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 revenue windfall they hoped for isn’t materializing—and the reasons why are far more complex than you might think. Let’s dive in.
As of January 11, 2026, growth in Victoria’s short-stay accommodation market has slammed to a halt, according to data from AirDNA, a leading international provider. In 2025, the number of listings on platforms like Airbnb and Stayz stagnated, mirroring the year the levy was introduced. And this is the part most people miss: while the tax was intended to fund social housing through Homes Victoria, its impact on both revenue and the rental market has fallen short of expectations.
Here’s the surprising twist: analysts aren’t blaming the levy for the slowdown. Instead, they point to a cooling market that’s hit its ceiling in customer demand. In 2025, Victoria averaged 43,735 short-stay listings daily—virtually unchanged from the previous year. This stagnation follows a post-pandemic boom, with listings surging 22% in 2023 and 12% in 2024, primarily in Melbourne and holiday hotspots.
Linda Rollins, a research analyst at AirDNA, explains, ‘While higher taxes might deter some hosts, the real culprit is slowing demand.’ Accommodation demand growth dropped to 6% in 2024 and a mere 2% in 2025, creating a supply glut that’s driving down occupancy rates and discouraging new listings.
The levy, introduced by the Andrews government in 2023, was designed to nudge property owners back into the long-term rental market. Revenue from stays under 28 days was earmarked for Homes Victoria, with 25% allocated to regional areas. But the initial projection of $75 million annually now seems optimistic. In the first six months, only $19 million was raised, though the final figure could rise as late payments trickle in.
Here’s the kicker: even if the levy meets its target, it won’t significantly improve Homes Victoria’s dire financial situation. The agency, which manages public housing, recorded a $359 million deficit in 2025—part of a pattern of annual deficits since its creation in 2021. Worse, the levy has failed to shift properties back into long-term rentals, as short-stay options remain more lucrative for many owners.
A 2025 study by the University of Canberra’s Professor Naomi Dale found that levies are unlikely to drive a mass conversion to long-term rentals. Why? Many short-stay owners use their properties for personal holidays or plan to move into them eventually. ‘These owners are hesitant to switch due to renter-friendly laws that could complicate their future plans,’ Dale notes.
State government data underscores the problem: active rental bonds in Victoria continued to decline in 2025, signaling fewer long-term rentals overall. Opposition Leader Jess Wilson calls the levy a ‘desperate attempt to fix Homes Victoria’s failing finances,’ vowing to repeal it if elected. ‘You cannot tax your way to affordable homes,’ she argues.
A government spokesperson counters that the deficit is a ‘timing issue between funding and expenditure,’ insisting the levy encourages long-term rentals and increases housing supply. ‘The only way out of the housing crisis is to build more homes,’ they state, highlighting streamlined planning processes and new developments.
But here’s the burning question: Is the levy a well-intentioned misstep, or is it simply too early to judge its impact? And what does this mean for Victoria’s housing crisis? Let us know your thoughts in the comments—this debate is far from over.
