A new report into the regulation of short-term holiday rentals through online platforms like Airbnb says local councils need greater certainty about how to regulate the rapidly growing sharing economy.

The report Short-Term Holiday Letting, by the Legislative Assembly Committee on Environment and Planning was tabled in Parliament on Wednesday this week after an 18-month inquiry.

It recommends easing restrictions on short-term renting so that home owners can rent out a room – or their entire house – without being fined by local councils for failing to lodge a development application for change of use.

Some of its recommendations talk about giving NSW councils a framework of how to deal with short-term rental accommodation (STRA), using regulations within the existing planning system but adding more detail.

This would include coming up with a definition of STRA within the Principal Local Environment Plan, for example, by defining use as STRA according to the number of days per year a property is rented out or the number of bedrooms occupied.

It also suggests amending the State Environmental Planning Policy(SEPP) on exempt and complying development to permit STRA and make the process quicker and easier.

Classing STRA as a residential use would also mean that the Building Code of Australia was not triggered, provided there are no special circumstances, making it cheaper and less arduous for people to rent out their homes.

The Committee also recommended that the State government establish a compliance system, while retaining a light regulatory touch.

“While we find that STRA is a low impact activity, the instances we heard of high impact STRA were real and serious,” said the report.

“When STRA is managed badly, or when rogue operators take advantage of their neighbours, it is vital for councils to have tools available which they can use within limited budgets and staffing to respond quickly to complaints and achieve effective outcomes.”

The report says that the Environmental Protection Act legislation already gave “clear and practical investigate powers” to councils to target non-compliance, for example around search and entry and getting information from landlords.

However, it suggests streamlining complying development certificates for the initial assessment, to set requirements such as smoke alarms and minimum waste disposal standards, and for councils to use as a compliance tool.

Another recommendation was that the Holiday and Short-Term Rental Code of Conduct be used more widely to set standards of behaviour, provide advice to owners and help councils regulate STRA.

“Using the Code as a compliance tool will free councils from much frontline compliance work, leaving them to focus on the most problematic properties,” the report said.

The Committee recommends that the NSW Government:

• changes planning laws to regulate short-term rental accommodation
• allows home sharing, and letting a principal place of residence, as exempt development
• allows empty houses to be let as exempt and complying development
• investigates impacts on traditional accommodation operators
• strengthens the Holiday and Short-Term Rental Code of Conduct
• develops a compliance system
• issues guidance and provides education for councils and the community
• communicates with owners about their rights and obligations
• amends strata laws and later reviews the effectiveness of changes
• collects information on the industry

Winners: Home owners who want to rent out a room or their house; accommodation sharing websites, like Airbnb; councils (hopefully) if they are given a proper framework to deal with STRA, without a large regulatory burden

Losers: Owner’s corporations and strata residents that don’t want Airbnb in their buildings; hotel and bed and breakfast operators

The impact of short-term rental accommodation on local councils

The sharing economy has long been a difficult area for councils in the absence of any firm guidance from the state government about how to regulate it. Now Uber is legal in  NSW it was only a matter of time before the government was compelled to tackle accommodation sharing websites.

Only 12 NSW councils currently have rules about regulating short-term accommodation and these vary greatly.

Some councils stipulate limits before STRA triggers development consent: it could be renting a property up to 45 days or having a threshold for the number of bedrooms that can be rented out. Others set no limits. Local councils may also impose conditions like posting evacuation plans and setting criteria for noise, traffic and rubbish disposal, others may not.

The Committee said local councils should be given latitude to decide how often a property can be rented out as a short-term holiday let before it needs development approval.

“Accepting that STRA is generally a low impact activity, we believe there is scope for specified development and compliance standards to be included in SEPP 2008 and for councils to have some local flexibility.”

Local Government NSW Chief Executive Donna Rygate said local council views about platforms such as Airbnb were “a broad church” dependent on many factors.

“Factors that influence are whether the location is a popular tourist destination, whether residents are generally supportive of tourism or not, whether people want to bring tourism in or whether they have ample amount and want to manage it,” she said.

Some coastal councils such as Gosford, Pittwater, Shoalhaven and Kiama Councils – all holiday rental hotspots – have already given short-term rentals the go ahead, although they can step in and use existing legislation to deal with concerns or complaints about safety, amenity or noise and demand development consent.

A few local councils, particularly those in Northern NSW in popular holiday resorts like Bryon Bay, have had a more difficult time with STRA.

These councils have complained that accommodation share services have made housing unaffordable for locals, as well as presenting a range of other nasties, such as fire safety, rubbish build up, parking issues and noise complaints from residents when the occupants get out of control.

Most councils are struggling to achieve an even-handed approach to STRA, balancing the rights of homeowners to rent out their places and the rights of other homeowners not to be annoyed by it, along with concerns for the safety of short-term renters.

For example, in the City of Sydney it is illegal to rent out all or part of your home on platforms such as Airbnb but the council’s investigations and compliance team is much more concerned by the illegal renting sector, where people are crammed into properties which are often subdivided.

The council’s submission to the inquiry said the interests of home owners wanting to lease their properties should be balanced by neighbourhood safety and amenity, indicating it would be willing to address its ban in future.

Whatever the views of individual councils, Airbnb and others of its ilk are not going to go away. They are only going to gather pace.

Ms Rygate said that the advent of platforms such as Airbnb had “put a rocket” under STRA industry making it “much more challenging” for councils to manage.

She said it was the lack of an agreed definition of what constituted STRA that presented one of the biggest headaches for councils trying to figure out where various scenarios fell in their LEPs.

“The activities that fall under the heading of short-term rental accommodation … can be intermittent and vary in terms of their intensity and so they are hard to define, particularly under LEPs,” she told the Committee in March this year.

“Potential impacts also vary significantly from minor, almost invisible, minimal impacts to the classic party house scenario.

“The activities fall under or between a lot of definitions in the standard instrument LEP template [dwelling or dwelling house, serviced apartment, bed and breakfast or tourist and visitor accommodation] and that is obviously critical in determining whether the activity is permissible in the zoning or whether it needs consent.”

A definition of STA was essential so that local government did not tie itself up in red tape or investigate and regulate unnecessary complaints.