Item 7: On-Line
Accommodation Providers
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Council
23 March 2022
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REPORT R26576
On-Line
Accommodation Providers
1. Purpose
of Report
1.1 To
consider actions to further regulate on-line accommodation providers (OAPs) to
respond to issues raised by Hospitality NZ.
2. Summary
2.1 Hospitality
NZ has raised concerns that OAPs in Nelson, are not subject to the same
standards and rating charges as other accommodation providers, i.e. motels and
hotels. They seek that Council more actively enforce the rules in the
Nelson Resource Management Plan and rate these providers in line with
commercial hospitality premises (e.g. bed and breakfast providers).
2.2 This
report traverses the issues and in summary, finds:
2.2.1 There
is a rule in the current Nelson Resource Management Plan (NRMP) that requires
resource consent for short term guest accommodation for more than four
travellers visiting at any one time and where there is no permanent resident on
site. The rule will only capture a smaller sub-set than the total number
of on-line accommodation providers in Nelson.
2.2.2 More
proactive enforcement of the rule, rather than responding to complaints, will
require a dedicated additional officer.
2.2.3 Rates
for OAPs are currently set at a residential rate level. Any change to the
rates levied would require a special consultative process which would be by way
of an amendment to the Long- Term Plan. Preparing the required reports
and undertaking consultation and then amending the rating provisions will add
to existing officer workloads. If rating changes are made separate to
more proactive rule enforcement, an officer resource would be required to do
the investigation work required to identify the OAPs.
2.2.4 Without
additional unbudgeted expenditure being approved by the Council, for the
position and work programmes, other Council work will be unable to be
delivered.
2.2.5 The
process for rating and more proactive enforcement of the rule, will result in
negative feedback from OAPs. This needs to be anticipated and prepared
for, e.g. it is likely there will be opposition to any changes to rating
through the Annual Plan/ Long Term Plan process from OAPs. This will
require communications input and may require legal input.
2.2.6 If
the end outcome is to put OAPs on the same platform as other commercial
accommodation providers, in terms of the areas Council can control, then that
involves more proactive enforcement and rating changes. Simply only
enforcing the rules more proactively will not alter the competition concerns
raised by Hospitality NZ, i.e. unfair starting points for costs etc as trade
competition is not a matter that can be considered under the Resource
Management Act.
2.2.7 The
matters raised by Hospitality NZ, are in the officer’s opinion, best
addressed nationally by Central Government.
3. Recommendation
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That the Council
1. Receives the report On-Line
Accommodation Providers (R26576) and its attachment (A2615399); and
2. Agrees not to pursue a different
rating charge for On-Line Accommodation Providers; and
3. Agrees to correspond with the
Minister for Business, Innovation and Employment and request Central
Government provide a consistent nationwide approach to regulation (including
building regulation) and charging/taxing for On-Line Accommodation Providers.
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4. Background
4.1 Hospitality
NZ (submission 27202 – Attachment 1) spoke to the Hearings on the
Long Term Plan (LTP) 2021-31 and highlighted the difficulty of finding
affordable accommodation for workers, particularly given competition with
AirBnB and other holiday rentals. The response to the submission, sent in
October 2021, acknowledged the concerns and that work on options and possible
rating solutions would be undertaken by the end of 2021.
4.2 At
the Council meeting on 17 December 2020 the Council resolved as follows:
Resolved CL/2020/001
“Requests
officers report to Council in 2021 on various regulatory options and subsequent
rating solutions for whole house AirBnB-type accommodation
providers.”
4.3 Work commenced on the
options and these were workshopped with Elected Members on 9 November
2021. After the workshop, officers were tasked with undertaking
consultation with OAPs and the public more broadly to elicit further
information. This engagement work stalled prior to Christmas, as the
Group Manager Environmental Management (GM EM) was on leave.
4.4 The
Environmental Management Strategic Adviser role has been vacant since September
2021 and so the work has progressed sporadically to fit around other priorities.
