At 10am on High Street in Millers Point, it’s checkout time. Departing guests have left laundry bags on their verandas for cleaners, who have laid out fresh towels on beds in neighbouring rooms. Other guests are heading out sightseeing in “I love Sydney” T-shirts.

Although it boasts enviable harbour views, this is not a tourist resort. It’s a street of Federation-era houses – formerly some of the oldest public housing in Australia – overtaken by short-term rentals, many of them managed through Airbnb.

Halfway down, leaves from the plane trees that line the street have piled up outside KU Lance kindergarten, which opened as a supervised playground in 1912. It closed at the end of last year because there aren’t enough local children to fill enrolments. “Now we’re a city without grandchildren,” says Cormac Champion, a Millers Point resident whose youngest child attended the centre before the class size dwindled.

It’s a similar story on neighbouring Kent Street, where Champion lives. Every second Victorian terrace has a key-safe on the front door, the telltale sign of a short-term rental. The area, nestled beside the Harbour Bridge and home to Sydney’s oldest pubs, is understandably popular with visitors.

But while the five-star Langham hotel sits quietly on the corner, the suburb around it has transformed into a giant hotel.

Last week the City of Sydney passed a motion to investigate the feasibility of banning short-term rentals where the host doesn’t live at the property.

The motion included the possibility of a ban linked to the rental vacancy rate or a ban in the worst-affected suburbs, of which Millers Point is “the canary in the coalmine”, according to the Greens councillor Matthew Thompson.

Thompson, who brought the motion, says a ban could return as many as 5,000 properties to the long-term rental market. Last year the council investigated lowering a statewide 180-day annual cap for short-term rentals to 60 days, following a move in Byron shire which covers the tourist hotspots of Byron Bay and Mullumbimby – a region with the second highest rate of homelessness in New South Wales after Sydney.

But Thompson says caps don’t work and are difficult to enforce. He favours a de facto ban like those being implemented in Barcelona, Amsterdam and New York.

“It’s not the silver bullet, this is not going to fix the housing crisis, but it’s something that we could do to return houses that already exist, that could be someone’s home,” he says.

Rental data from the asset analyst SQM, used by the council, indicates that vacancy rates sit between 1% and 1.5% in most postcodes across the local government area.

Murray Cox, the founder of Inside Airbnb, which collects data on short-term rentals in global cities, was a key activist who campaigned for restrictions on non-primary residences being used as short-term rentals in New York, which have been in place since September 2023.

Cox, who grew up in Sydney, says vacancy rates are well below what most cities would consider a housing emergency, at less than 5%.

“I don’t think we need to cannibalise our housing markets just to provide cheaper travel options,” he says. “I think we need to prioritise people that are trying to find housing, housing for our children and our students, our elderly.”

The deputy mayor, Jess Miller, says a ban would be difficult to enforce without changes to the state government’s register of short-term rentals.

“We don’t have the ability to match … whether or not it’s a primary or secondary residence,” she says. “We don’t know if it’s a property under management by an agent. We don’t know if it belongs to a consortium.”

Families moving out

Champion began renting his Kent Street house as an office space in 2018 to accommodate staff in his sales and marketing business. He moved his family to the area in 2020.

“We’ve seen so much change in the last six or seven years in this neighbourhood but in the city as well,” he says.

He has seen about 20 families with children leave Millers Point. “There was one family in particular, their rent from one lease to the next, they wanted to raise it by $600 a week,” he says.

“That’s because the houses on either side of them had become Airbnbs, and that’s what the owners were making.”

Many short-term rental operators are themselves renting the properties then subleasing them as holiday homes – turning up to rental inspections alongside prospective tenants, applying for leases, and running portfolios of dozens of properties, typically with the landlords’ permission.

One Airbnb superhost identified by local residents has listings for at least 66 properties in inner Sydney, including several on High Street.

There are ad-hoc bans in place in NSW: strata corporations can vote to restrict short-term rentals if a property isn’t the host’s principal place of residence. But if the host lives at the property, they can still rent out rooms or the whole home while they are away.

The Minns government came out strongly against short-term rentals after it was elected, launching a review of the sector in 2024.

But more than two years after the initial four-week public consultation, the government is yet to release its report. Meanwhile, Airbnb donated $7,900 to the NSW Labor party in 2025, more than doubling the $3,750 it donated across 2024 and 2023. The company also donated $2,000 to the Liberal party when it was in government in 2022.

In 2024 and 2025, it was a community partner to Vivid Sydney, the annual light festival run by Destination NSW, the state government’s tourism agency. Last year it was both a community partner to Local Government NSW’s annual conference and an “elite partner” for the agency’s Destination and Visitor Economy Conference. A spokesperson for Local Government NSW said “event partners do not have any role in Local Government NSW’s policy positions or advocacy”.

According to diary disclosures, the company or lobbyists representing it have met 12 Minns government ministers across 24 occasions, including at larger industry events, since 2023.

Asked if the government supported a ban, a spokesperson said it was reviewing the planning and regulatory framework surrounding short-term accommodation and would make an announcement in due course, but did not say when the housing minister’s review of the sector would be released.

They added: “The best way to reduce demand for short-term rentals is to build more visitor accommodation. Short-term rental accommodation provides important economic benefits and choice for visitors.”

Airbnb declined to provide a written statement in response to questions from Guardian Australia but shared a statement from Claudia, an Airbnb host with a listing near St Vincent’s hospital in nearby Darlinghurst.

“It gets booked by families in medical crisis who need to be close to the hospital and families who book my place specifically because they have neurodiverse children and they simply cannot stay in a hotel,” she said.

Champion says one short-term rental a few doors down from him advertises itself online as a hotel. One day a lost guest knocked on his door looking for it.

“We want [tourists] here,” Champion stresses. “But it’s not as if they won’t come because they can’t rent a whole house for their visit.”