Using one motel for transitional housing could cost Rotorua businesses $3.4 million a year and lead to job losses and business closures, a new report says.
It further found tourism losses would hit $14.8m if another six in-progress resource consent applications to use Rotorua motels for public housing were granted.
The report was prepared by NERA Economic Consulting for Restore Rotorua Inc, a new group of Rotorua citizens "deeply concerned" about the state of the town.
The group is inviting Rotorua Lakes Council to "engage with us in the best interests of all who live in Rotorua" but says it will consider taking legal action as a last resort.
The council has met with members of the group and Kāinga Ora was also interested in hearing from Restore Rotorua.
Group chairman Trevor Newbrook told the Rotorua Daily Post the group came together to stop the council from considering resource consents for transitional and emergency housing without public consultation.
"We're a group of people concerned about the way the town is deteriorating and what the future will look like," he said.
"We've set up an incorporated society because we're really serious about this. We really love the place, we're passionate about it and we want it to be good again."
In a media release, Restore Rotorua said the council did not inform and consult with the local community when granting resource consent for Kāinga Ora to turn the Boulevard Motel at 265 Fenton St into transitional housing.
It said the council did not inform or consult with the local community about six other resource consent applications from the Ministry of Housing and Development (MHUD) for "emergency housing".
MHUD confirmed the six applications had been lodged.
Restore Rotorua has hired lawyers to give advice about the council's resource consenting processes and will monitor for potentially non-notifiable resource consent applications.
"Restore Rotorua has also instructed our lawyers to write to the chief executive of Rotorua Lakes Council to inform the council of our concerns, that all pending resource consents relating to emergency and transitional housing in the centre of Rotorua should by law be notified," Newbrook said.
The group was not against homeless people being housed, but encouraged the council to explore other options and "be more transparent".
It said that between Kāinga Ora, MHUD, and managed isolation and quarantine (MIQ) facilities in Rotorua, there was "insufficient accommodation left to support our local tourism industry".
"Businesses in Rotorua are suffering. Tourists are not able to find decent accommodation near the heart of our city, which means our hospitality sector will also suffer."
The report found Rotorua had about 60 hotels and motels in 2020 but that had since reduced by about 22 per cent. Other tourism hot spots in New Zealand such as Taupō and Queenstown were down about 3 per cent.
"A removal of the likes of the Boulevard Motel from this supply pool only exacerbates the problem further," the release said.
Restore Rotorua said the mixed-use model for motels, where tourists stayed alongside public housing tenants, was being phased out.
In early 2021, there were 45 mixed-use motels in Rotorua.
"Now, Boulevard is one of 30 motels which the government is seeking to use exclusively as transitional and emergency housing, which effectively halves the number of motels available for tourists and visitors of Rotorua that are essential to the survival of our local businesses."
Rotorua Lakes Council's district development deputy chief executive Jean-Paul Gaston said Restore Rotorua Inc had approached the council.
"We have met with one of their members along with their legal representation. We will continue to engage with them as appropriate."
The six other consents applications were in the "processing phase" so had not been granted and no decision about public notification had been made.
As previously reported, the District Plan allowed, through a resource consent process, for motels on Fenton St to be converted to housing.
Kāinga Ora Bay of Plenty regional director Darren Toy said it would be looking at redeveloping the Boulevard Motel for mixed housing.
He said Kāinga Ora was exploring options to provide more warm, dry homes for Rotorua including purchase, lease, development and partnership housing.
"We would be interested to talk with the Restore Rotorua group about our intentions, as well as explore with them any opportunities they may be aware of which could support the pressing need for more housing for people in the city."
MHUD deputy chief executive of housing supply, response and partnerships Anne Shaw said the ministry acknowledged motels were not a "satisfactory long-term response to homelessness" but there was an "acute shortage of suitable accommodation in Rotorua".
"A motel is a better option for whānau than sleeping in a car or 'couch-surfing in overcrowded homes," she said.
The ministry was open to hearing other workable solutions from those concerned about emergency housing in Rotorua.
Tourism-dependent businesses bearing the brunt
According to the report, the reduction in tourist accommodation in Rotorua would lead to reduced tourism spend.
It said this could lead to insolvency, job losses and business closures, especially for hospitality outfits heavily reliant on visitors.
To estimate the impact on tourism of losing the 34-unit Boulevard Motel to transitional housing, NERA Economic Consulting estimated the reduction in the number of domestic visitors and their associated expenditure by looking at guest night data from the Ministry of Business, Innovation and Employment, and tourism spend.
It estimated a loss of annual domestic tourism expenditure to Rotorua businesses of about $100,000 per motel unit, per year or $3.4m for the Boulevard Motel.
Applying the same $100,000 per unit method to the other six motels pending resource consents, it found the total annual loss, including The Boulevard, would be $18.2m.
The report suggests as more motels are contracted or purchased by the government for transitional/emergency housing, some Rotorua businesses, already affected by a lack of international tourism, may be pushed past their "tipping point".
The report said any offset from public housing residents spending money in Rotorua would be limited as most were already Rotorua-based.
While any from outside Rotorua would add to net expenditure, the report said "this would not be material, relative to the loss of tourism expenditure, given that those
who move into transitional/emergency housing are likely to exhibit lower discretionary spending".
Another possible positive economic effect highlighted by the report related to motel owners who profit from the sale or contracting of their motels to the government.
"However, at the same time as motel owners profit from the payment from the government, this should be balanced against the direct loss of tourism profits to the motels. When considering both these effects, there is likely to be only a marginal gain."
The Restore Rotorua media release said there had been reports showing the increasing use of transitional/emergency housing in Rotorua had increased crime rates in nearby areas.
Economic costs of more crime could include medical costs, property losses, loss of income and higher security costs.