Private accommodation owners are speaking out against a proposal by Tauranga City Council to take a cut of millions of dollars in profits generated from renting rooms and houses to tourists. Bay of Plenty Times Weekend reporter Dawn Picken shows us how the innkeeper business has changed – and how governments worldwide are working to rein in the private room-to-let market
Listed and at risk
A virtual tour of a penthouse with views of the ocean and Rabbit Island provides a glimpse of luxury lodging in the Bay. It features a wraparound deck, media room, three bedrooms, three bathrooms, spa pool, swimming pool, Sky TV and sleeps six.
Advertised rates start at $750 per night and, according to research on similar private rental properties, it's likely the owner doesn't pay commercial rates for economic development, wastewater and even higher Sky TV prices forked out by hotels and motels.
Tauranga City councillors are studying whether to change that. Hospitality New Zealand's Bay of Plenty manager has lobbied council to follow leads of Queenstown and Rotorua and charge commercial rates for what he described as "boutique accommodation businesses running under the guise of a private residence". The council's finance staff have been asked to look into options for a targeted rate on short-term rental properties advertised on sites such as Airbnb and Bookabach.
Homeowners not happy
Homeowners who hire out rooms and houses for short-term accommodation say the proposal's unfair and will hurt the local tourism industry.
Mary Allison-Florence rents out a small apartment in downtown the Mount. She didn't want us to mention the name of the building or amount she charges, but did say she had been listed with Airbnb for two-and-a-half years and had nearly full occupancy from day dot.
Allison-Florence says she already pays taxes on rental earnings and another tax would be unfair.
"It's the way the world's going. Everyone's wanting to find the best accommodation and most reasonable rates, value for their buck."
She takes all the bookings and does the cleaning, too.
"We have just one little apartment with two bedrooms in it … it's not really a commercial enterprise."
Shane (who asked us to use his first name only) says he and his wife have been hosting with Airbnb almost two years.
"We have a space that's perfect for short-term rentals … and short-term rentals are getting three to four times the revenue as long-term."
Shane can also keep the room open for his own guests, and avoid a tenancy agreement.
"It's not easy to kick tenants out if you have a bad one whereas with Airbnb you only have to tolerate them until the time's up."
The basement suite in the Omanu area of Mount Maunganui helps pay the mortgage, says Shane, and he likes hosting's social side. The couple books the suite around 300 nights per year, charging from $90 in low season to as much as $250 in high season.
He says he's a sole proprietor who pays tax on rental earnings and has appropriate fire safety equipment. He thinks being charged commercial rates would be overkill.
"If we just had a larger family in the house, what's the difference from a council point of view from the load on services, water and stuff? Rates are already a major cost to homeowners."
Shane says details of the accommodation tax would determine whether he and his wife would continue renting their suite.
"We're not political. Whatever happens, happens and we'll deal with it."
Anna rents a guest cottage with three beds on her property in rural Bay of Plenty, near Tauriko. She says she charges lower rates than a motel ($95 per night plus $20 per extra person), but still must pay power and other utilities, plus clean the cottage and wash the linens.
"If council put another tax on this it's not worth doing versus getting rent with no responsibility and renters pay their own power."
Anna says her own home is not a commercial property.
"It's just the average Kiwi trying to make ends meet and pay our mortgages. We pay so much rates and tax already, and it's difficult to cover living costs on an average wage. Why make everyone's life so difficult when we are providing a much-needed service when there is an accommodation shortage?"
Anna says her rental is filled an average of five nights per week over summer.
Hospitality New Zealand's Bay of Plenty manager Alan Sciascia says research his organisation commissioned shows some Airbnb owners are making tens of thousands of dollars per year on multiple listings.
Hospitality NZ bought data from a company called AirDNA that analyses Airbnb markets. Sciascia says one Bay of Plenty host with multiple listings made more than $80,000 a year.
He says local Airbnb traffic has increased four-fold the past three years, with revenue sitting at $12 to $13 million per year. Sciascia says those accommodation providers are treated as residential properties, so they don't face the "rafts of charges" commercial properties must pay.
