The Herald reported on Tuesday that from July 30, Short Term Rental Accommodation (STRA) providers in the city will only be able to lease non-hosted properties for 180 days per year. Six other NSW locations will also be subject to the cap, including Sydney and parts of Muswellbrook.

The government said Newcastle was included after receiving a request from the council, but City of Newcastle chief executive officer Jeremy Bath said the government made the decision without allowing council to set a higher limit for some suburbs or streets.

"Such a punitive cap is likely to actually reduce the availability of short term rental accommodation in an events focused city like Newcastle," Mr Bath said.

"The cap means a property owner will be limited to just 180 days in which to generate income to pay interest on a mortgage calculated over 365 days a year."

Mr Bath pointed out in the last week alone, Newcastle was featured on national TV, hosted international surfing, women's rugby, a half marathon, a seafood festival, and a sailing competition.

"These events attracted thousands of people and millions of dollars for the local economy," he said. "But for people to stay overnight, they need to be able to secure affordable accommodation close to the city and our beaches. The State Government's 180 day cap makes this harder to achieve."

The issue of night limits was flagged at council in 2018 amid complaints from neighbours of STRA sites about poor guest behaviour.

Mr Bath said he hoped the NSW Government would delay the start of the cap to ensure the industry had time to adapt and also allow for the development of an industry code of conduct to "ensure that any property owners who don't consider the reasonable needs of their neighbours can have rental restrictions placed on their property".

Holiday rental platform Stayz also called on the government to delay the change for at least six months, to allow time for consultation with platforms and owners.

"According to ACIL Allen Economics, a 180-day cap on the availability of short-term rental accommodation in the Hunter region will put $21.2 million of economic activity and 117 jobs at risk," Stayz corporate affairs director Eacham Curry said. "Stayz believes that short-term rentals will have a key role to play in the Hunter's economic recovery and the extension of the 180-day cap to Newcastle will act as a blow to the region's tourist economy."

"Night caps for holiday rentals not only put the economic uplift associated with the tourism sector at risk, but also fail to address the four most consistently raised questions about our industry: housing affordability, housing availability, the impact on government resources and service provision, and impact on neighbourhood amenity."

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