Short-stay market growth stalls, threatening social housing revenue

The government had originally projected the tax would increase by about $75 million per year; this figure was largely due to the continued strength of the short-term accommodation market.

The income uncertainty comes at a precarious time for Homes Victoria. The agency that manages the state’s public housing stock recently recorded a $359 million deficit.

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In the first six months of the tax, the government collected only $19 million. However, the final figure may rise as some owners must make payments by this month for the period covered by the 2024-25 financial year.

Even if the tax raises all expected revenue, it would do little to improve the current financial position of Homes Victoria, which has run a deficit every year since its inception in 2021.

The tax also appears to have done little to achieve its other goal of returning properties to the long-term rental market; Numerous studies show that short-term rentals continue to be financially advantageous for many property owners.

A 2025 University of Canberra study led by Professor Naomi Dale, which analyzed the relationship between short-term rentals and housing affordability in 18 local government areas across the country, found taxes were unlikely to trigger a significant conversion of short-term listings to the long-term market.

The researchers found that most short-term accommodation owners use their properties for personal holidays or plan to move into their properties, meaning they are unlikely to switch to long-term rentals regardless of the new taxes.

“A lot [short-term rental] Homeowners are soon-to-be retirees or others who own homes with the intention of moving into them in the future, Dale said.

“These property owners have been deterred from moving into long-term leases, largely due to laws that favor tenant rights and may prevent them from moving in when they need to.”

State government data shows the number of active rental bonds in Victoria continuing to decline in 2025; This shows that there is a decrease in the number of long-term rental properties available overall.

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Opposition Leader Jess Wilson said the short-stay tax was a “desperate attempt” to fix Homes Victoria’s “failing finances”.

“Under Labor, Homes Victoria is sinking further into the red as more and more Victorians await housing support,” Wilson said.

“You can’t tax your way to more affordable homes. The Liberal and National government I lead will scrap Labour’s short-stay tax to ease cost-of-living pressure and return investment to Victoria.”

A state government spokesman said Homes Victoria’s deficit had no impact on service delivery and was “due to timing differences between government funding and project spending”.

“Our Short Stay Tax… [is] “It is designed to encourage more homeowners to rent or sell their homes long-term and give Victorian families more opportunities to find a home,” he said.

“The only way out of the housing crisis is to increase supply, so we are streamlining the planning process and building more homes closer to jobs, transport and services.”

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