With the recognition of, and encouragement for, the use and development of land for a 'small second dwelling' introduced by Amendment VC 253 and amendments to the Building Regulations 2018, a question has arisen as to whether it i.e.. a small second dwelling, can be used for tourist or short term accommodation (of the Airbnb and Stayz type) without the need for a planning permit. If small second dwellings can be used for tourist or short term accommodation without a planning permit, this will presumably encourage their construction in potentially large numbers and lead to the inevitable question, “are small second dwellings the short term accommodation of the future?”.

In this article we examine the extent to which the proposition that a small second dwelling can be used for short term accommodation without a planning permit, is accurate and the implications on a council’s responsible authority and enforcement authority functions in Victoria. In doing so, we examine whether the Victorian Civil and Administrative Tribunal (Tribunal)’s reasoning and commentary in Armato v Hepburn Shire is still ‘good law’.

Background: What is a 'small second dwelling'?

To borrow from the Department of Transport and Planning website, by operation of Amendment VC 253 to the Victorian Planning Provisions:

“It’s now so much easier to build a small second home thanks to changes to the Victoria Planning Provisions, building regulations and all planning schemes. Victorians can now build a small second home without a planning permit if it is 60 square metres or less and there are no special planning controls in place”.

Amendment VC 253 added a new definition to the land use terms, that being a definition of 'small second dwellings'.

“A small second dwelling is:
A building with a gross floor area of 60 square metres or less, on the same lot as an existing dwelling and used as a self-contained residence, which must include:
(a) a kitchen sink;
(b) food preparation facilities;
(c) a bath or shower; and
(d) a toilet and wash basin.

To be noted about the definition is that it significantly overlaps with 'dwelling' in that a dwelling and a small second dwelling are both:

• located within 'a building'
• in a building 'used as a self-contained residence'
• required to include the facilities (kitchen sink etc) listed in the definition; and
• nested under 'Accommodation'.

The only quantitative differences are that a small second dwelling is limited to a gross floor area of 60 square metres and a second dwelling must be on the same lot as an existing dwelling.

In the residential zones (Mixed Use, Residential Growth, General Residential and Neighbourhood Residential), a permit is not required to use land for small second dwelling provided no more than one dwelling exists on the lot, the small second dwelling is the only dwelling on the lot and reticulated natural gas is not supplied to the dwelling. Subject to other conditions, use of land for small second dwelling is also allowed without a planning permit in the Township and Low Density Residential Zones and the Rural Living and Farming Zones.

According to the Department of Transport and Planning website:

We all know that finding the right type of housing in the right location is getting harder and more expensive. That’s why the Victorian Government’s Housing Statement – The decade ahead 2024-2034 sets out a plan to deliver significantly more housing that better meets the needs of our wonderfully diverse community.

Small second homes on the same lot – also known as granny flats or dwelling garden units – have become more and more popular. They can give families the space to grow together, provide a critical second income, or give kids somewhere to stay when they visit for the weekend. But for many, the burden of getting a planning approval has put building a second small home in the too hard basket.”

The Premier’s media release that accompanied the small second dwelling reform suggested:

There will be no restrictions on how a small second home can be used – they can be used flexibly, whether it’s keeping family members closer, providing temporary housing or being rented out for additional income.

Recent industry presentations by Department personnel have suggested that where a small second dwelling is constructed, the dwelling may be used for 'short term accommodation' without the need for a planning permit.

What are the relevant legal principles and context?

Whether a small second dwelling may be used for short term accommodation invokes questions of law and fact. One must first start with the planning schemes. What may be permitted as of right in one zone may require a permit or be prohibited in another zone. Primacy must always be given to the planning scheme. The meaning to be given to terms including land use definitions, in the planning schemes is a question of law. Where a land use definition overlaps with another or other land use definitions (including umbrella definitions under which a land use is nested) a quantitative as well as a qualitative assessment may be required.

Once the meaning is given to a land use definition, it then falls to the facts to determine whether a use, or perhaps more precisely the real and substantial purpose of the use, falls within that meaning. It might instead fall within another definition or be undefined. This often involves questions of degree.

Added to the above, one must consider the extent to which other planning concepts apply to the facts of the case. This includes, among other things, concepts of existing use rights and ancillary uses.

So, for example, if a person elects to rent their dwelling or in this case, their small second dwelling, for short term accommodation of the Airbnb or Stayz type on an irregular or intermittent basis, such rental may fairly be regarded as ancillary to 'self-contained residence' use of the building. Ancillary uses are not regulated by the Victorian planning schemes. Thus, if the second small dwelling is “rented out for additional income” and that renting out is ancillary to the real and substantial purpose of the small second dwelling (being a building used as a self-contained residence), there is no controversy about the proposition that small second dwellings can be rented out.

This article considers cases where the small second dwelling is used solely or primarily to provide short term accommodation for people away from their normal place of residence and where the dwelling is not being used by a resident of the dwelling to provide such accommodation, such as is the case with bed and breakfast.

How do Victorian planning schemes currently regulate 'short term accommodation'?

As most readers would be aware, the characterisation ‘short term accommodation’ and the manner in which the Victorian planning schemes regulate such use was the subject of the Tribunal’s determination and reasons in Armato v Hepburn Shire [2007] VCAT 603 (a decision of Deputy President Gibson and applied by numerous subsequent Tribunal decisions).

In Armato, the Tribunal summarised its task as being to decide “…. whether the house on the subject land, known as Holly Lodge, which is regularly let as weekend rental accommodation, requires a planning permit for this use. This depends upon whether the use of the land should be characterised as 'dwelling' (no permit required), 'residential building' (permit required) or 'accommodation' (permit required), and if a permit is required, whether it is exempt under the provisions of clause 52.23 relating to 'shared housing'.

