The underground raves are not licensed and are known for unregulated drinking, drug use and potential fire hazards in unsafe buildings. Popular sites include disused warehouses or studios in the inner-city industrial belt between Marrickville and Alexandria, but also old army barracks in areas including Mosman.

Murat Kilic, owner of the Spice Cellar nightclub at Martin Place, said there had been an "uprising" in secret dance events not seen since their heyday in the late 1980s. He said he had lost much of his business to the Star casino and warehouse parties, some of which were attracting up to 1000 guests.

"It's definitely a renaissance," he said.

Such events had traditionally been a home for experimental forms of dance music that might be out of favour with mainstream nightclubs. But they had also attracted the ire of law enforcement.

A NSW Police spokesperson said the rate of "detected" warehouse parties in the Marrickville area had declined compared to the same period last year, and there had been only five callouts in the past six months. Marrickville Council also said it had not received any complaints about such parties in the past 12 months.

But Mr Kilic said governments and the police were disconnected from reality.

"The police don’t even know what’s happening, otherwise it wouldn’t be happening," he said. "It just shows their lack of understanding of what lockouts are actually doing on the ground."

Mr Kilic attended three warehouse parties on one weekend where he witnessed indoor smoking, open drug use and partygoers drinking spirits straight from the bottle.

"They’re completely illegal," he said. "We’re talking BYO parties where people are bringing their own booze, there are no cameras, there is grossly inadequate security, there are hazards everywhere. It's exactly what the authorities don’t want."

The underground raves were also luring top international DJs the clubs could no longer afford, Mr Kilic said.

"It’s a real shame because we were really making progress on the international [electronic music] scene."

Music promoter Sasha Skalrud predicted a rise in illegal warehouse parties when the lockouts were first introduced. This week he said there had been a "huge increase" and that there were up to 15 parties in "definitely unsanctioned areas" each weekend, some with 800 or 900 attendees.

Ian, a 23-year-old student and DJ who did not want to reveal his last name, said there had been a "huge spike" in warehouse parties since the lockouts came into effect. He admitted some events he had organised or attended would "fall short" of regulated safety standards. He said they operated in a legal grey area: unlicensed parties couldn't operate as a commercial venture but many asked for a donation instead.

"You are, in effect, charging entry but not from a business point of view," Ian said.

The events were primarily advertised on forums, social media and by word of mouth, which avoided tipping off police. Ian said many parties escaped the attention of authorities, but he feared a crackdown was imminent. A rave he attended last weekend was shut down by a large police contingent.

Contrary to popular impressions, most warehouse parties were organised in agreement with the owner of the premises, Ian said. "The breaking and entering thing is much rarer", but did happen. He said the parties were smaller than others suggested, usually attended by 200 or 300 people, and said he had never seen a fight or an ambulance called. Ian declined to comment on illegal drug use but said: "Because these are essentially private parties, people are taking care of themselves and taking care of each other."

Mark Gerber, owner of the Oxford Art Factory live music venue on Oxford Street, played in Sydney band Scapa Flow during the post-punk era of the late 1970s and early 1980s. He said he was now "too old" to attend raves but encouraged their proliferation.

"You need rebellion to create change," he said. "It’s never going to end and it’s a good thing. Local councils should support it and not fight it."

A parliamentary inquiry into the new laws is accepting public submissions until August 15.