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Victoria’s ‘Airbnb tax’ has failed – and unfairly targets hosts
Victoria’s 7.5 per cent Airbnb tax was sold as a housing crisis fix – but six months in, rents are higher, vacancies tighter, and tourism at risk. Did policymakers miss the mark? Examines Ethan Brown, general manager APAC at Hospitable.
On 1 January 2025, the Victorian government introduced Australia’s first statewide short-stay levy: a 7.5 per cent tax on revenue from short-term rental accommodations. Framed as a fix for the state’s rental crisis, the levy was introduced to push properties back into the long-term rental pool and increase housing supply.
But six months in, the numbers show it is not delivering: vacancy rates remain critically low, rents continue to rise, and housing availability has barely budged. The levy has done nothing to fix the crisis it was supposed to address. Instead, it has given policymakers an easy talking point while adding layers of red tape for short-term rental hosts.
Why the levy isn’t helping renters
Victoria’s housing supply was already under severe strain when the levy was introduced. In Melbourne, the state’s largest rental market, the vacancy rate in November 2024 sat at 2 per cent, already well below the 3 per cent threshold for a balanced market.
The levy has failed to bring relief to the people it was intended to help. By March 2025, the vacancy rate had dropped to 1.5 per cent, and by June, six months into the policy, it had only inched up to 1.8 per cent. That’s a movement of just 0.2 percentage points in six months. In practical terms, renters are facing the same scarcity and competition as before.
Low vacancy rates are more than just numbers. They mean fewer choices for renters, intense bidding wars for available homes, and landlords able to command higher rents. None of that has changed under the levy.
Rents have also continued to climb. By July 2025, Melbourne’s average weekly rent hit $651.62, up 2.8 per cent year-on-year, leaving tenants paying more than ever while facing the same fierce competition for scarce homes.
Why STRs aren’t the problem
Short-term rentals make up just 1–2 per cent of the overall housing stock in each Australian state. Even if every one of them switched to the long-term market tomorrow, the effect on overall housing availability would be marginal.
And there’s little sign they’re switching at all. Airbnb research found 88 per cent of Australian hosts surveyed would not offer their homes as long-term rentals even if stricter caps or rules were introduced. Many hosts said their properties were primary residences, holiday homes, or otherwise unsuitable for long-term use.
The levy hasn’t changed that reality. It hasn’t shifted host behaviour; it has simply created more paperwork and compliance costs for a small sector of the market, while the broader housing crisis remains untouched.
Why this policy could hurt tourism
Victoria’s rental scarcity isn’t limited to Melbourne. Rental vacancy rates are just as tight: in June 2025, regional Victoria’s rate was just 1.9 per cent. But in tourism-reliant towns, the levy adds a different kind of pressure.
When a seaside property in NSW or Queensland is 7.5 per cent cheaper than one in Victoria simply because of the levy, travellers are far more likely to choose the better-priced option elsewhere. This choice doesn’t just affect individual bookings; it redirects visitor spending away from local businesses and weakens the economies that depend on tourism to survive.
Why Australia needs to focus on its nationwide housing crisis
Victoria’s challenges are just one slice of a bigger national problem. Across Australia, renters are fighting for survival in an undersupplied market. In June 2025, the national rental vacancy rate was 1.3 per cent, far below the 3 per cent benchmark considered healthy.
Smaller capitals face even tighter conditions. Brisbane sits at 0.9 per cent, Perth at 0.8 per cent, and Adelaide at just 0.8 per cent. In markets this tight, renters have virtually no bargaining power.
The Victorian short-stay levy shows how easily governments can reach for a headline policy that targets a single sector rather than confronting the root cause: a chronic shortage of homes.
A better way forward
The starting point for any serious fix is to increase supply. That means building more homes, doing it faster, and making smarter use of the housing we already have.
A statewide short-term rental register would be a more effective first step than a blanket tax. It would give policymakers accurate data on where these properties are located, how they are used, and where targeted measures might help. Councils could then apply tighter rules in areas where housing is scarce without undermining tourism in regions that depend on it.
This needs to be paired with planning reform and significant investment in housing. That means building at scale and removing planning bottlenecks. The Victorian government’s plan to rezone 50 inner-Melbourne suburbs for higher-density housing, aiming to deliver 300,000 new homes near transport hubs by 2051, is the kind of long-term, supply-boosting measure that can make a real difference. While its benefits will take years to materialise, pairing this with accurate short-term rental data and targeted local policies would have far more impact than a blanket 7.5 per cent levy.
Without more supply, vacancy rates will stay low and rents will continue to rise, no matter how much pressure is placed on the short-term rental sector. The goal should be policies that work in practice.
Australia’s housing crisis is bigger than one state, one sector, or one policy, and it demands solutions that address the root cause. Until governments commit to building more homes, reforming planning rules, and using targeted measures based on accurate data, policies like the levy will remain a distraction from the real work. The solution is not more political point-scoring; it is a sustained, coordinated push to increase housing supply and make the most of the homes we already have.
Ethan Brown is the general manager, APAC, at Hospitable.
