Owners of Sydney houses and apartments will be able to rent out properties all year round using services such as Airbnb under a loophole in the government’s proposed regulation of the sector, critics say.

Draft laws open for consultation provide an exception to the 180-day yearly cap the government had proposed for short-term residential rentals in Sydney. The exception is that when short-term tenants rent a premises for more than 21 days at a time, those days do not contribute to the 180-day annual cap.

Independent MP for Sydney Alex Greenwich has raised concerns about an exemption to Airbnb-style letting limits. Credit:James Alcock

This 180-day cap was described as a "fair and balanced approach" by former planning minister Anthony Roberts when it was first announced last June.

But member for Sydney Alex Greenwich, whose inner-city electorate takes in areas of high demand for tourist accommodation, described the proposed 21-day exception as a "gross betrayal".