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 accommodations, the expected rental windfall for social housing seems like a distant dream. Why? Because the market has hit a wall, and the numbers tell a story that’s far from rosy.
As of January 11, 2026, growth in Victoria’s short-stay accommodation market has stalled, according to data from AirDNA, a leading international provider. In 2025, the year the levy was introduced, the number of listings on platforms like Airbnb and Stayz barely budged, hovering around 43,735 daily—a stark contrast to the 22% and 12% growth rates seen in 2023 and 2024, respectively. And this is the part most people miss: analysts aren’t blaming the tax for the slowdown. Instead, they point to a saturated market where demand has peaked, leaving supply to outstrip interest.
Linda Rollins, a research analyst at AirDNA, explains, ‘While higher taxes might deter some hosts, the real issue is slowing demand. Accommodation demand growth dropped to just 2% in 2025, leading to falling occupancy rates that discourage new listings.’ This oversupply has created a ripple effect, making it harder for the government’s levy to meet its revenue targets.
The levy, introduced by the Andrews government in 2023, was designed to funnel funds into Homes Victoria for social and affordable housing projects, with 25% earmarked for regional areas. Initially projected to raise $75 million annually, the tax has fallen short, collecting only $19 million in its first six months. Even if it reaches its full potential, it’s a drop in the bucket for Homes Victoria, which recorded a staggering $359 million deficit in 2025—part of a consistent pattern of financial shortfalls since its inception in 2021.
Here’s the kicker: the levy was also meant to coax property owners into shifting from short-term to long-term rentals. But multiple studies, including a 2025 University of Canberra report led by Professor Naomi Dale, suggest this goal is largely unmet. The research found that many short-stay owners use their properties for personal holidays or plan to move into them, making them resistant to long-term leasing—tax or no tax. Dale notes, ‘Laws favoring renter rights further discourage owners from transitioning, as they fear losing control of their properties.’
State government data backs this up, showing a continued decline in active rental bonds in 2025, indicating fewer long-term rentals overall. Opposition Leader Jess Wilson didn’t hold back, calling the levy a ‘desperate attempt to fix Homes Victoria’s failing finances.’ She argues, ‘You cannot tax your way to affordable housing. A Liberal and Nationals government would repeal this tax to ease cost-of-living pressures and reignite investment in Victoria.’
A government spokesperson countered that Homes Victoria’s deficit hasn’t affected service delivery, attributing it to ‘timing differences between funding and expenditure.’ They defended the levy as a tool to ‘encourage more long-term rentals and increase housing supply,’ adding, ‘The only way out of the housing crisis is to build more homes.’
But here’s the question that lingers: Is the levy a well-intentioned but flawed solution? Or is it a necessary step in a larger, more complex battle against housing affordability? As Victoria grapples with these challenges, one thing is clear: the Airbnb boom is over, and the fallout is far from simple. What do you think? Is the levy a step in the right direction, or a misstep that needs rethinking? Let’s hear your thoughts in the comments below.