As recorded by the Tribunal, the “somewhat rambling weatherboard house” had for a number of years operated as a bed and breakfast but, of more recent times, was let on the holiday accommodation market as self-contained weekend rental accommodation. The owner of the house did not deny that to be the case but argued that a planning permit was not required because that land was used and would continue to be used “in accordance with the requirements of clause 52.23 of the Hepburn Planning Scheme relating to shared housing”.

The Tribunal further recorded that both parties (the owner and the council) conceded that the land was not being used for the purpose of a dwelling. The Tribunal accepted the concession as properly given, saying: “The definition of dwelling provides that it is a building used as a self-contained residence which must contain certain facilities. Residence means a place where people live or reside either permanently or for a considerable period of time”. It later expanded with:

[13] It is also important when considering whether the land is used as a dwelling not to be distracted by the form of buildings on the land. Just because there is a house on the land does not necessarily mean that it is being used as a dwelling. The house on the subject land may well be used as a residence in other circumstances, but it is not being so used at present. The use of land for planning purposes is not determined by the style of development but the purpose for which the land is actually used. Thus it is fallacious to say that because there is a house on the land ipso facto the land is being used as a dwelling.

[14] In the present case, no one resides at Holly Lodge. People stay there temporarily over the weekend or for very short periods of time. I therefore find that the house is not a building used as a residence and therefore the land cannot be said to be used for the purpose of a dwelling.

It then fell on the Tribunal to characterise the use of the land (having determined it not be used for the purpose of a dwelling). After a thorough review of the planning scheme definitions and previous Tribunal and Court decisions, the Tribunal concluded that the land was being used for the purpose of “accommodation”. As such, by operation of the Residential 1 Zone that applied at the time, the use required a planning permit “…unless it falls within the exemption created by clause 52.23 for shared housing”.

Importantly, for present purposes, it fell on the Tribunal to determine whether the shared housing exemption could apply to tourist or short term accommodation. The Tribunal concluded that the exemption could apply, saying:

But based on the planning scheme as it is today, my conclusion is that where accommodation of any sort, including tourist or other short term accommodation, is of a domestic scale and meets the requirements of clause 52.23 in terms of being in an area or zone which is used mainly for housing, provides self-contained accommodation and does not have more than 10 habitable rooms, then under the operation of clause 52.23 it does not need a permit.

Ultimately the Tribunal found that the building did not meet the 10 habitable rooms requirement and so ruled that the applicant could not rely on the shared housing exemption. This finding of fact does not however change the fact that it ruled that the shared housing exemption could apply to tourist or short term accommodation.

Is Armato still 'good law'?

Armato was decided some 17 years ago. There have been many amendments to the planning schemes since then. Significantly though, none of those amendments changed the definition of 'dwelling' or 'accommodation'.

We can confidently say therefore that a Tribunal will not, under the current planning schemes, have a reason to depart from the Tribunal findings that a tourist or short term accommodation use is not a dwelling use or that the appropriate characterisation is 'accommodation'.

There has been one material change to the planning schemes since Armato. That change is the removal from the planning schemes of the shared housing exemption. That exemption no longer exists. New exemptions were introduced in 2018 (by VC152) for 'community care accommodation' and 'rooming house', but it is not difficult to see that the use of land for tourist or short term accommodation of the type considered by this article does not come within those land use terms.

We are left to conclude that Armato is still good law (as to the appropriate characterisation of tourist or short term accommodation) but the manner in which that characterisation applies has changed. We are left to conclude that a Tribunal will hold to the view that tourist and short term accommodation is not a 'dwelling' use and that it is instead the use of land for 'accommodation'. A Tribunal will continue to hold that, in the absence of an applicable exemption, the planning scheme provisions (including the residential and rural zone provisions) fall to be applied on the basis that the use is 'accommodation'.

Given that the definitions of 'dwelling' and 'small second dwelling' share the same quantitative elements (particularly the requirement that they be used as a self-contained residence), and we would suggest the same 'qualitative elements', it is difficult to see how a Tribunal would say anything other than that land used for tourist or short term accommodation is also not a small second dwelling. It is also not a bed and breakfast if it is not being used by a 'resident' of the small second dwelling to provide the short term accommodation.

Under the current suite of residential zones, 'accommodation' would more often than not require a planning permit.

What are the implications for responsible authorities?

We again reiterate, the characterisation of land use and the meaning of land use terms are questions of both law and fact. Context is also important. The way in which a zone or overlay applies to any given land use is to be examined on a case by case basis. Regard must be had to overarching planning concepts such as existing use rights and ancillary uses.

This article focuses on buildings that are solely or primarily used by a non-resident of the building to provide tourist or short the accommodation where the concepts of ancillary use or existing use rights do not apply.

A legitimate question has been asked as to whether a small second dwelling may be used for short term accommodation without the need for a planning permit. The Department of Transport and Planning and the Premier’s media release which announced the small second dwelling initiative may be interpreted or misinterpreted as meaning that, in and of itself, a small second dwelling may be used for short term accommodation without the need for a planning permit. This article argues that Armato remains good law as to the proper characterisation of tourist and short term accommodation. It argues that the Tribunal’s findings apply to a 'small second dwelling' as it would to 'dwelling' given the significant overlap in the definitions.

It is acknowledged that the implications apply equally to ‘dwelling' as they do to 'small second dwelling'. Great care needs to be taken in accepting a general proposition that, in and of themselves, a dwelling and/or a small second dwelling may be used for short term accommodation without a planning permit. In many cases, a planning permit will be required.