5. Discussion
Who
are On-Line Accommodation Providers?
5.1 OAPs
advertise through a range of on-line platforms including: Bookabach; Stayz;
Bachcare; Airbnb; Holiday houses; Booking.com; holidaylettings; vrbo; HomeWay;
Expedia; HometoGo; Luxury Lodges; and Flipkey.
5.2 An
OAP in Nelson requires resource consent where they are providing short term
guest accommodation for more than four travellers at any one time and there is
no permanent resident on site. Where there are fewer than four travellers
at any one time or there is a permanent resident on site, no resource consent
is required.
How many On-Line
Accommodation Providers are there in Nelson?
5.3 AirDNA
data for the 2020-2021 year showed 427 active rentals in Nelson with 76% of
these renting out the entire site (i.e. no resident on site). This means
that at the time of the data sample, approximately 325 OAPs could potentially
require resource consent for undertaking the activity. However, there
would need to be further interrogation to find out how many travellers are
staying at any one time, e.g. more than four (resource consent triggered) or
fewer than four (resource consent not triggered). This is not a simple
task and is discussed further later in the report. All that can be said
is it will be a number fewer than 325 (based on the 2020-21 data).
5.4 Hospitality
NZ noted in its LTP submission presentation that there are 38 commercial
accommodation providers in Nelson (788 beds). They also noted that in
January to March 2020, AirBnB providers had 87% occupancy compared to
commercial premises with 54% occupancy. The data for January 2021 shows
76% occupancy for AirBnB. It is noted that some commercial premises do
not list on the on-line platforms.
5.5 The
average occupancy rate shown in the Ministry of Business, Innovation and
Employment Accommodation Data Programme for commercial accommodation was 39% in
the year to January 2022. The AirBnB occupancy rate was 36%.
5.6 It
is anticipated that Hospitality NZ will provide further data at the Council
meeting, in their public forum presentation, showing that the number of active
rentals has increased. The numbers are indicative only as the numbers will
fluctuate.
The Pros and Cons
5.7 Use
of houses for short term rentals can affect the sense of community compared to
homes being occupied by permanent tenants who then get to know their neighbours
and add to the local community.
5.8 Counter
to that, having options for where visitors can stay adds to the local economy
through spend.
5.9 The
Nelson Regional Development Agency estimates (crude estimation) that AirBnB
visitors contribute up to a third of the regional visitor spend. For the
year to the end of January 2022 total spend was $147m which would mean AirBnB
visitors contribute up to $49m of existing visitor spend. Based on a
Deloitte report from 2017 quoting GDP and AirBnB visitor nights across New
Zealand, it is estimated the GDP generated from that $49m spend would be about
a further $41m of added value, bringing the total to $90m GDP created for the
region.
5.10 It
is unknown whether this spend would still occur if AirBnB was not available and
their customers would go to other commercial providers. It is not
possible to say absolutely that AirBnB is responsible for this contribution to
spend and GDP, only that the contribution is made by AirBnB customers.
NZ-Wide Issues Requiring
Government Input
5.11 Data
prepared by Parliamentary Library, Research and Information has compared (date
unknown but the information was collated over the last six months) AirBnB
accommodation vs long term rental properties after a search through Trademe for
rentals and the AirBnB website. The comparison is:
Table
One
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Place
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AirBnB
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Trademe Rental
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Queenstown
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300 plus
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27
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Tauranga
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300 plus
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74
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Rotorua
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300 plus
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45
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Taupo
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300 plus
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9
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New Plymouth
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300 plus
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36
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Nelson
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466 (364 entire home)
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42
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Tasman
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881 (713 entire home)
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28
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5.12 What
the table shows is that the proliferation of OAPs and the low number of rental
properties in comparison, is an issue not unique to Nelson.
