The issue of whether residential ratepayers who rent out their homes for profit should pay rates in line with their commercial counterparts is not a new one.
However, with the rise in popularity of Airbnb, and the like, and a background of soaring tourism activity the equity of rate collection is a hot topic once again
The year kicked off with Queenstown Lakes District Council (QLDC) dispatching close to 800 letters to locals who were revealed by audit to be renting their properties on popular accommodation websites.
The move came after a two-year amnesty in an attempt to encourage homeowners-come-landlords to correctly register their properties and therefore rates obligation.
QLDC chief financial officer, Stewart Burns, said the southern lakes audit was to gain an understanding “of the scope of activity out there” and to make sure there were fair and sensible rules in place.
Following QLDC’s move, Tourism Ticker carried out its own audit to find out if councils in other tourism hotspots and major centres plan to follow suit by putting the rates debate on their agendas for 2017.
Of inquiries to 14 councils across the country only the South Island’s Mackenzie District Council (MDC) has indicated it is likely to make some changes imminently.
Chief executive Wayne Barnett explains that this simply means an update to their procedure to ensure lettings on relatively new arrivals like Airbnb are being captured in their current audit process.
The MDC policy dictates that people who let their house out for 20 days or more annually will be charges the “tourism rate” which is based on a property’s capital value.
Currently the staff “periodically” review holiday accommodation advertisements within the District, and cross reference that with the Council’s rates database.
Barnett echoed Burns’ sentiment by describing homeowners paying the correct rate as “a matter of fairness”.
Nelson, which does not actively enforce its current policy on short-term lets, said it was undertaking a routine review of its Resource Management Plan. This would take its rates policy as a matter of course.
Responses from the remaining 11 councils can broadly be split into two groups: a majority who do not see short-term lettings as an issue for their district and a minority who are actively monitoring the issue.
Thames-Coromandel, Tauranga, New Plymouth, Wellington, Tasman and Christchurch unequivocally stated a review or policy change on the provision of visitor accommodation was not on the agenda.
For Marlborough too, which already has a tourism-targeted rate, there was no change planned.
Others, such as Rotorua and Taupo, said no changes were planned “at this time”. With Napier adding it was “keeping a close watch” on moves in other regions.
Auckland fell into this category with a statement saying it is not following in QLDC’s footsteps with a desktop exercise at present.
There is however a plan announced by new Mayor Phil Goff for a targeted rate on commercial accommodation providers through a visitor levy.
Push-back from commercial operators who point to shadow accommodation providers escaping such a rate could see this become more of an issue for the City of Sails.
AUCKLAND CITY COUNCIL
Position: Not actively conducting a desktop exercise to look for these properties at present.
Policy: Properties providing short-term accommodation, or any other home business, are subject to business rates on the proportion of the value of the property used for business purposes.
Position: This is not a concern currently and no changes are being considered.
Policy: A home, bach or holiday house is subject to residential rates regardless of letting activity.
TAURANGA CITY COUNCIL
Position: “Is not an issue in Tauranga” according to Jim Taylor, Team Leader: Revenue, Tauranga City Council, said it “is not an issue in Tauranga”
Policy: Under Tauranga City Council’s current rating policy, general rates for both commercial and residential property are based on capital value of the property and are set at a rate of $20 per $10,000 of capital value. The residential category applies to properties for which the permitted activity in the City Plan is related to residential use, and the commercial category applies to properties for which the permitted activity in the City Plan is related to commercial use.
ROTORUA LAKES COUNCIL
Position: Is “aware of what’s been happening elsewhere but it’s not something Rotorua Lakes Council has done any work on at this stage.”
Policy: In terms of when something becomes ‘commercial’ RLC’s definition is as follows: Land and buildings for use as temporary accommodation by paying guests, where the accommodation is not their normal place of residence (including motels, hotels, boarding houses, private hotels, tourist house licensed premises, guest houses, backpacker lodges, youth hostels and similar accommodation), and includes accessory facilities such as visitor, service and recreation facilities, conference facilities and restaurants are all classified as commercial.
TAUPO DISTRICT COUNCIL
Position: An audit or review is “not something we are considering at this time”.
Policy: If it is a residential property, residential rates are charged regardless of whether it is a rental or a holiday home or how many times it is let.
NEW PLYMOUTH DISTRICT COUNCIL
Position: NPDC will not be auditing or taking action.
Policy: Sue Davidson, Chief Operating Officer, NPDC, said: “We understand Nelson Council has a specific policy which differentiates between the rates to be charged to residential properties and the rates to be charged where residential properties are rented out. This is because Nelson has a high proportion of holiday homes and absentee owners. New Plymouth District Council does not have a policy that differentiates between different categories of residential properties. All residential properties are charged rates on the same basis regardless of whether they are rented out as holiday homes. Any change to this policy would require a Council resolution.”
NAPIER CITY COUNCIL
Position: Is not looking at anything of this nature at this stage, but staff are keeping a close watch on any moves to amend or tighten commercial accommodation regulations in other regions.
Policy: NCC’s current practice for determining residential v commercial accommodation rates is as follows:
– Bed & Breakfast accommodation for 10+ guests
– Boarding Houses
– Bed & Breakfast accommodation for less than 10 guests
WELLINGTON CITY COUNCIL
Position: WCC has not changed its policy specifically for Airbnb but include short-stay accommodation [in its commercial rates classification]. It carries out periodic audits for policy compliance.