"All we're asking for is where these properties are being operated as a commercial business, they be treated as a commercial business and be charged accordingly."
Sciascia says he's not too concerned about someone selling off a room for three weeks over January, but anyone renting their place 300 nights per year sits at a different level.
"This is serious business. It's happening right throughout the year."
Research shows the number of Tauranga listings marketed on Airbnb had risen from 34 in 2013 to more than 1000 this year – a number that could double in summer. Three of the city's top 10 hosts controlled 61 properties, according to AirDNA data.
Colonial Court Motor Inn owner Kris Stamatakos says he thinks the council proposal to tax private accommodation providers is a "phenomenal idea".
Stamatakos says he doesn't have a problem with people renting out properties in high season, but takes issue with residential property owners paying less for nearly everything than he does for his motel.
"These guys are taking rooms away from us yet they don't have to do WorkSafe, they don't have to do the [commercial rates for] Sky. Their overhead is drastically a lot cheaper than ours."
Commercial providers in Tauranga also pay a "pan tax", which we'll examine in more detail later in this story.
Stamatakos says the housing crisis can largely be blamed not on rising property values, but on long-term rental properties being turned into short-term holiday rooms and houses.
He cites the example of an acquaintance who used to have two separate long-term rentals in one house.
"Both of them are gone, because he was getting $450 to $500 a week for two; he's getting $200 a night now. So there's two more people that don't have accommodation because now it's an Airbnb. That to me is what the Government has to look at."
Trade Me Property reports the number of rental listings on-site in Tauranga has dropped 38 per cent since May 2012. Since May last year, the number of rental listings in Tauranga has increased 12.4 per cent.
850 Cameron Motel owner Tony Bullot echoed Stamatakos's concern holiday rentals were depriving families of housing.
"You've got tourists taking houses that needy families need and needy families being put into motel rooms by Winz."
Online chiefs weigh in
Bookabach lists around 600 properties in the Tauranga district, a number likely to grow over summer.
The Kiwi brand is owned by HomeAway, based in Texas, and is part of Expedia. Bookabach general manager Peter Miles told the Bay of Plenty Times earlier this month he thinks there are better ways to raise funds for tourism infrastructure than property rates.
He says the Auckland Council plan – a sliding scale where more rented nights meant higher rates – was ripe for abuse.
"The approach encourages under-reporting and will see some property owners decide it's not worth renting out short-term rentals for the added cost/hassle."
Miles says an extra tax could mean less choice for holidaymakers and families and more expensive rentals. He says Bookabach favoured a bed tax jointly administered by councils and central government.
"We feel travellers would accept a nominal fee added to their accommodation bill if it was clear the funds were going towards tourism infrastructure."
An economic impacts report on Airbnb in New Zealand found the company helped contribute about $660m annually to the country's economy last year ($781m including accommodation), supporting more than 6000 fulltime equivalent jobs.
Airbnb's Australasian head of policy, Brent Thomas, says the company supports a "simple, straightforward" bed tax and would love to see central government allow communities to charge one.
"Our community of hosts, Kiwis who share their homes, they want to pay their fair share and one of the easiest ways to do that is by an accommodation industry bed tax or tourism tax."
It's about fairness, says mayor
Tauranga mayor Greg Brownless says it's too early to say the council is investigating a bed tax, which would need approval from central government.
Brownless says tourism promotion and infrastructure is funded by a special rate on businesses, which private accommodation providers don't pay.
"There are some people making very big business in residential areas. One person runs 22 Airbnbs, and that is a business. That's a bigger business than a motel."
Brownless says the council is looking to make the climate fairer for commercial accommodation providers, but has yet to set a timeline for adoption of a new rule, if, in fact, one were to be enacted.
"It was quite a surprise to council as to the extent of this. Nobody's after someone who decides to rent out their house for a few weeks here and there, but if you're making a business out of it.
"In Queenstown, there are situations where buses go around the city, pull up alongside houses and disgorge tourists and neighbours feel they've been taken over by de facto hotels."
The mayor says there's much work to do on the issue and both sides need to be heard. The main goal, he says, is to spread costs fairly.