5.13 Holiday
rentals are not covered by the Residential Tenancies Act 1986 and are therefore
not covered by Healthy Homes Standards. In addition, there is no
requirement for mobility access or to meet the same fire regulations as
commercial operators. These are issues raised by Hospitality NZ as
needing addressing to provide a more level playing field. These issues
are not able to be resolved by the Council and need to be resolved at a Central
Government level.
Will regulation of On-Line
Accommodation Providers result in more properties becoming available on the
rental market?
5.14 If
resource consents are required (bearing in mind this is only for OAPs that have
more than four travellers at a time and where there is no resident on site) and
the properties are rated at a higher amount, would some owners choose to make
their properties available to longer term rentals? Possibly but there are
some points to consider that may mean this does not occur:
a) According
to Auckland Council, the tipping point where an OAP receives more revenue from
short-term accommodation than full-time rental is 135 nights (four and a half
months). The owner of an OAP can earn the same income per year as a
long-term rental and have the property available for friends and whanau for the
rest of the year.
b) There
are new healthy home requirements for rental homes, e.g. insulation, extractor
fans and fixed heating. Owners that do not meet their obligations under
the Healthy Home Standards are in breach of the Residential Tenancies Act 1986
and may be liable for exemplary damages of up to $7,200. This may put
some owners off from making the home then available for long-term
rental.
5.15 Any
property owner is going to consider these factors in terms of the cost of
improvement and availability of the property for their own use before deciding
whether to turn the property into a long-term rental. There is no
guarantee that homeowners will make the decision to release their property for
long term rental to the extent that it will make a difference to the rental
market.
5.16 It
is unknown how many of the OAPs in Nelson offer accommodation to more than four
travellers at any one time and where there is no resident on site. It is
difficult then to gauge how many of the 76% renting out the entire site (from
the 427 active rentals in Nelson outlined in paragraph 5.3 above) could then potentially
be available to rent long- term. Suffice to say it will be a smaller
number. Note: the NRMP rules were introduced many years ago and were not
designed to directly deal with the current situation regarding more OAPs in the
market today. Any change to these rules would require a plan change
process.
What are other Councils
doing?
5.17 Only
a few councils have introduced requirements to manage OAPs.
5.18 Thames-Coromandel
District Council proposed a targeted rate of $200 plus GST per year to go
towards the Economic Development activity. They have about 50%
non-resident ratepayers. It did not progress as a result of community
response.
5.19 Queenstown
Lakes District Council proposed a requirement for resource consent as a
Controlled Activity (meaning it must be granted). The rules are under
appeal. The consent process was to be used as a trigger for charging a
rate that was 25% business and 75% residential.
5.20 Rotorua
introduced a business rate where the property was being used for more than
100 nights as an OAP.
5.21 Both
Tauranga and Tasman have historically considered charging and controls, but
they did not progress.
5.22 Christchurch’s
Plan Change 4 was subject to a Hearing in October 2021. The notified
Plan Change proposed Controlled Activity status for un-hosted visitor
accommodation up to 60 days, Discretionary Activity status for between 60 and
180 days and Non-Complying Activity status beyond that. Council’s
position has altered since notification and has now proposed that anything more
than 60 days in a Residential Zone, will be Discretionary, i.e. no control
below 60 days and no Non-Complying Activity status. Submissions
from OAPs are seeking a more permissive approach and the hospitality sector
generally seeks greater restriction. The submissions from residents raise
concern that a commercial activity is occurring without appropriate
controls.
5.23 Christchurch’s
existing funding impact statement sets a general rate differential for
businesses of 1.697 and this includes for traveller’s
accommodation. In practice however, they find that only a small number of
properties are rated as businesses as it is difficult to identify the
properties. The comment made is that typically accommodation websites do
not reveal the address of a property until a booking occurs. Council
staff have avoided the strategy of making and then cancelling bookings, both
because of the staff time required to identify all the properties and because
of concerns about the ethics of that approach. Instead, they will look to
rate any that apply for a resource consent.
What do the On-Line
Accommodation Providers say?
