The golden era of Airbnb in Victoria is officially over, and it’s leaving behind more questions than answers. But here’s where it gets controversial: despite the state government’s ambitious 7.5% levy on short-stay rentals, designed to fund social housing, the market has hit a wall. Could this be a sign that the strategy isn’t working as planned? Let’s dive in.
As of January 11, 2026, growth in Victoria’s short-stay accommodation sector has stalled, casting doubt on the revenue stream that was supposed to bolster social housing initiatives. Data from AirDNA, a leading international analytics provider, reveals that listings on platforms like Airbnb and Stayz plateaued in 2025—the very year the levy was introduced. And this is the part most people miss: while the tax was meant to discourage short-term rentals and push properties back into the long-term market, analysts argue it’s not the primary culprit behind the slowdown. Instead, they point to a saturated market where customer demand has peaked.
Across Victoria, the number of daily short-stay listings hovered around 43,735 in 2025, nearly identical to the previous year. This stagnation follows a period of rapid growth post-COVID-19, with a 22% increase in 2023 and 12% in 2024. Linda Rollins, a research analyst at AirDNA, explains, ‘While higher taxes may have deterred some hosts, the real issue is slowing demand.’ She highlights that accommodation demand growth dropped to just 2% in 2025, creating a supply-demand imbalance that’s driving down occupancy rates and discouraging new listings.
The levy, announced in 2023 by the Andrews government and implemented in January 2024, was intended to generate approximately $75 million annually for Homes Victoria, with a quarter earmarked for regional areas. However, in its first six months, it raised only $19 million—a figure that may rise slightly as late payments trickle in. Even if the levy meets its target, it’s a drop in the bucket for Homes Victoria, which faces a staggering $359 million deficit and has operated in the red every year since its inception in 2021.
Here’s the kicker: the levy doesn’t seem to be achieving its secondary goal of shifting properties back into the long-term rental market. Multiple studies, including a 2025 University of Canberra report led by Professor Naomi Dale, suggest short-term rentals remain more lucrative for many owners. The study found that most short-stay hosts use their properties for personal holidays or plan to move into them, making them unlikely to switch to long-term leasing—tax or no tax. Dale notes, ‘Many owners are soon-to-be retirees or individuals who intend to occupy the homes in the future. Renter-friendly laws make long-term rentals less appealing for them.’
State government data further underscores the challenge: the number of active rental bonds in Victoria continued to decline in 2025, indicating a shrinking long-term rental market. Opposition Leader Jess Wilson criticizes the levy as a ‘desperate attempt’ to address Homes Victoria’s financial woes, arguing, ‘You cannot tax your way to more affordable homes.’ She vows to repeal the tax if elected, promising to ease cost-of-living pressures and attract investment.
In response, a government spokesperson insists the levy is part of a broader strategy to increase housing supply, stating, ‘The only way out of the housing crisis is to build more homes.’ However, with the levy falling short of expectations and the rental market showing no signs of recovery, the question remains: is this approach enough?
What do you think? Is the short-stay levy a misguided policy, or does it need more time to show results? Share your thoughts in the comments below. And if you want to start your day with more insights like this, sign up for our Morning Edition newsletter [insert link].
For further reading:
- Victorian Budget
- Airbnb
- Jess Wilson
