People who let their properties to poorly-behaved guests on short-term accommodation sites like Airbnb could be slapped with a fine or a temporary ban under proposed NSW legislation.
The regulations released in an options paper on Friday aim to crack down on the booming industry.
Measures suggested for services such as Airbnb and Stayz range from self-regulation to forcing hosts to apply for a license or development application from councils.
Another proposal suggests owners be fined for rowdy behaviour by guests or temporarily banned from short-term letting.
The red tape involved in forcing hosts to get licenses was a "barrier to participation" and goes against the accessibility offered in the shared economy, Airbnb Australia's public policy head Brent Thomas told AAP.
But options such as self-regulation and rules around guests behaviour were welcomed, he said.
NSW Planning Minister Anthony Roberts says any new policy would have to balance protecting neighbours and allowing people to profit from providing short-term accommodation.
"You have the person that supplements their income by occasionally renting a room out in their property (through) to the person who purchases a property with the sole outcome of renting it out to bachelor parties," Mr Roberts told reporters on Friday.
"No one wants to live next door to a party house."
There needs to be a distinction between the city and regional areas so as not to badly affect holiday homes, Stayz corporate and government affairs director Jordan Condo said on Friday.
"If this distinction is not recognised, it will have damaging consequences for the economy and jobs in regional towns like Port Macquarie and Kiama," he said in a statement.
There are more than 40,000 Airbnb listings in NSW including 17,000 in greater Sydney alone.
The options paper will be open for public input until the end of October.
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