5.24 The
GM EM spoke with representatives of Bookabach and Airbnb in Australia on 17
February.
5.25 In
summary, the comments made were:
(a) Any
approach should be led by Central Government. OAP internet platform
providers were involved in work commenced by the Ministry of Business,
Innovation and Employment on a national approach to OAPs, but the work has not
been progressed by MBIE since late 2020.
(b) There
is support by these providers for the visitor levy proposed by Queenstown that
would capture all tourism providers (e.g. car hire companies) and be used to
pay for things associated with tourist activities e.g. increased rubbish
collection. They consider this is something that could be worked through
further by Central Government.
(c) Before
Local Government takes any step the questions to be asked are: What impact do
the OAPs have on Local Government and how should they be regulated?
(d) They
consider that OAPs are not the same as Bed and Breakfast providers who provide
for a greater number of nights of accommodation and charge additional charges
for food and beverages, i.e. running a business. In comparison OAPs
generally are not businesses in the same way, but rather the owners are looking
to defray some costs by letting for part of the year and have a home they can
continue to use.
(e) Market
demand is unlikely to be met e.g. during major events. It is noted that
during civil defence emergencies some homes have been let at no cost to FENZ
and others.
Regulatory Compliance Issues
5.26 Resource consents are required for
those OAP that do not live on the premises and there are more than four
travellers coming through the premises at any one time. The resource
consent is for a Discretionary Activity meaning it can be declined, affected
parties need to be considered and it could be notified. If there are
fewer than four travellers and/or the owner is on site, then no resource
consent is required.
5.27 The
rule structure was not set up to manage anything other than potential effects
on neighbours, e.g. associated with traffic movement. The rules are not
intended to manage potential unlevel playing fields for other accommodation
providers.
5.28 The
Resource Management Act does not allow a territorial authority to have regard
to trade competition or the effects of trade competition in regional policy
statements, plans, deciding on the level of adverse effects or deciding a
resource consent application (sections 61(3), 66(3), 74(3), 95D(d) and
104(3)(a)(i)).
5.29 There
is therefore not the ability to require resource consent for all OAPs and
indeed it may be less than 50% of OAPs (assuming we know 76% had no owner on
site based on 2020-21 data) and so those able to and actually accommodating
more than four travellers at any one time, will be a percentage less than that.
5.30 The
approach that has been taken to date regarding compliance with the rule, is to
act on complaints. Acting on those complaints has resulted in ten
resource consents being received over five years. The average resource
consent cost across those ten is $4,700 noting that one was over $11,000 due to
complex issues with affected parties.
5.31 If
more proactive enforcement was undertaken, rather than relying on complaints,
then the following would be necessary:
5.31.1 Interrogation of Air DNA data to confirm the exact
addresses and the property owners. Interrogation steps would include data
capture and analysis (noting the comments made by staff at Christchurch Council
in paragraph 5.23 around ethics); site visits to confirm locations; confirming
owners and addresses through the rates database; confirming if existing use
rights applied to any of the properties; writing to confirm numbers of
travellers at any one time and then follow up with those that need to apply for
resource consent i.e. those with no owner on site and letting to more than four
travellers at a time (assuming these factors can be confirmed as some OAP may
say their numbers are fewer than four). All of this work will not be cost
recoverable. There will be some income generated from processing the
resource consents but it is difficult to gauge the income without knowing the
number that require resource consent.
5.31.2 Follow
up would be required and this would involve: one on one conversations; understanding
each owner’s particular situation; giving guidance on what is required
for the resource consent; determining if there are affected parties and getting
the owner to obtain any approvals; processing the consent (on a notified or
non-notified basis); and issuing the decision. Any conditions of consent
would need to be monitored.