"It's more an equity thing. It's certainly not something that's going to make the council money in any way. We get nothing out of tourism; we get costs. We have to provide facilities – cruise ship disembarkation, information centres ... "
Brownless says private accommodation providers who benefit from tourism should not expect a free ride. "Often, those in business struggle, and most people know whether they're running a business, or not."
A council staffer says work has not yet started on the proposal.
Beyond Auckland, councils in other popular tourist destinations are taking steps to regulate private accommodation providers.
In Queenstown, people can let out their homes for short-stay guests for 90 days a year. That could be reduced to 28 without resource consent. The council estimates 2700 homes have been removed from the long-term rental market thanks to platforms like Airbnb.
Christchurch city council staff are working out possible ways to apply a business rate to short-term rentals. Rotorua Lakes Council earlier this year opted to keep its existing policy of up to 100 days use as a holiday home before an owner would pay business rates.
Around the world
Policy makers globally have erected barriers to hosts listing with Airbnb.
AirDNA identified 365 cities that had some kind of licensing requirement. Some fine hosts, while others place caps on how many days hosts can rent their homes.
In Australia, the NSW government voted to impose a 180-day cap on the number of days a year an empty property in Sydney can be rented out on a short-term basis.
In Japan, about 80 per cent of the country's apartment listings on Airbnb recently disappeared.
Barcelona last month told Airbnb to remove 2577 listings it found to be operating without a city-approved licence, or face a court case potentially leading to a substantial fine.
Berlin had instituted a $100,000 fine on unlicensed private accommodation of an entire house and has introduced a ban on converting apartments to holiday rentals. The decision reportedly returned 8000 apartments to the long-term rental market.
Who pays what?
Airbnb and Bookabach aren't the only platforms where you can list unlicensed accommodation. Other sites such as Booking.com and Expedia feature accommodation providers including hotels, motels, apartments, holiday homes and bed and breakfasts.
The Bay of Plenty Times Weekend analysed Tauranga-area bed and breakfasts, some of which have hundreds of online reviews and charge $200 per night or more. Of the 20 B&Bs for which we found Tauranga City Council property rating information, none pays the commercial rate listed as "3200, Economic Development". The council recently voted to increase the commercial rate differential, to be phased in over three years, eventually rising to 1:1.2 in July, 2020.
The commercial rate can add $600, $800 or more to a business owner's annual rates bill. It's small change compared to commercial wastewater rates, which can bump up yearly payments by thousands of dollars.
We compared rates on the Tauranga City Council website for an Expedia listing, a private home in The Lakes, Pyes Pa, with a Gate Pā motel. The home's CV is $950,000 and total rates for 2017/18 are $4825. It pays no economic development rate. Wastewater rates are listed at $834.
The Gate Pā motel CV is listed at $895,000. It pays $559 for economic development, and $3336 for eight wastewater connections (otherwise known as the "pan tax"). Total rates for the motel are $7024.
One bed and breakfast owner we spoke with said he wasn't sure if he was paying commercial rates (he's not), but says he does pay commission to booking sites, tax on rental income and liability insurance.
TCC manager, environmental planning Shanan Miles says bed and breakfasts can be operated as a permitted activity under the city plan as a 'homestay'.
"They are a permitted activity in the Suburban Residential Zone (along with the rural residential zone and rural zones) if they comply with applicable permitted activity rules for homestays. They also need to comply with the city plan rules for signage and noise ..."
Miles says If they meet the criteria, they may operate without a resource consent or other council permission.
Council defines a homestay as a portion of an independent dwelling unit (excluding a secondary independent dwelling unit) occupied continuously for periods of up to 3 months during any 12 month period.
Oleg Bartsaikin of Casa del Mare Boutique Bed & Breakfast in Papamoa says the home was already a B&B when he and his wife bought it.
They book around 240 nights per year, charging $160 to $210 per night. The property has an exceptional rating on Booking.com. The couple are engineers, and Bartsaikin says the B&B is a sideline.
"It's not a great income, it's a lot of expenditure if you think about it – power bills, gas, water, insurance – we're doing it for fun, really. If we earn a few thousand dollars a year, we're happy with that."