Victoria’s Airbnb Boom Has Fizzled — But Don’t Count On A Rental Market Breakthrough

Victoria’s much-talked-about Airbnb boom appears to have lost momentum, according to recent data and expert analysis — a development with important implications for the state’s housing market, tourism economy, and ongoing affordability crisis. After years of rapid growth in short-stay listings throughout the state, new figures suggest that the expansion of the Airbnb and broader short-stay rental sector has stagnated, raising questions about projected revenue and potential impacts on the long-term rental supply.

Airbnb Growth Comes to a Standstill

For several years, Victoria experienced strong growth in short-stay listings, particularly through platforms like Airbnb and Stayz, as property owners looked to capitalise on booming tourism demand. But recent data shows that this trend has stalled, with relatively flat growth in listings over recent months. This slowdown has been highlighted by analysts as a sign that the Airbnb boom — once viewed as a burgeoning contributor to Victoria’s accommodation landscape — is now plateauing.

One factor often cited in discussions about this shift is Victoria’s 7.5 per cent short-stay levy, introduced with the intention of both generating revenue for housing initiatives and encouraging property owners to return listings to the traditional long-term rental market. While the tax has generated some revenue — approximately $19 million in its first six months — it fell well short of initial projections, which envisioned around $75 million annually.

However, even where the levy has had an impact, there’s limited evidence that it’s prompting a significant reallocation of properties into the long-term rental sector. That’s largely because many Airbnb hosts view their properties as personal holiday homes, future retirement residences or flexible assets that they aren’t inclined to lease out on a long-term basis, regardless of tax incentives.

Why Rental Stock Isn’t Flooding the Market

For renters in Victoria, the hope that a slowdown in short-stay properties would translate into a sudden surge of available long-term rentals has not materialised. Despite a levelling off in Airbnb listings, the number of available rental properties — as measured through rental bond data — continued to decline in 2025, indicating that rental vacancy rates remain tight.

Experts argue that short-stay rentals represent only a small percentage of the total housing stock, and even dramatic shifts in how they’re used would likely have modest direct effects on supply. That means broader structural issues — including slow housing construction, population growth and limited new dwellings coming onto the market — remain the dominant factors driving rental scarcity.

The Victorian government has emphasised that measures such as the short-stay levy are part of a wider strategy to support housing supply and ease pressure on renters. They argue that revenue from the tax will help fund housing projects and initiatives aimed at boosting long-term accommodation options for households in need. Critics, however, counter that taxing a relatively small segment of the housing market does little to address the chronic undersupply of homes that is central to Victoria’s rental affordability crisis.

Tourism and Local Economies at Stake

While slower growth in Airbnb listings might be welcomed by some advocates for long-term renters, the story isn’t that straightforward. Short-stay properties have played a significant role in Victoria’s tourism ecosystem, accommodating travellers in city centres, coastal towns, and regional hotspots alike. These listings, whether whole homes or private rooms, have helped support local tourism businesses by broadening accommodation capacity beyond hotels alone.

The drying up of new listings raises concerns among some tourism operators, as fewer flexible short-stay properties could reduce capacity during peak seasons and dampen visitor spending in key destinations. Many small business owners in regional locations, in particular, rely on tourism flows that short-stay rentals help facilitate.

Balancing Housing Supply and Tourism Needs

The challenge facing policymakers is one of balance: how to protect and grow Victoria’s tourism industry while also ensuring that housing is affordable and increasingly available to long-term residents. Experts argue that tackling the underlying causes of housing shortages — such as slow planning approvals, limited construction of new dwellings, and fragmented local development policies — will be far more effective than relying on tweaks to short-stay rental regulations alone.

Some analysts have also suggested more nuanced regulatory approaches that allow short-stay rentals in areas where they can thrive without harming housing stock, while tightening rules in neighbourhoods with critical rental shortages. The aim, they say, should be to foster a diversified accommodation landscape that supports vibrant tourism economies without sidelining the needs of long-term renters.

Moreover, while cities like Melbourne continue to manage high rental demand and low vacancy rates, alternative accommodation trends are emerging. An increasing number of residents and visitors are exploring flexible living options such as co-living spaces, dual-purpose homes and shared accommodation models. These trends reflect a broader shift in how people think about housing and travel, shaped by affordability pressures and evolving lifestyle preferences.

Ultimately, the end of Victoria’s Airbnb boom — at least in terms of rapidly rising listings — does not signal a dramatic easing of pressure on the rental market. Instead, it paints a picture of a housing system under strain, where supply bottlenecks and affordability challenges persist despite policy interventions. Addressing these deep-rooted issues will require sustained investment in housing supply, smarter planning frameworks and a willingness to innovate across both the rental and tourism sectors.

In the coming years, Victoria’s housing landscape is likely to remain a key focus of political debate and public concern, with furnished short-stay accommodation’s role continuing to be part of that broader conversation. Policymakers will need to navigate complex trade-offs and engage with communities across metropolitan and regional areas to craft solutions that genuinely support both residents and the state’s vibrant visitor economy.