New apartment builds in Rotorua's CBD will help to revitalise the city centre and alleviate the housing shortage, city and business leaders say.
And local real estate agents say there would be a huge demand for inner-city living.
There are currently 107 apartment units in the CBD made up of six apartment blocks on Arawa St, Fenton St, Hinemoa St and Whakaue St.
Two apartments have been created in an existing building on Hinemoa St over the past 12 months.
One new apartment block consisting of eight apartment units on Tutanekai St was granted resource consent late last year.
Rotorua mayor Steve Chadwick said the city needed all types of housing to alleviate the housing shortage.
"... We want to see more inner-city living as part of a comprehensive housing plan currently being developed," she said.
"There is plenty of opportunity in our CBD ..."
Chadwick said the council approved investigating potential incentives last year to encourage building improvements and conversions to apartments.
"Of course ultimately it's up to property owners to determine if and when conditions are right for them, but it is certainly something we'd love to see and the council is keen to work with those ready to invest in our CBD."
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The mayor believed more people living in the CBD would add vibrancy, benefit businesses, including retail and hospitality, and could encourage new businesses into the area.
"It also offers a lifestyle that I think would be attractive to people who enjoy being around others and enjoy being active and having easy access to amenities, activities, cultural hubs and parks."
Rotorua Chamber of Commerce chief executive Bryce Heard said apartment living would help to revitalise the CBD.
"It is certainly one big important ingredient in a package of solutions for the CBD recovery."
Heard said Rotorua was short of housing and residential sections.
"The CBD is under-populated and has huge potential for inner-city living. Repopulating the CBD is the key to the whole thing."
However, he said the issue was more car parking was needed.
"We have got to find somewhere for people to park their cars."
There also needed to be a momentum started on building apartments in the CBD.
"It's a bit like, 'Who's going to go first?'
"We just need to get the first dozen and I am sure others will follow."
Simon Anderson, managing director of Realty Services Limited, which operates Eves and Bayleys, said there was a demand for inner-city apartment living as long as the price point was right.
"The revitalisation of a CBD needs people. I think there would be huge demand for two-to-three-bedroom apartments in Rotorua's CBD."
It would also help to free up other homes in the city and help alleviate the city's housing crisis, he said.
"It would be a smart move by any council to encourage this type of development ... It will bring people into the CBD."
Professionals McDowell Real Estate co-owner Steve Lovegrove said people living in the CBD was good for any tourist city and suggested Rotorua follow Queenstown's example.
"I think it would be good for vitalisation of the CBD."
Lovegrove said although the city needed to sort more parking space, there would "definitely be a demand" for apartment living in the CBD.
Real Estate Institute of New Zealand and First National Rotorua principal Ann Crossley said the demand for the CBD apartments was good but they did not come up often.
If more apartments were built and became available there would be good demand for them if they hit the right price point and size, she said.
Tremains Rotorua sales manager Megan Davies said, in her opinion, there was a reluctance from people wanting to live in apartments under body corporate rules.
However, she said there was certainly a demand for apartment living in the CBD and Rotorua's CBD provided a "wonderful opportunity for people to live inner city".
Davies said if more apartments were built "they would be snapped up" and would help to revitalise the city centre.
A programme director at Kāinga Ora, Nick Seymour, said there were no current plans to build apartments in the CBD.
But he said Kāinga Ora had 26 new state homes under construction in Rotorua and another six will get under way in the next few months.
Of the homes under construction, there are five homes on Eruera and Amohau streets which, once complete, will be in walking distance of the town centre.
"At this stage, we expect to build approximately 70 additional new homes in Rotorua by the end of financial year 2022."
Kāinga Ora was delivering new homes in areas of high demand in Rotorua close to amenities, shops, schools, and other services.
"In most cases, we are replacing existing state homes with at least two or three times the number of homes in order to make better use of the land and provide more homes for families in need," Seymour said.