Airbnb: Councils Crack Down | Impression Real Estate
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Airbnb: Councils Crack Down

Posted by Aaron Tunstall on 29, Jun 2018

Councils across New Zealand are grappling with the fast-growing short-stay rental market, writes Aaron Tunstall

Councils across New Zealand are changing how they deal with Airbnb and short-term rentals. Queenstown was the first city where the council cracked down on short-term stays – and it cracked down hard. Homeowners will now need to apply for resource consent to rent out their houses for more than 28 days in a year. The council has made this move because there is a shortage of places for workers to live; Airbnb is taking houses out of the rental pool. Queenstown has an outsized share of this market, with 14% of houses across Queenstown and Wanaka listed online for short stays, compared to 1.2% across the rest of the country. The top-earning host in the region pulled down income of around $2.9 million from 19 properties in the 12 months to October 2017*.

Clearly this will also bring in some money for the council, which it needs since a small catchment of ratepayers have to bear the burden of more than a million visitors each year. But the council says it won’t likely grant resource consents for low-density areas. Making it more expensive to rent your holiday house on Airbnb will mean some homeowners won’t bother. That is likely to cause a few issues – there’s a hotel bed shortage, too, and a predicted increase in tourists. So nobody’s quite sure where all the extra tourists are going to stay.

That’s less of a problem in Auckland, because there are more formal accommodation providers. For the Auckland Council, the Airbnb issue is partly one of fairness. Hotel and motel owners are paying business rates, while Airbnb owners are paying residential rates. This gives Airbnb owners a definite advantage. For example, our company manages some apartments in hotels which rent for around $170 per night, but if you book this through the hotel itself you’ll pay closer to $300 per night. (Compared to Queenstown, Auckland is much cheaper: the top Auckland host earned $3.1 million from 154 properties.)

Auckland Council is introducing the Accommodation Provider Targeted Rate (APTR) that will even up the playing field for high-use Airbnb properties. The biggest change in rates will be on high-use properties in central city, rented for more than 135 nights a year – the rates will increase by 277%. On the other hand, for up to 28 nights the rates will remain the same. We’ve seen Airbnb per-night costs remain flat over the two years we’ve been managing them, partly because more properties arrive on the platform each year. However, the prices are very low compared to hotels and motels and this may change once the costs increase.

Tauranga is now considering ways to treat its 1,000-odd Airbnb rentals as businesses. Christchurch City Council is in the same boat, with the council citing an “unequal playing field” between traditional accommodation and privately rented houses. On the West Coast there’s been an explosion in the number of Airbnb listings and Hospitality NZ has made a submission to the council proposing a rates overhaul.

It’s slightly tricky to have a different rule for each different council, but regions have wildly different demands on their housing. Queenstown is obviously a market apart, while other regions don’t have a shortage of housing or they have only a small number of Airbnb rentals – for those councils it might not be worth doing all the paperwork to put extra fees in place.

Airbnb and executive rentals now form an important part of our business, but that doesn’t mean we’re against the increase in fees. It seems only fair for accommodation providers to be paying the same rates, and frankly we work pretty hard for those nightly rates – there’s no reason that prices shouldn’t increase. However, if the new costs aren’t reflected in higher prices, we’d expect to see returns decreasing on Airbnb properties. This might make some of our landlords rethink their approach, especially as traditional rents increase. It’s going to be fascinating to see how the combination of market forces, council costs and landlord sentiment combine over the next 12 months.

Let’s put it this way: we’re not in any danger of being bored.

*The Spinoff.

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