Property owner Mary Banfield has been told by the City of Sydney that she must change her two residential flats into serviced apartments if she wants to continue offering short-term stays through the website Airbnb.

It is just one of the ways councils are seeking to shoehorn the market for short-term holiday rentals into planning laws designed to sustain neighbourhoods, but ill-equipped to handle the growth of an online industry connecting homeowners with holidaymakers.

The council is proposing a new statewide definition for this kind of accommodation, which could limit the number of days a property could be let.

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