The New South Wales government’s efforts to combat misleading rental listings using AI-generated images have run into an unexpected snag. In a recent media release, the government highlighted an example of a supposedly AI-doctored listing from a property in Leichhardt, Sydney’s Inner West, claiming it showed a digitally altered view of Bondi Beach. However, the listing agency, IB Property, denied the images had been manipulated. The agency confirmed the photos showed a real $5,000 mural of Bondi Beach painted on an internal courtyard wall, visible through the unit’s windows. The mural, commissioned by the landlord, is not visible from the street and remains in place. The property was listed for lease in February 2026 and has not been advertised since. The Better Regulation and Fair Trading Minister, Anoulack Chanthivong, did not directly address the mix-up but reiterated the government’s stance on protecting renters from misleading advertising. Despite the confusion, the new legislation aims to tackle a growing issue known as “housefishing,” where digital alterations distort the actual size and condition of a property. Under the new rules, real estate businesses in NSW could face fines of up to $22,000 if they fail to disclose digitally altered or AI-generated property images. The laws, set to take effect in early 2027, are designed to ensure ethical AI use and protect renters from deceptive marketing practices. The rise of generative AI has complicated the real estate industry, where digital enhancements have long been used to improve property listings. While virtual staging—such as adding furniture to photos—can give an idea of what a space could look like, it is different from false advertising. Experts warn that AI-generated images can introduce misleading features, such as non-existent schools, renovations, or landscaping, which can distort a renter’s perception of a property. Consumer trust in AI-generated content remains low, with only 40% of Australians expressing confidence in such outputs, according to a 2026 study. For tenants navigating a competitive rental market, AI-generated imagery has added a layer of frustration and deception. Many report encountering listings that do not match the reality of the property, with artificial greenery, lighting, or furniture making spaces appear larger or more appealing than they are. Some have stopped visiting AI-altered listings altogether, opting instead for unedited options. The new legislation also includes privacy protections for over 2.3 million renters, limiting data collection and ensuring landlords use standardised application forms. These reforms aim to build trust in the rental process by focusing on transparency and fairness.