Policy: Where a properties “principal use” is for short term stay they are classified as commercial. Where the “principal use” is for long term stay they are classified as base (residential)
The term “principal use relates to the proportion of the year that the property is used for one of the above purposes versus the other.
Where there are two separately identifiable parts of a rating unit (property) that are clearly used for different purposes, which would if they were separate properties, be rated differently. In this situation and where a property has a capital value of over $800,000 OR the minority use makes up more than 30% of the total capital value of the property, the Council can require that a “division” be set up so that the property can be split for rating purposes. A bed and breakfast type set up would be subject to this policy where the requirements around capital value or minority use are met.
It is unlikely renting one room out (for example) for Airbnb will meet the above thresholds in most residential properties, and therefore they will be rated as base (residential)
We do random audits and require a declaration from the ratepayer for any change of use.
NELSON CITY COUNCIL
Position: Currently, not actively checking residential properties offering commercial accommodation.
Policy: There is a rule in the current Resource Management Plan which requires homeowners to have a resource consent when offering commercial accommodation. Where the homeowner is living on the property, they can have up to four holiday makers staying as well, without a resource consent.
However, Council is in the process of reviewing the current Plan with the aim of releasing a new draft Nelson Plan by the end of 2017, and the public will be able to make submissions on this.
We would advise though, that foregoing a resource consent when offering commercial accommodation can pose risks to home owners, including insurance issues.
MALBOROUGH DISTRICT COUNCIL
Position: MDC has no plans to carry out an audit or change it’s policy as home and bach owners using Airbnb and the like are already subject to a Tourism Targeted Rate.
Policy: Introduced by MDC in the 2004/2005 year the Tourism Targeted Rate applies to tourism activity including transport, accommodation, food & beverage providers as well as tourism operators. They charge a CPI-adjusted fee of around $320 annually for providers of 30 or more rooms and scales down for fewer rooms. The rates are used to fund Destination Malborough, the local Regional Tourism Operator.
TASMAN DISTRICT COUNCIL
Position: A spokesperson for the council said it is “not currently an issue”.
Policy: TDC does not regulate rental housing. In Tasman district’s residential and rural zones, whole houses that are rented or tenanted by the owner for short or long term, are not regarded as commercial accommodation, as the use of the house remains a residential activity in its purpose and environmental effects. Where a building is used for visitor or tourist accommodation, where rooms or parts of the building are hired on a short stay basis to the public at large, such as a boardinghouse, motel or hotel, it is regarded as a commercial activity and would require a resource consent if starting up, unless it is able to continue as an existing use. Where a houseowner rents part of the house out as visitor accommodation, this is regarded as a home occupation, and in which case, a maximum of four visitors are allowed as of right.
CHRISTCHURCH CITY COUNCIL
Position: Has no current plans to change our current rating approach, either by introducing new rates for “accommodation” properties or by extending the Business rate to include short or long term rental houses. Any future change would need to be subject to public consultation, usually through the three yearly Long-Term Planning process. No such review is currently being contemplated.
Policy: Christchurch City Council charges its General Rate differentially to different property sectors – Business properties pay a 66% premium, and remote farms receive a 25% discount. All other rates (eg. for water, sewage, and refuse management) are charged in the same way for all sectors.
The higher Business rate is applied to all commercial properties, including commercial accommodation such as hotels, motels, and hostels. However, it is NOT applied to residential-style accommodation, even those being run as a business for income tax purposes – ie. rental houses, owner-occupied houses with a lodger, and holiday homes are rated at the Standard rate, not the Business rate.
Carol Bellette, General Manager Finance and Commercial says the reason for this difference is both practical and philosophical:
Practically, we have no robust and consistent way to identify rental houses – although we could identify many short-term rental houses by monitoring websites such as Book-a-Bach and AirB&B, we would need to employ additional staff to do so and such houses are not inherently more “commercial” than long-term rental accommodation.
Philosophically, the justification for the higher Business rate is that businesses are considered to put more pressure on Council’s costs (eg. through greater wear and tear on roads) – rental homes and holiday homes may be “commercial”, but their basic nature is still residential in a way which is not true for hotels, motels, or hostels; a higher Business rate is therefore not warranted.
We are aware that some local authorities put more emphasis on identifying short-term rental accommodation in order to rate it differently. However, this simply reflects their more complex rating systems – for example Queenstown-Lakes District Council differentiates its rates charges between a number of different property sectors, including a specific category for “accommodation” properties, so it is necessary for them to identify which properties fit into which category.
MACKENZIE DISTRICT COUNCIL
Position: Mackenzie mayor, Graham Smith, is caling for the council to take a tougher stance on property owners offering short-term holiday accommodation but paying residential rates.
Policy: There is currently no targeted rate for tourism but it is something that is on the agenda to be discussed in the New Year.
QUEENSTOWN LAKES DISTRICT COUNCIL
Position: Following the conclusion of a two-year amnesty encouraging home-owners to sign up if they are renting out their property, QLDC conducted an audit of accommodation websites like Airbnb. It has sent a letter to 792 property owners asking for them to register for the correct rate or cease renting their property.
Policy: Property owners can let their home for once for up to 28 days per year. If conducting multiple lets the short-term holiday rental room or house should be registered as visitor accommodation and move to a mixed-use rate.