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Read the following two articles from The Conversation:
• Australia has taken a ‘light touch’ with Airbnb. Could stronger regulations ease the
housing crisis? (March 2023)
LINK: https://theconversation.com/australia-has-taken-a-light-touch-with-airbnb-could-stronger-regulations-ease-the-housing-crisis-200347?utm_medium=email&utm_campaign=Latest%20from%20The%20Conversation%20for%20March%208%202023%20-%202564025768&utm_content=Latest%20from%20The%20Conversation%20for%20March%208%202023%20-%202564025768+CID_df19d595a03b7723c01c291e45e95565&utm_source=campaign_monitor&utm_term=Australia%20has%20taken%20a%20light%20touch%20with%20Airbnb%20Could%20stronger%20regulations%20ease%20the%20housing%20crisis
• Will taxing short stays boost long-term rental supply? Other policies would achieve
more (Sept 2023)
LINK: https://theconversation.com/will-taxing-short-stays-boost-long-term-rental-supply-other-policies-would-achieve-more-213989
These articles consider the short-term and long-term rental markets. Let’s define them as
follows:
• Short-term (S-T) rental market: rental contracts of short duration, up to 6 months
• Long-term (L-T) rental market: rental contracts with a duration of 6 months or
longer
In the following questions, please assume that these rental markets are perfectly competitive, and the market is originally in a long-run equilibrium unless stated otherwise.
1) The Conversation article Australia has taken a ‘light touch’ with Airbnb. Could stronger
regulations ease the housing crisis? mentions in Byron Bay, the Byron Shire Council has
endorsed the change for non-hosted holiday letting to 60 days per year for most of the
Shire. Use of diagrams and explain the effect of such policy on short-term rental market
and the effect on long-term rental market.
2) The Conversation article Australia has taken a ‘light touch’ with Airbnb. Could stronger
regulations ease the housing crisis? mentions weekly rents rose from $555 in June 2020
to $800 by September 2022 in Byron Bay. Use of a diagram and explain how weekly rents
in Byron Bay has increased so much during the period.
3) The Conversation article “Will taxing short stays boost long-term rental supply? Other
policies would achieve more” mentions the state of Victoria’s plans to introduce a levy (or
tax) on the revenues of S-T rental platforms. Assume for simplicity that it is a per-unit
tax levied on landlords of S-T rental properties. Use of diagrams and analyse the possible4
effect of this levy on the short-term and long-term rental markets. (hint: a levy will raise
the marginal cost)
4) The Conversation article “Will taxing short stays boost long-term rental supply? Other
policies would achieve more” mentions the state of Victoria’s plans to introduce a levy (or
tax) of 7.5% on the revenues of S-T rental platforms. According to the article, it is thought
that “the size of the Victoria government’s levy and its own budget projections imply the
intention is more to raise revenue than to eliminate the state’s short-stay sector.” [i.e. a
rather small reduction in the quantity of S-T rental accommodation]. With that statement,
what are the assumptions on the demand and supply elasticity? Would you expect the
size of the deadweight loss to be larger or smaller? Illustrate with a diagram.
– Please write a minimum of 70 words for each question, and the word count should be a minimum of 400 words in total.
– Diagram MUST be included.
– If external sources are used, please include in-text citations and use APA 7th referencing style.
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