Trouble with air BnB and VRBO

I am not a fan of AirBnB for the very problem you cited. They can cancel your reservation without giving any reason, and while you can file a complaint, nothing will come of it. Just be grateful they canceled 9 months out - they can do it to you within weeks if not days of a reservation, too. I no longer use them because of this sort of nonsense that can really foul up a trip at the last minute.

I think a lot of it stems from trying to book many months in advance and over a major holiday. I have had some challenges from a variety of sites to get a night or two in Venice for next Carnival...and they keep getting cancelled as well. The hosts may not have blocked out their calendars soon enough to then go in and manipulate the pricing or availability. It's frustrating, but I would say they ultimately have the final decision. They should close the calendar before Christmas, for example, but they don't.
I know Christmas can be a big issue with similar problems happening in Mexico tourist locations. Those sometimes get cancelled the month before, and when you need multiple rooms or an entire villa, that becomes a major challenge.
I can't help you with alternatives, but this isn't new.

You are trying to book a unicorn. Places close to Sydney Harbour will be booked out 12 months in advance for New Year's Eve as everyone wants a good view of the fireworks.

The other thing to note is that Sydney has very few harbourside apartments that would have three bedrooms. Sydney just never traditionally had apartments in the city. There are some older apartments on the north shore - Neutral Bay, Mosman - built in the 1920s and 1930s - but many are only two bedrooms. On the city side most apartments have only been built since the 1990s and if you are lucky enough to have an apartment with a harbour view it is traditional to have a New Year's Eve party for your friends. So the apartment stock is very low in the city itself.

By the way VRBO isn't really a thing in Australia. AirBnB and booking.com will have the best apartment options.

If you are happy to not be right on the harbour you should be able to find an apartment in the eastern suburbs - Bondi Junction, Bondi beach, Coogee, Double Bay or Edgecliff - that suits your requirements. Very close to great ocean or harbour beaches. You can then just catch public transport into the city.

If the Eastern suburbs is too expensive then try the inner west - areas like Balmain, Glebe, Leichhardt, Homebush. Also quick to get to the harbour by public transport.

Just be aware that there are some sections of the harbour foreshore where you need to buy tickets for New Year's Eve as they get so crowded. For the free spots people arrive by mid morning on New Year's Eve and picnic and drink all day waiting for the fireworks.

Some city hotels that have harbour views offer very expensive fireworks packages of drinks and canapés. There are also harbour cruise options that will give you once-in-a-lifetime views (unless like me you lived in Sydney for most of your life).

Thank you all so very much for comments. Really helps. If you need any Colorado help, just let me know. Thanks again. Peggy