Councillors were briefed on Tuesday about options to increase its revenue from rates in 2024/25, with Airbnbs one of the key areas identified for reform.

There are around 600 short stay properties in Adelaide and North Adelaide, according to the council administration.

Currently, city Airbnbs are subject to the same rate in the dollar as residential properties despite being capable of generating much higher yearly returns for owners than traditional long-term rentals.

The situation has prompted concern from councillors that Airbnbs have a competitive advantage over the city’s hotels, which are subject to higher commercial rates.

Councillor Janet Giles, who succeeded on Tuesday in commissioning a council report into short stay rentals, also said Airbnbs were limiting the amount of rental accommodation available in the city and could hinder the council’s target to double the city’s population to 50,000 by 2036.

Anthony Spartalis, council’s manager finance and procurement, said state legislation was “quite restrictive” in what council could do to regulate Airbnbs.

He presented four options council could explore:

1. Changing the land use category of short-stay rentals from residential to commercial (thus subjecting them to higher rate calculations).
2. Declaring a separate, higher rate for Airbnbs/short stay rentals.
3. Targeting city areas that have a high concentration of short-stay rentals with higher rates.
4. Introducing a bylaw requiring a permit to operate a short-term rental property.

Spartalis said there were drawbacks to the first three options, and while the fourth option was “viable” it would require the council to set up a licensing regime for Airbnbs.

The first option, Spartalis said, might not raise rates high enough to disincentive Airbnbs and change housing outcomes in the city, although it could net the council an extra $250,000 in rates revenue.

“The average residential rate is around $1865 but if I round to around $2000 we’d be asking for an extra $225 a year for those types of properties,” Spartalis said.

“Yet they’re generating tens of thousands of dollars – so would that be enough disincentive?

“That’s one of things we would have to consider.”

Spartalis said the second option – declaring a separate rate for short-stay rentals – comes with limitations on how council can spend the additional money it generates from short-stay rentals, i.e. the funds may have to be quarantined for spending on short-stay rentals.

The third option – targeting areas in the city with high concentrations of Airbnbs – could result in non-Airbnbs being forced to pay higher rates, Spartalis said.

The fourth option – a licensing system – is being explored by the City of Melbourne and would require council to establish a licensing system.

“Based on the drawbacks of the first three options, [option four] is a viable option but then we have to set up a regime in which we license these type of properties with a permit and then to monitor those,” Spartalis said.

“So there are options available to us, they all have different pros and cons, but that’s the initial stance we’ve got in terms of what we can do under the current legislation.”

Council’s draft 2024/25 business plan and budget is due for completion in April ahead of public consultation and adoption in late June.