Complaints about the spread of illegal brothels have jumped by more than a third in Sydney since recommendations to improve industry regulations were blocked by the NSW government last year.

Fairfax Media can reveal that since a proposed licensing system and specialist police unit were rejected in May 2016, the City of Sydney has witnessed a 37 per cent increase in reports from disgruntled businesses and members of the public, triggering 80 separate investigations that can take up to two years to complete. One of those involves an alleged illegal sex establishment located less than 100 metres from St Andrew's Cathedral School in Sydney's CBD.

The Star Massage parlour in Sussex Street. Credit:James Brickwood

The head of the NSW Police Sex Crimes Squad recently warned a NSW Parliamentary inquiry into human trafficking that exploited overseas workers were slipping through the cracks because there was now no way to identify – or stop – underground brothels.

"The industry should be regulated and if someone wants to operate as a prostitute they should be licensed," Detective Superintendent Linda Howlett told the hearing.