Tourism is the lifeblood of Kangaroo Valley. Travellers flock to the lush greenery of the New South Wales town for the trails, rivers and wineries. It also hosts folk and arts festivals, is a popular wedding spot, and is a short drive from south coast beaches.

But Kangaroo Valley finds itself in a bind brought on by its own popularity – it’s almost impossible to find somewhere to live there.

In the town of about 1,000 residents, there was just a single listing for a residential lease advertised this week. But if you want to stay for a few days, there are 76 homes listed on Airbnb, Stayz and VRBO to choose from.

Businesses in Kangaroo Valley have had to close due to a shortage of local workers and inability to house anyone willing to move there.

Across the wider Shoalhaven region, the problem is even more pronounced. There were 94 long term residential leases advertised in April, but 4,131 homes available to rent for short stays – an imbalance that locals fear is contributing to homelessness, and making it near impossible for businesses to attract workers.

Short-term accommodation websites rose to prominence more than a decade ago as a relatively straightforward way for Australians to make money when their holiday homes were sitting empty.But now many listings on sites such as Airbnb have become commercially run properties available all year round.

That brings more tourism money into regional economies, but a growing number of towns are beginning to question whether the benefits outweigh the costs.

And governments at state and local level are increasingly looking to regulate the short-term accommodation sector as one lever to address the housing crisis.

‘I might get a second or third property now ’

Laura Crommelin, a senior lecturer at the University of NSW City Futures Research Centre, says the demographics of a town or suburb can begin to shift as more and more owners convert their residential properties to short-term leases.

Crommelin, who began researching technological disruption in private housing markets in the middle of the last decade, says smaller communities find it particularly hard to adjust.

“Smaller housing markets have very little flexibility, especially tourist towns. You don’t need many Airbnb listings to have a real impact on how the community functions,” she says.

She stresses that other factors would continue to restrict the rental market even if platforms such as Airbnb were to disappear overnight. But she says entire home listings – where the owner does not live in the property as a host – are contributing to wider problems.

She points to research from the Australian Housing and Urban Research Institute tracking changes in rent in Sydney, Hobart and the Shoalhaven during the first Covid wave in 2020, which found rents fell across the board when short-term accommodation stock returned to the long-term rental market. Even a modest reduction in Airbnb listings was associated with a significant reduction in rents, the research found.

Crommelin, whose research has included interviewing owners who rent their properties through Airbnb, says the knowledge that it is a reliable source of income is contributing to some wealthier capital city residents’ decisions to buy regional properties.

“Knowing they can very easily make money when they’re not using that holiday home is giving them reason to buy it, and that could be at the expense of a local [or potential new local] who can’t pay as much for a house.

“These platforms have provided another way [for] the people who already own real estate to get extra flexibility in the market to use their properties to make money … They’re thinking, ‘I might get a second or third property now because of these short-term accommodation platforms’,” she says.

In popular holiday towns, short-term accommodation can be much more lucrative than a long-term lease, she says.

“In premium locations you can make so much during the high season, it outweighs the amount you can make on a long-term rental, even if the property is sitting empty for months of the year,” she says.

In Kangaroo Valley, Natalie Harker has been following the short-term and long-term markets closely.

As manager of Arts in the Valley – a festival beginning at the end of September – and treasurer of the Kangaroo Valley chamber of tourism and commerce, she says the town is grateful for the extra tourists that platforms such as Airbnb have brought in.

“We’ve seen what happened during Covid when there aren’t any tourists in the Airbnbs,” she says.

After flooding closed the Moss Vale road for months – one of only two ways into the valley – the town is banking on a bumper tourist season, and better luck in attracting new workers, once it reopens next month.

However, when Harker and her partner moved from Sydney to Kangaroo Valley to be closer to family four years ago, she experienced the lack of long-term rental properties for herself.

“It was really difficult finding a place, we had to negotiate with the property owner to take the house off the short-term market and let us lease it,” she says. “Our home had been a holiday let for eight years.

“Some owners in town are beginning to understand the issue, and see that offering full-time rental helps the village and the community.”

Harker says people moving from Sydney and working remotely for capital city wages have also helped push up prices and restrict availability. The local workforce has halved, she says, and many hospitality staff such as cleaners must now drive in from out of town.