5.31.3 There
would also need to be further follow up with those that do not make a resource
consent application. If they say they are no longer going to operate,
then further follow up, within a time period, would be required to see if they
have permanently removed themselves from multiple on-line platforms and do not
re-list. Where someone continues to operate, then a decision would have
to be made around enforcement. At some point, if there is continued
refusal to apply for resource consent, then prosecution would be the
result. The costs of undertaking the prosecution would be met by the
Council.
5.31.4 This
process would need to occur on an ongoing basis as on-line accommodation
providers cease operating or new providers come on-line.
5.32 This
means an additional person resource, with planning and compliance skills, will
be required to undertake these tasks. Given the ongoing nature of
listings and checking listings this would be an ongoing role. It may be
over time that the numbers reduce at which point the role can undertake other
planning and compliance duties but it is not possible to say when this would
be.
Rating
5.33 There are two potential approaches
regarding rating being:
5.33.1 Rating is triggered where a resource consent is
issued (for those OAPs having more than four travellers and with no owner on
site). If rating follows the resource consent, then the rating component
would be added to the existing workload of rating officers.
5.33.2 Rating
occurs for all known OAPs. If rating was to occur separately to the
resource consent then an additional officer resource is still required to
undertake all the tasks outlined above in paragraph 5.31.1.
5.34 Appropriate
rating solutions have not been considered in detail but the initial thinking on
an approach could be to levy a mix of residential and commercial rates similar
to Bed and Breakfasts. To provide for administrative simplicity this
could be a levy of 75% residential and 25% commercial per year that the house
is operated as a OAP.
5.35 Bed
and Breakfast providers pay a mix of commercial and residential rates depending
on the number of guests the business can host:
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Maximum guests
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Residential rate
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Commercial rate
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1-4
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100
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0
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5-8
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75
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25
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9-12
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50
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50
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13 -16
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25
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75
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17+
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0
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100
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5.36 To
change the rating requirements for OAP’s requires a Long Term Plan
amendment, including consultation with the public. The most appropriate
time to undertake that consultation process would be through the 2023 Annual
Plan as this would allow time to prepare the necessary consultation material
and consider rating options.
Steps to change Rates
5.37 In
terms of the rating aspects the following would be required:
5.37.1 Preparation
of the necessary documentation for a Special Consultative Process under the Local
Government Act including reports to the Council; and preparation of material
for public engagement.
5.37.2 Assuming
confirmation of a rating change, mechanisms would be put in place to rate those
properties at a different amount.
Other costs and risks
5.38 In
addition to staff resource, there will be the need for communications input and
possibly legal advice. To provide for the required steps to undertake
this work it is anticipated one additional staff resource and additional
expenses equating to approximately $100,00 opex for the first year and $80,000
per annum thereafter, will be required.
Timing of change
5.39 The
work on finding the properties and requiring them to go through a resource
consent process could occur ahead of any rating changes being in place by 1
July 2023. If rating only were to occur then work on finding the
properties is still required.
5.40 Simply
undertaking more proactive enforcement of the rules will not alter the
competition concerns raised by Hospitality NZ, i.e. unfair starting points for
costs etc as trade competition is not a matter that can be considered under the
Resource Management Act. Given the discussion outlined in paragraph 5.16
it is also difficult to gauge how many on-line accommodation providers would
trigger the requirement for resource consent and those that could continue
without the need for resource consent, meaning not all OAPs are captured.
6. Options
6.1 An
analysis of the options is contained in the table below. For completeness
a bylaw has been considered as an option, however, regulating OAPs through a
bylaw is unlikely to meet the threshold, under the Local Government Act, of
protecting from nuisance or protecting/promoting/maintaining public health or
minimising the potential for offensive behaviour and therefore is not included.
6.2 There
are four options considered below which are: the status quo; more proactively
enforcing the NRMP and rate; or proactively enforce the NRMP only or rate
only. Officers recommend the status quo – Option One.
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Option 1: Status Quo –
Continue to Reactively Enforce the NRMP and do not Apply a Higher Rate to the
Property
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Advantages
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· There
is enforcement albeit on a complaint basis.
