots, they would be free to let their entire apartment with Airbnb in addition to just a room if they so wish. I use the term ‘resident’ to mean both the owner and the tenant, although in the case of tenants the owner’s permission would be required to undertake such activities and, indeed, would likely be subject to the terms of individual leases and, therefore, subject to the relevant residential tenancies legislation.
We already have some product differentiation operating in strata schemes in Queensland, as determined in the different regulation modules discussed. Using this module framework to incorporate particular Airbnb rules would not only be a relatively simple task but it would (or should) be easier to understand. In this way, policy certainty could be achieved within the existing regulatory framework, with some amendment undertaken after full examination and consultation.
Dr. Stephen Thornton is a social economist and principal of BG Economics. Disclosure: Stephen owns a strata investment property in Brisbane.