The Pitfalls of Airbnb

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Around the country, home owners and renters alike have been renting out their spare bedrooms and baches to visitors via websites like Airbnb. The explosion in listings on these sites has led to complaints from neighbours about noisy guests (in turn leading to compliance action being taken by district and city councils), and complaints that the hosts (i.e., the person renting the room to guests) are not paying their fair share in rates.

In this article, we touch on two common issues with Airbnb rentals: rates and district plan compliance.

Rates

With the rapid increase in use of Airbnb (and its counterparts), traditional accommodation providers have been calling foul of the higher rates and levies applied to them that are not applied to Joe Bloggs renting his apartment on Airbnb. As a result, Auckland Council recently extended its ‘business rate’ to include any online accommodation booked for more than 28 nights per year (with a graduated scale on the rate as the number of nights booked per year increases). It also extended its ‘accommodation provider targeted rate’ to include online accommodation providers in certain local board areas, again scaling the rate in accordance with the number of nights booked per year. However, these new rates only apply where a ‘clearly identifiable and separate area of the property is being let out online on a short-term basis’. This will generally mean that an apartment, an entire dwelling, or a self-contained unit let on Airbnb will be captured by the rate, but that letting part of a dwelling, such as a bedroom, will not trigger the rate.

District and city councils throughout the country are grappling with this issue currently, so no doubt we can expect similar rates to be levied in other areas in the near future.

As a result of these increased rates, an important question to ask the vendor when purchasing a property will be: has the property been let for short-term accommodation for more than 28 nights in the previous year? Where a property has met the criteria for the higher rates as set out above, those rates apply for the whole rating year, regardless of whether the new owner lets the property on Airbnb or not. That new owner will be liable for the rates on the property from the settlement date to the end of the rating year.

District plan compliance

Another common issue with Airbnb rentals around the country is that many of the properties being let are located in residential zones, but effectively operating as commercial businesses. This can affect the residential coherence of the area and often puts them at odds with the residential zone provisions of the relevant district plan, which will generally restrict guest accommodation activities in some way. For example, where entire properties are let, some councils have put limits on how many days they can be let for per year before it is no longer considered a permitted activity and will require resource consent. Again, many councils are considering changes to their district plans that will make short-term rental accommodation even less likely to fall within permitted activity rules in residential zones.

In addition to any district plan requirements, property owners may be required to provide councils with written notice that they intend to change the use of a building and/or obtain building consent under the Building Act 2004. Rental accommodation may also be required to comply with more stringent fire safety requirements.

Summary

While Airbnb may on the face of it look like a profitable venture, letting your mostly empty holiday home to short-term guests may land you in an uncomfortable situation if you fail to comply with council requirements. Anyone letting their property as short-term accommodation should ensure that they comply with the relevant district plan/s, pay the appropriate rates, and are aware of any Building Act requirements they may have triggered.

Councils around the country have indicated that they will be cracking down on short-term rental accommodation and making changes to their plans and bylaws to regulate these. In light of this, if your Airbnb is currently a permitted activity under the relevant district plan, you may wish to consider obtaining an existing use certificate or certificate of compliance to protect that activity status from subsequent plan changes.