Airbnb hosts have been outraged - often highly confused - by Auckland Council's new Accommodation Provider Targeted Rate (APTR). Popularly known as the "bed tax", it sees commercial rates charged to private homeowners who list through Airbnb or similar services.

Criticism has been three-fold. Airbnb hosts tell the Herald the targeted rate formula, which involves a matrix of factors including the location of home, its value, how many nights are let a year, and arguments over whether a given area is self-contained, is over-complicated.

They also say the council's messaging has been confusing, and shifting.

And many say their rates have shot up, making it no longer economic for them to be hosts.

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Airbnb's Brent Thomas proposes sweeping aside the targeted rate and replacing it with a flat accommodation levy, which he says would be easy to understand and administer.

If an Airbnb listing or hotel room cost $100 a night, a bed tax of 5 per cent would mean the guest pays an extra $5 dollars, he says, by way of example of how a hypothetical rate could work.

Thomas says the "true bed tax" concept has already been adopted by more than 400 central and local government jurisdictions worldwide, and that it's been used to raise more than $1.5 billion in levies from Airbnb hosts alone.

He describes it as more fair than the targeted rate formula. The more people earn from Airbnb, the more they would pay.

Rates bill hiked from $3600 to $16,000

Airbnb host advocate Ray Pitch strongly supports the idea. He says it would be transparent, and he sees guests accepting it if it was itemised on their Airbnb bill.

With the introduction of the targeted rate, midway through last year, Pitch saw his the rates bill on his central Auckland home jump from $3600 to $16,000. He had it reduced to $5800, says it took three rounds of appeals - and that even post-appeal his rates bill is still too high for him to remain an Airbnb host.

Like other Airbnb hosts, Pitch says he did not realise from Auckland Council's initial communication that the targeted rate only applied to so-called online peer-to-peer portals like Airbnb and Bookabach. Bookings made through word of mouth or a personal website were exempt.

That was the case for a lot of Pitch's bookings, which came from parents of children at a neighbouring private boarding school. He adds that when council staff pore over Airbnb listings, they also can't tell if dates are blacked out because, for example, a host has in-laws coming to stay. But maximum bookings have been assumed in targeted rates bills, with the onus on hosts to appeal.

Pitch says the council was forced to send out new communication explaining the exemptions. Council financial policy manager Andrew Duncan says the information on the council's website has been consistent throughout, but that it has made tweaks to its messaging.

"Information relating to properties which are liable for the APTR is set out in Auckland Council's Funding Impact Statement. This hasn't changed. We have made some amendments to our communications to make it easier for property owners to understand how this applies to them," Duncan says.

Ombudsman complaint

An unsatisfied Pitch has laid a complaint with the Chief Ombudsman over the targeted rates communication and process, which he thinks intimidated and confused Auckland's 11,300 Airbnb hosts.

A spokesman for the Ombudsman's office said it was being assessed.

Meantime, National's Nikki Kaye has already decided the council's communication was not up to snuff.

"At an administrative level, this is a frickin' hornets nest in that they didn't even define basic terms when they went out to people and rated them," she told the Governance and Administration select committee shortly before Christmas, reacting to a submission from Pitch (a clip of her appearance is on high-rotate in a closed Facebook group for Airbnb hosts; Kaye's greatest hits are from 18.00 here).

Law change required

Thomas and Pitch both say they appreciate Auckland Council has been forced into contortions by the Rates Act, which restricts local bodies to collecting revenue associated with land use.

The Herald approached local government minister Nanaia Mahuta, who confirmed "A true bed tax is not possible under the Rating Act."

Her response, in short, is that she'll think about it and that her decision will partly hinge on an inquiry underway.

"Bed taxes are within the scope of the Productivity Commission inquiry into local government funding," she says.

That inquiry includes looking into the cost pressures councils face like infrastructure and services to support visitors.

"The efficacy of a bed tax needs to be considered as part of the council funding system as a whole. It also needs to be considered in the context of other work to relieve the pressure from growing tourism demand like an International Visitor Conservation and Tourism Levy," she says.

"It's still too early to say whether or not a bed tax should be part of future funding tools for councils."

The Government requested the Productivity Commission's investigation in September. A spokeswoman says it is targeting June for a draft, which will be followed by a round of submissions. Its final report is due on November 30.

Auckland Mayor Phil Goff has said any Airbnb hosts who feel they are being overcharged should contact the council. Pitch is angry it took him three rounds of appeals to get his bill reduced, however.

Some see the targeted rate for Airbnb hosts as the result of successful lobbying by hotel and motel owners.

But Pitch says the talk among a closed Facebook group of 198 Airbnb hosts is more that they've been dragged into the housing affordability debate. The working theory is that the council pitched the targeted rates high in a bid to drive hosts out of the online booking game to return properties to the long-term rental market (and Airbnb has copped blame for a rental squeeze in several areas).

'Council out of control'

The opposition is already on board with any move to scrap the APTR.

At a Governance and Administration select committee hearing on December 19, National's Nikki Kaye said ratepayers had no heads-up about the targeted rate, which was applied retrospectively.

The Auckland Central MP also said: "The inequitable nature of it means we are equivalent to Venezuela in that some people have had rating bills, on top of their tax bills, that mean they're paying 80 per cent tax."

She added: "I've never seen anything as a Parliamentarian as flawed and inequitable and worrisome about a council out of control."

'Blunt tool'

Airbnb exec Thomas says his company will support Auckland council's efforts to implement its targeted rate. Pitch grumbles that Airbnb has done a lot in terms of encouraging hosts to agitate and complain to councillors and the media, but nothing in terms of helping to explain the new tax to hosts, adding, "we've had to advise them.".

But he adds: "We have always been clear that we think there is a better way.

"Rates are blunt tools which don't take into account a person's income or earnings - only the value of their property. It means an asset-rich, cash-poor retiree sharing their empty nest for extra income would be harshly penalised because their family home has appreciated over the years. Rates are also difficult to collect and enforce in an efficient, targeted way."

Airbnb believes a bed tax on all accommodation operators is a fairer and better solution," he says.

"Put simply, with a bed tax, those who earn the most pay the most. Bed taxes are also quick and easy to implement which means less money spent on administration and more money invested in local infrastructure.

"Rather than forcing local councils to rely on regressive rates, New Zealand should be bold and explore bed taxes."

Airbnb says it has not seen any fall-off in hosts because of the targeted rate, but several hosts have told the Herald they have months of forward-bookings to honour before they throw in the towel.