Victoria's Airbnb dream is fading fast, potentially jeopardizing funds earmarked for crucial social housing projects. But don't get your hopes up for a sudden surge in long-term rentals – the situation is more complex than it appears.
New data paints a concerning picture: The rapid growth of short-stay accommodations like Airbnbs and Stayz in Victoria has slammed on the brakes. AirDNA, a leading data provider, revealed to The Age that listing growth flatlined in 2025 – the very year the state government introduced a 7.5% levy on short-term rentals. This levy, remember, was intended to generate revenue for much-needed social housing.
But here's where it gets controversial... Is the tax to blame? Most analysts say no. While the timing is certainly suspect, experts believe the slowdown is primarily due to the market simply cooling off after reaching peak demand. Think of it like a popular restaurant – eventually, everyone who wants to try it has done so, and the initial rush subsides.
Across Victoria, the average number of daily short-stay listings barely budged, hovering around 43,700 in both 2024 and 2025. This stagnation follows a period of significant growth as the market rebounded from the COVID-19 pandemic, with increases of 22% in 2023 and 12% in 2024. The question is: what caused the sudden stop?
"Some of the listing slowdown we’ve seen in the last few years could be attributed to hosts being deterred by higher tax levies, but it’s more likely the result of slowing demand," explains Linda Rollins, a research analyst at AirDNA.
Rollins further elaborates that accommodation demand growth decelerated from 6% in 2024 to a mere 2% in 2025. This has created a situation where supply outstrips demand, leading to lower occupancy rates and discouraging new hosts from entering the market. Imagine trying to sell something nobody wants – it's not a great business model!
The 7.5% levy on accommodation charges, announced in 2023 and implemented in January 2025, was designed to encourage property owners to shift their properties from the short-term rental market back into the long-term rental pool. The logic was simple: make short-term rentals less profitable, and owners will be more inclined to rent them out to long-term tenants, thus increasing the supply of available housing. This tax applies to stays of less than 28 days.
The revenue generated from this tax is specifically earmarked for Homes Victoria, the agency responsible for managing the state's public housing stock. The funds are intended to finance the construction and maintenance of much-needed social and affordable housing, with 25% specifically allocated for regional Victoria.
The government initially projected that the tax would generate approximately $75 million annually. And this is the part most people miss... This projection was heavily reliant on the continued strength and growth of the short-stay market. With that market now faltering, those revenue projections are looking increasingly optimistic.
This revenue uncertainty comes at a particularly vulnerable time for Homes Victoria, which recently reported a substantial $359 million deficit. The agency has been operating in deficit every year since its inception in 2021, highlighting the immense challenges it faces in addressing the state's housing crisis.
Preliminary data shows that the government raised only $19 million in the first six months of the tax's implementation. While this figure may increase as some owners have until later this month to pay for the period covered in the 2024-25 financial year, it's unlikely to reach the initial $75 million target.
Even if the levy manages to generate the full projected revenue, it's important to remember that $75 million is a relatively small amount in the context of Homes Victoria's overall financial situation. It would barely scratch the surface of the agency's existing deficit and the long-term funding required to address the state's affordable housing needs.
But that's not all! The tax also aimed to incentivize property owners to shift their properties back into the long-term rental market. However, multiple studies suggest that short-stay rentals remain more financially attractive for many owners, even with the added tax burden.
A 2025 study by the University of Canberra, led by Professor Naomi Dale, analyzed the relationship between short-term rentals and housing affordability across 18 local government areas nationwide. The study concluded that levies are unlikely to trigger a significant conversion of short-term listings to the long-term market.
Researchers found that many short-stay owners used their properties for personal holidays or had plans to move into them in the future. These owners were less likely to switch to long-term leasing, regardless of any new taxes.
"Many [short-term rental] owners were soon-to-be retirees or other people who owned the homes with the intention of moving into them in future," Dale explained. "These owners were dissuaded from switching to long-term rentals due to laws that largely favor renter rights, which may prevent them from moving into them when they need to." This raises an interesting point about the balance between protecting renters' rights and incentivizing property owners to offer long-term rentals.
State government data further supports this trend, showing that the number of active rental bonds in Victoria continued to decline in 2025, indicating an overall decrease in the availability of long-term rental properties.
Opposition Leader Jess Wilson has strongly criticized the short-stay levy, calling it a "desperate attempt" to fix Homes Victoria's "failing finances."
"Under Labor, Homes Victoria is sinking deeper into the red as a growing number of Victorians are awaiting housing support," Wilson stated. "You cannot tax your way to more affordable homes. A Liberal and Nationals government I lead will repeal Labor’s short stay accommodation tax to ease cost-of-living pressures and drive investment back into Victoria."
A state government spokesman defended Homes Victoria's deficit, stating that it had no impact on service delivery and was "driven by timing differences between government funding and project expenditure."
"Our Short Stay Levy … [is] designed to encourage more owners to make their dwellings available for longer-term rent or sale and give Victorian families more opportunities to find a home," he said. "The only way out of the housing crisis is to increase supply – that’s why we’re streamlining the planning process, and building more homes close to jobs, transport and services."
So, where does this leave Victoria's housing situation? The Airbnb boom has stalled, the revenue stream for social housing is uncertain, and the long-term rental market remains stubbornly tight. The effectiveness of the short-stay levy is clearly debatable.
What do you think? Is the government's approach the right one, or are there better ways to address Victoria's housing crisis? Should renter rights be balanced against the need to incentivize long-term rentals? Share your thoughts in the comments below!