· No
additional unbudgeted expenditure that will add to rates charges.
· Minimises
negative reaction from OAPs.
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Risks and Disadvantages
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· There
will be a negative reaction from Hospitality NZ and commercial providers.
· Questions
may be raised about why Council is not being more proactive about
enforcement.
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Option
2: Proactively Enforce the NRMP and Apply a Higher Rate to the Property
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Advantages
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· Provides
for a more level playing field as sought by Hospitality NZ.
· More
active enforcement of the rule occurs.
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Risks and Disadvantages
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· Requires
a Special Consultative Process for a change to rates.
· Adds
$100,000 for the first year and $80,000 per annum thereafter to unbudgeted
expenditure.
· Will
attract complaint from OAPs.
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Option
3: Proactively Enforce the NRMP only
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Advantages
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· The
rules are already in place to enable resource consents to be required albeit
it is uncertain how many would trigger the rule.
· Avoids
the need to undertake a Special Consultative Process for a change to rates.
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Risks and Disadvantages
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· Does
not provide the level playing field sought by Hospitality NZ.
· Additional
unbudgeted expenditure required.
· Will
attract complaint from OAPs.
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Option
4: Rate only
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Advantages
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· Provides
some what more of a level playing field as sought by Hospitality NZ as would
be charged to all identified OAPs.
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Risks and Disadvantages
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· A
Special Consultative Process is required.
· Additional
unbudgeted expenditure required.
· Will
attract complaint from OAPs.
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7. Conclusion
7.1 Proactively
pursuing enforcement of resource consents and/or rating OAPs differently will
require an additional officer resource to achieve. Only undertaking
proactive enforcement without rating will not achieve the change as sought by
Hospitality NZ, i.e. unfair starting points for costs etc as trade competition
is not a matter that can be considered under the Resource Management Act.
7.2 There
needs to be a clear understanding that any changes to the rating provisions
will attract opposition. In the absence of Government direction or
control of OAPs, Nelson would be a leader in changing provisions regarding
rating. If rating changes were introduced, these would not have effect
until 1 July 2023.
7.3 There
is no definitive evidence to support the contention that OAPs will release
their properties to the rental market.
7.4 For
these reasons officers do not support any change from the status quo and note
the additional unbudgeted expenditure that would be required to deliver change,
should the elected members decide to bring in change.
Author: Clare
Barton, Group Manager Environmental Management
Attachments
Attachment 1: Long Term Plan
2021-2031 Submission - 27202-1 - Kim Odendaal - Hospitality NZ Nelson Branch -
A2615399 ⇩
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Important considerations for decision making
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1. Fit with Purpose of Local Government
Decisions about unbudgeted expenditure, resource
requirements and rate setting, fit with the purpose of local government as
Council’s ability to promote community well-being and deliver
infrastructure, regulatory functions and other services, is linked to revenue
from rates and the prudent use of resources.
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2. Consistency with Community Outcomes and Council
Policy
The decision aligns with the ratings decisions made
through the Long Term Plan 2021-2031.
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3. Risk
There is a
risk that Hospitality NZ will be dissatisfied with this decision.
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4. Financial impact
There is no financial impact from the report
recommendation.
However, a decision to proactively enforce the NRMP
and/or to change the rates requirement for OAPs would require additional
officer resource and add approximately $100,000 for the first year and
$80,000 per annum thereafter as unbudgeted expenditure.
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5. Degree of significance and level of engagement
While there is a high degree of interest in this
decision from Hospitality NZ, the decision has been assessed against
Council’s Significance and Engagement Policy as being of low
significance overall and therefore consultation is not required.
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6. Climate Impact
This decision will have no impact on the ability of
the Council to proactively respond to the impacts of climate change now or in
the future.
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7. Inclusion of Māori in the decision making
process
No engagement with Māori has been undertaken in
preparing this report.
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8. Delegations
Decisions relating to the setting of rates are
matters for Council.
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