Strata lawyers scramble to plug Airbnb loopholes

A couple of stories have shone a spotlight on Airbnb and other short-term letting platforms this week.

Firstly, we have discovered (by chance) that strata lawyers in NSW are looking at the relatively new laws that are supposed to allow owners corporations to prevent short-term rentals being set up in their blocks.

And while it seems clear enough that by-laws can be adopted to ban investors from turning their empty flats into holiday homes, what about the allowance for genuine “sharing’ which is so badly written that you could drive a Kombi van full of backpackers through it?

I say “genuine” sharing because that was the original principle on which Airbnb was created – people sharing their homes and their local experience with travellers. All very kumbaya.

But then it became a global business worth about $50 billion (before the coronavirus decimated tourism) and itsdefinition of “sharing” began to sound awfully like “commercial transaction”.

Anyway, back to the sharing exemption in the Act. Section 137A (2) says this:  

A by-law has no force or effect to the extent to which it purports to prevent a lot being used for the purposes of a short-term rental accommodation arrangement if the lot is the principal place of residence of the person who, pursuant to the arrangement, is giving another person the right to occupy the lot.

OK, what is a “principal place of residence” or PPR?  Now, this is an horrendously complicated concept, which is probably why you don’t find a definition in the NSW strata Act or even in the Fair Trading Act.

It’s important, however, because it impacts on the tax you may have to pay when you sell your home.  If you’re interested, this FindLaw fact sheet does its best to explain the many complexities.

However, it’s reasonable to assume that for the purposes of the above by-law exclusion, someone who spent most of their days and nights in their apartment would claim it as their PPR.

Prime letting time

And this is where it gets tricky.  What if the PPR resident spends four or five nights a week there but then takes off for the weekend – prime time for short-term city lets – to stay with his or her parents, besties or booty-buddy.

Even worse, what if they hand over their keys over Christmas and New Year while they go off with their friends to wherever is taking Aussie tourists by then? That would test anybody’s festive spirit.

That’s why strata lawyers are currently concocting by-laws that are legal mazes full of regulatory tripwires and landmines, just to keep the short-term renters at bay.

Those that I’ve seen stop short of saying you can’t let your flat to strangers at weekends when you’re not there – because that restriction might be illegal.

But they make it so difficult to comply with their otherwise reasonable and legitimate restrictions that most would-be hosts would just give up and “permanently reside” elsewhere

Oh, and if you think the government might step in to fix the hole in their laws, you have failed to appreciate the hold the short-term letting industry has over our politicians.

Why else has the much-vaunted “code of conduct” yet to see the light of day? When the firies are saying safety is such an issue that some hosts would have to shut up shop, nobody will be rushing to put the government stamp on that.

One other thing, getting back to the tax exemptions for PPRs: if you’ve let your apartment for say 50 nights a year as a short-term let, you could be slugged proportionately on vendor tax when you come to sell.

Airbnb bubble burst

Now we all tend to use “Airbnb” as the generic term for short-term lets that you find on the internet.  It’s one of the perils of being such a dominant brand that you take on the identity of the whole sector – like LandCruiser, Hoover or Jacuzzi.

But there are times when we say Airbnb and we mean them and only them.

Like last week when they claimed to have boosted tourism to Australia by $10.8 billion (back when there was such a thing as tourism to Australia).

According to a report by Oxford Economics, Airbnb contributed that amount back in 2019 when, it’s claimed, it supported nearly 9000 jobs and its guests would then go out to spend $8.67 billion in local communities.

Fact check

That would be pretty impressive … if it was a simple as that.  But, says Professor Peter Phibbs of Sydney University, the actual facts are far from so clear-cut and may be a tad exaggerated. 

“It’s not like people didn’t travel in Australia before Airbnb,” he told Business Insider Australia. “If someone didn’t have an Airbnb tourist opportunity in the place, would they use some other opportunity? Some other competitive platform or a local B&B?”

“To accurately say what the impact of Airbnb is, they’d actually have to work out whether people would not travel at all if the Airbnb opportunity wasn’t there.

“And they haven’t done that. All they’ve done is just add up their Airbnb customers.”

Prof. Phibbs also argued that if someone stayed at the local pub in a country town instead of an Airbnb, you’d still have the same or an even greater economic contribution.

“The economic impact would probably be greater because the people might spend more time in the hotel buying meals,” he said.

“With Airbnb the travel is X. Without Airbnb it’s Y. And you’ve got to be able to prove what that difference is.

“Airbnb never do that. They just say people spend all this money. But I would argue that people also spent a lot of money travelling around before Airbnb and other platforms.

“I’ve been an Airbnb researcher for about five years,” he added. “Nothing Airbnb has ever put in a press release has been accurate.” Ouch!