Certainty and recognition for NSW short-term rentals under new regulations in 2021

Starting November 2021, new rules under the Short-term Rental Accommodation (STRA) Planning Policy will commence across NSW.

At a state level, this policy will validate the permissibility of short-term rental accommodation and Airbnb's across NSW, in a welcome move that will end years of confusion caused by different rules across local council zones.

Short-term accommodation is formally recognised under the new planning framework as a legitimate residential dwelling use and an 'exempt development' which will not require local council approval if used according to the rules of the policy.

The new laws complement existing NSW legislation in 2020: updates on the limits of strata by-laws prohibiting short-term rental and the NSW short-term rental accommodation code of conduct.

NSW Short-term Rental Accommodation (STRA) Policy Rules

To qualify as an exempt development STRA dwelling, the following criteria and rules must be met:

1) 180-day booking cap (with an exemption for bookings 21 days or longer)

For properties where the host is not present on the premises (non-hosted STRA) and located in Metro/Greater Sydney and several regional local council areas, the dwelling can be rented on short-term up to 180 days per year.

However, any bookings 21 days or longer will not count toward the cap, and thereby increasing the effective occupancy rate of a short-term rental.

2) Properties are listed on a NSW government-run industry register

Which will ensure rules are properly enforced, and only hosts, property owners and management agents that plan to comply with the framework will be allowed to participate in the short-term rental industry.

3) Minimum fire safety standards

These include smoke alarms, fire extinguishers, fire blankets and evacuation diagrams (requirements depend on the property type).

Does the 180-day cap mean short-term rentals will earn half as much revenue?

No, and far from it because:

1) The market occupancy average for short-term rentals is not 100%, rather, closer to 75%.

With the exemption of 21 day or longer bookings, a property would need to only secure four bookings over a year of the minimum 21 days (or less if any bookings are longer than 21 days) to reach the existing market average occupancy, once they have filled their 180 days.

"At MadeComfy we're actively marketing to capture a larger share of these extended stay bookings through our booking website, reservations service, loyalty program and corporate stays. Bookings 21 days or higher represented 24% of our total booking revenue in 2019 Vs 34% in 2020."

2) The average nightly rate for properties differs significantly between peak seasons, weekends Vs weekday and special peak event periods such as school holidays or new years eve.

These dates, likely to already make up close to 50% of existing booked nights, represent a disproportionate share of booking revenue over a year. A dynamic pricing strategy that leverages these nightly rate differences intelligently, will ensure your revenue will be maximised.  

3) These rules will be resulting in less competition from owners without the right pricing strategies - thereby reducing the overall supply of short-term rentals in the market and putting upward pressure on average nightly rates.

Summary

As Australia's leading short-term rental management company, MadeComfy welcomes the certainty and recognition that the NSW short-term rental planning policy will bring to the industry.

For property owners requiring assistance with navigating the new rules in NSW, CONTACT MADECOMFY today.