The Government says it has no immediate plans to apply for resource consent so three Fenton St motels housing 170 homeless people comply with the district plan.
A resident lobby group says that's not good enough and the Government shouldn't be allowed to flout the law.
Tuscany Villas, Emerald Spa and Four Canoes have been housing the city's most vulnerable since Rotorua went into the first Covid-19 lockdown in 2020.
All three motels are contracted by the Ministry of Housing and Urban development to offer accommodation to those in need.
But like all motels offering accommodation for the homeless, it is against the district plan because motels are only consented to offer visitor accommodation on a short-term basis.
The council has recently taken steps to enforce the district plan by making motel operators apply for resource consent to operate emergency housing.
The ministry has just applied for resource consent for 12 motels it contracts but hasn't included the three motels in its application process because it says it's focusing on the others first.
The Rotorua Lakes Council is taking a tough stance with about 40 other motels that aren't contracted by the Government that are also operating as emergency housing providers by threatening court action if they don't become compliant.
However, the council says it hasn't written to the owners of Emerald Spa, Tuscany Villas and Four Canoes because it is taking a "staged" approach.
Four Canoes is contracted to Te Taumata o Ngati Whakaue Iho Ake Trust and can cater for up to 182 people but on May 31 had 52 people. Emerald Spa can take up to 99 people but had 65 occupants at the end of last month and Tuscany Villas can have up to 69 people and had 53 people at the end of last month. The latter two are contracted to Visions of a Helping Hand.
At maximum capacity, the three properties can take 350 homeless but the ministry said there were no plans to reach that because they were brought on board as part of a Covid response and numbers were expected to decline over time.
Restore Rotorua chairman Trevor Newbrook said the motels had housed homeless people for two years and, in his view, the council should make the ministry apply for resource consent or stop operating them.
In his opinion: "To suggest the council is taking a staged approach is not acceptable, after over two years."
Newbrook said the generosity of local people had been exhausted and he believed it was time for the council to act on behalf of residents.
Newbook said ''the Government is not above the law'' and he believed the housing minister needed to explain why these motels were being used outside the district plan.
Motels were not designed to be used as permanent accommodation and were not suitable, especially for families, to be living there for long periods, he said.
Rotorua mayoral candidate Fletcher Tabuteau said, in his view, it did not make sense for the ministry to not include the three motels as part of its applications with the other 12.
Tabuteau has launched a petition to Parliament calling for emergency housing in Rotorua for non-Rotorua residents to be banned, alternative solutions to motels in Fenton St and resources for police and the council to improve the safety of residents.
He said it was about "making a noise" so the Government was forced to look for better solutions other than using motels to house people.
Ministry housing and services delivery general manager Jonathon Fraser said the council and the ministry had focused on prioritising the consent applications for the 12 motels "in the first instance".
"But we appreciate further discussion about another three motels we engaged to house people as part of the Covid-19 lockdown response may need to happen."
He said the ministry was in regular discussion with the council over concerns about how the motel accommodation was delivered so it could operate within the district plan.
"We're also focused on ensuring that people requiring emergency housing are supported with the appropriate wraparound support that brings stability to families, and in particular vulnerable children and rangitahi as we work with the council, Kāinga Ora and others to continue to increase the supply of affordable homes in Rotorua."
He said the three motels were brought on board as part of the Government's Covid-19 response to help vulnerable people who could not be safely isolated.
He said the motels operated like other ministry motels and transitional housing where people received social support and were contracted to housing providers.
Council district development deputy chief executive Jean-Paul Gaston said the council was ''taking a staged approach to ensuring compliance".
He said in terms of the 12 motels contracted by the ministry, the council was dealing with those applications first.
Housing Minister Megan Woods said the Government was working closely with the council to ensure emergency and transitional housing operated within the district plan.
She supported the council taking a staged approach to ensuring compliance.
She said the three motels that did not have resource applications pending were ensuring people who were homeless and supported during the first Covid lockdown continued to have a roof over their heads and wraparound support, instead of living on the street, as well as providing accommodation and support for other households who had needed it.
The Government was increasing public and transitional housing at pace in Rotorua, she said.
Rotorua mayor Steve Chadwick said she was assured that staff undertaking the regulatory work would get to all operators.
"The ongoing use of motels is untenable and needs to end as soon as possible. We share the community's frustration and concerns but the reality is that we first need more houses. I can assure you that council is doing everything it can to get more homes built as quickly as possible."
Rotorua district councillor and mayoral candidate Tania Tapsell, who has campaigned on the homeless issue, said in order to stop the, in her view, inappropriate use of motels it was crucial to address the cost-of-living crisis and lack of affordable homes.