Home-owners across NSW will be able to open their spare rooms and granny flats to short-term renters without fear of reprisal from council under new recommendations made to the Baird government.
The report will be tabled in state parliament on Wednesday following an 18-month inquiry by the Legislative Assembly Committee on Environment and Planning.
The report recommends amending planning laws to make home-sharing legal across the state, committee chairman and Oatley Liberal member Mark Coure said.
"The planning powers of the state and local governments haven't been updated over time to accommodate groups like Stayz and Airbnb, so we're looking at compliance across the state to make it legal for everyone," Mr Coure said on Sunday.
Only 12 NSW councils have rules in place which regulate home-sharing, which vary.
Port Stephens does not require consent for any number of bedrooms rented out, while Pittwater and Central Coast impose time limits on home-sharing, ranging from 45 days to three months.
Hosts in other council areas often need permission to home-share and can be prosecuted if they do not comply with their council's rules.
"Many people are unaware that the planning law has not kept up with the 21st century and I think this is a major issue," Mr Coure said.
He says the report also recommends the NSW government work closely with councils to ensure stricter regulations and penalties apply for potential party houses.
Airbnb has welcomed the news, saying it's a big step in the right direction.
"Many of the regulations were put in place sometime last century and certainly before the internet even existed and so for Airbnb the laws and regulations just aren't applicable," Airbnb Country Manager Sam McDonagh said.
There are more than 33,000 Airbnb listings in NSW and 17,000 in Greater Sydney alone.
"For a lot of Australian families, the opportunity to list their home on Airbnb makes a real difference to paying off the mortgage, electricity bills and other daily expenses."
Mr McDonagh said the average Airbnb host in NSW earns $4500 in a year sharing their home.
"We welcome the news today and look forward to hearing more," he said.