The Kangaroo Valley Fudge House and Ice Creamery has closed due to staffing issues, and Harker says local businesses are considering renting houses in Bomaderry, about a 30-minute drive away, where they can offer new staff an affordable place to live.

A Shoalhaven council spokeswoman said short-term rentals played a significant role in the visitor economy, and it was a high priority for the council to balance this with “community needs”.

Shoalhaven mayor Amanda Findlay acknowledges that the growth of platforms such as Airbnb is changing the nature of her community.

“Because there are no people living [there] from Monday to Sunday, the services pack up and go because there’s not a permanent population,” she told the ABC. Findlay said more than one third of the area’s properties were owned by people living outside the region, and that in villages that figure rose to 80%.

‘Aghast at the statistics’

As tourist hotspots across the world clamp down on Airbnb and other short-term rentals, the regulatory response in Australia has varied.

The NSW government has introduced a register of short-term rental homes, a code of conduct and a 180-day-a-year cap on short-term rentals of entire homes in greater Sydney.

In regional areas, councils must nominate to apply a cap.

Appetite for it so far appears mixed. This week the state government approved a request for a 90-day-a-year cap in Byron Bay, where rental availability has become acute throughout the pandemic and floods.

In April there were 43 long-term residential homes advertised for lease across the Byron region, and 2,013 entire home rentals with active listings on short-term accommodation sites.

The Greens MP for Ballina, Tamara Smith, praised the decision, saying locals had “all been aghast at the statistics” and that the cap came “after years of people facing loss of amenity from party houses and zero rental availability”.

In the Shoalhaven, the council considered a cap, but there is currently no limit on short-term rentals.

Crommelin says properties can still be commercially viable under the 180-day cap.

Trish Burt, the founder of advocacy group Neighbours not Strangers, is similarly underwhelmed by the NSW regulations, and sceptical of how well policed the cap and code of conduct will be.

Burt, a retiree, has been active for more than 10 years with the group, and says her call for tougher rules is motivated by seeing many of her contemporaries struggle to find affordable housing in retirement.

“Tourism has taken priority over the fundamental right to housing, and the people staying in these properties don’t support the schools, the dentists, the doctors, all that local trade that matters so much to towns,” Burt says. “They stay there to have a party.”

In Tasmania, Hobart city council has passed a motion to prohibit short-term rental of new investment properties, but the proposal must be approved by the state’s planning commission before it becomes law. Existing short-term rentals will receive a permit, and the permit will remain with the property even when it changes hands.

Ben Bartl, of the Tenants Union of Tasmania, says Hobart has the highest density of short-term rentals of any capital city. “Airbnb and short-term accommodation more generally has been a disaster for Tasmania,” he says.

“We have historically low vacancy rates, property prices have gone through the roof, and more and more tenants are being forced into transitional accommodations. They’re moving into caravan parks, they’re couch-surfing, and in the worst-case scenarios, they are being made homeless – there are people being made to live in tents,” Bartl says.

Bartl believes stronger laws are needed for Hobart, including a ban on renting out whole unhosted properties to tourists.

“These platforms started as the sharing economy, but that’s not how these properties are operating now. They don’t have hosts living there, they’re run like businesses,” Bartl says.

Airbnb’s country manager for Australia and New Zealand, Susan Wheeldon, says the company is not opposed to regulations that are “fair, sensible and strike a balance so that everyone can enjoy the benefits of tourism”.

Wheeldon says Australia’s housing issues are driven by a range of factors, such as population movements, supply, the ratio of public housing, interest rates and broader economic conditions, and that “short-term rentals generally comprise a tiny proportion of the overall Australian property market”.

“In markets that are traditionally popular with holidaymakers and have always comprised holiday homes, supply of housing has been under significant pressure due to the relocation of many Australians from cities to regional areas throughout the pandemic who have taken advantage of remote and flexible work arrangements, and cheaper housing compared to the major capitals.

“In many cases, hosts make properties available on our platform that would otherwise be used only as holiday homes for themselves and their friends and family – many of these homes are unlikely to be offered on the long-term rental market,” she says.

Expedia, which owns Airbnb’s main competitors VRBO and Stayz, did not respond to a request for comment.

Back in Kangaroo Valley, Harker acknowledges the town will need a balance of Airbnb listings and longer-term housing, and wants to see out-of-town owners contributing to the community, financially or otherwise.

“I just invite those owners who aren’t living here to be more active in the community and consider how they can offset some of the issues.”