Aucklanders who rent out their properties on websites such as Airbnb are reeling after enormous rate rises of up to 225 per cent.
Some of them said it no longer made financial sense to rent out their homes online, but they were in a difficult position because they had secured months of advance bookings from tourists.
Auckland Council's new targeted rate, also called a bed tax, is being applied to online accommodation providers through rates bills which are turning up in letterboxes this week.
Thousands of other homeowners across the city are bracing for rates increases while some have seen their annual rates bills dip.
The council estimates that there are 8000 Auckland properties listed on Airbnb alone, and that the tax will apply to around 3800 of them.
Phil McNally, from Oneroa on Waiheke Island, rents out a one-bedroom sleepout at his home on a small Waiheke-focused website. The rates bill on his $1.8m property has shot up from $4191 to $13,628.
McNally said at that cost, renting out the self-contained unit was not viable.
"Our bookings have already occurred for next Christmas. So it presents all sorts of problems. It's going to be a mongrel."
The bed tax is based on the value of the property, its location, and the number of bed nights it was booked for in the last year. It applies to homes and self-contained units but not single rooms in a larger home or properties which are rented out fewer than 28 days a year.
The council wrote to all homeowners who are using online accommodation websites and asked them to declare how many nights their properties were booked for in the last year. It also held a briefing with Airbnb owners in Auckland this week.
McNally said he never received any correspondence from the council - though the council is adamant the notification was sent to him by email.
In these situations, the council charges the full rate - which is equivalent to the charge for a motel at full occupancy 180 nights of the year.
For McNally, that meant a business rate of $9605 and a bed tax of $3189. He plans to appeal, saying he only rented the sleepout on 142 days of the last year.
"My main problem is the communication from the council," he said. "We don't really know where we stand."
Auckland Council manager of financial policy Andrew Duncan said anyone who felt their bill was not accurate could contact the council with further information and it would be amended.
The rate was initially applied to hotels and motels. After the industry complained about an uneven playing field, it was extended to Airbnb, Bookabach and other websites.
"We have listened to their concerns and decided to make rates fairer," Duncan said.
He said the council had been careful to develop a charging system that reflected the scale of each commercial operation.
Not all ratepayers were stung by their bills this week. Overall, 57 per cent of Auckland households had a rates increase of less than 2.5 per cent and 43 per cent had an increase of more than 2.5 per cent. One in 10 households had rates rises above 10 per cent.
Many of the largest increases were in the South Auckland suburbs of Manurewa, Otara, Papatoetoe, Mangere, Papakura and in West Auckland, where house price growth was highest during the last revaluation cycle.
A Manukau resident, who bought an apartment in 2015, said his rates had almost doubled.
His home had risen in value from $335,000 to $400,000 in that time, and as a result his rates jumped from $1417 to $2667.
The council says the increase reflected the property's use being reclassified from residential to business.
"Fortunately it is affordable for me but that's a crazy increase. Certainly not something I or others would have budgeted for."