Victoria's Airbnb bubble has seemingly burst, but don't get your hopes up for a sudden flood of affordable rentals. The rapid expansion of the short-stay accommodation market, fueled by platforms like Airbnb and Stayz, has come to a screeching halt, and this slowdown could have serious consequences for social housing initiatives.
Here's the breakdown: the Victorian government introduced a 7.5% levy on short-stay rentals, hoping to disincentivize owners from using their properties for short-term stays and encourage them to make those properties available for longer-term rental. The revenue generated from this levy was specifically earmarked to fund Homes Victoria, the agency responsible for managing the state's public housing stock and building more affordable homes. The initial expectation was that this levy would generate a substantial $75 million annually.
But here's where it gets controversial... Data from AirDNA reveals that growth in short-stay listings stagnated in 2025, the very same year the levy was introduced. This raises the question: Is the tax to blame?
According to analysts, the answer is likely no. While the tax might have played a minor role, the primary culprit appears to be a cooling market. After a significant post-COVID boom, demand for short-stay accommodation seems to have hit a ceiling. In 2025, the average number of daily short-stay listings across Victoria was 43,735, virtually unchanged from the 43,738 listings in 2024. This is a stark contrast to the 22% increase in 2023 and the 12% increase in 2024.
AirDNA research analyst Linda Rollins explains that accommodation demand growth slowed considerably, from 6% in 2024 to a mere 2% in 2025. This has created a situation where supply now exceeds demand, leading to lower occupancy rates and discouraging new listings. Think of it like a popular restaurant: when it's always packed, everyone wants to go. But when tables start sitting empty, fewer people bother showing up.
The 7.5% levy, announced in 2023 and implemented in January 2025, applies to stays of less than 28 days. The idea was to make long-term rentals more attractive by increasing the cost of short-term options. The government anticipated that the levy would provide a vital source of funding for Homes Victoria, with 25% of the revenue allocated to regional Victoria.
And this is the part most people miss... The timing couldn't be worse for Homes Victoria, which is already facing financial challenges. The agency recently reported a $359 million deficit. While the levy generated $19 million in its first six months, the final figure might increase as some owners have until later this year to pay for the 2024-25 financial year. Even if the levy reaches its target revenue, it won't be enough to significantly improve Homes Victoria's financial situation, as the agency has been operating in deficit since its creation in 2021.
Furthermore, the levy seems to have failed in its other objective: shifting properties back into the long-term rental market. Multiple studies suggest that short-stay rentals remain more profitable for many owners. A 2025 University of Canberra study, led by Professor Naomi Dale, analyzed the relationship between short-term rentals and housing affordability across 18 local government areas. The study concluded that levies are unlikely to trigger a substantial conversion of short-term listings to long-term rentals.
Researchers discovered that many short-stay owners either used their properties for personal vacations or planned to move into them in the future. These owners were unlikely to switch to long-term leases, regardless of the new taxes. Professor Dale noted that laws favoring renter rights might also deter owners from switching, as they could face difficulties moving back into their properties when needed. State government data also indicates a continued decline in the number of active rental bonds in Victoria during 2025, suggesting an overall decrease in available long-term rental properties.
Opposition Leader Jess Wilson has criticized the short-stay levy as a "desperate attempt" to address Homes Victoria's "failing finances." She argues that taxing short-stay rentals is not a solution to the affordable housing crisis and has pledged to repeal the tax if elected.
In response, a state government spokesman stated that Homes Victoria's deficit doesn't affect service delivery and is due to timing differences between government funding and project expenditure. The spokesman also reiterated that the short-stay levy is designed to encourage owners to make their dwellings available for longer-term rent or sale, providing more housing opportunities for Victorian families.
So, where does this leave us? The short-stay market is cooling, the Airbnb levy might not be the silver bullet everyone hoped for, and Homes Victoria continues to grapple with financial challenges. Will increased housing supply and streamlined planning processes be enough to address the housing crisis? Or are more radical solutions needed? What are your thoughts on the effectiveness of the Airbnb levy and its impact on the Victorian housing market? Do you think it's a fair tax, or does it unfairly target property owners? Let us know in the comments below.
