The council wants to restrict short-term rental accommodation to just 180 days a year, a move that comes after state government reforms to the sector were passed in Parliament in 2018.

The reforms, including a Code of Conduct and a short-term rental accommodation register, are on hold due to the COVID-19 pandemic.

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The changes would allow Illawarra councils to decide if permitting short-term holiday letting for the entire year is acceptable for their local communities.

The majority of Kiama councillors recently voted that council staff collate relevant data and prepare a case to councillors for reducing the non-hosted short-term rental accommodation period in Kiama LGA from 365 days to 180 days per year.

Kiama councillor Neil Reilly said there were a number of issues driving this proposed change.

These included difficulties for residents in acquiring affordable full-time rental accommodation, maintaining the "character" of the area, and preserving the amenity of nearby properties.

Cr Reilly said the council's proposal wouldn't affect the number of days available for any existing short-term rental accommodation. However, it would apply to any new holiday rental businesses and properties listed once the cap is in place.

Cr Reilly said the process would include a survey to determine the number of short-term rentals in the LGA and their condition, as well as community engagement, before they presented the proposal to the Minister for Planning for approval.

Short-term rental platform Stayz believes the council should wait for the statewide regulatory framework, including the Code of Conduct, which is expected to be implemented later this year.

Stayz corporate affairs director Eacham Curry said they supported Kiama council in its desire to get better certainty about the rules for short-term rentals.

However, he urged them to wait until the NSW government introduces its register for short-term rentals.

He said a cap on nights would fail to meaningfully address the cited concerns of council and rather would only result in holiday homes sitting unused for longer.

Craig McIntosh, who owns South Coast Holidays and manages holiday homes in the Kiama LGA, questioned the suggestion that the cap would free up a significant number of properties for full-time rental.

"Out of about 100 properties, we would maybe have five that just nudge over the 180 days a year occupancy in any case.

"And of those five, they are generally quite high-end, luxury properties in stunning locations."

Mr McIntosh also said the cap might drive potential holiday property investors away from the Kiama area.

"It could start to have a detrimental effect on what are probably Kiama's biggest industries - tourism and hospitality," he said.

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