Auckland Council have passed their 10 year budget plans. Relevant to Short-Term Rental providers is the decision to start charging commercial rates and the Accommodation Provider Targeted Rate.
From 2019 Auckland Council will be able to charge Commercial rates and the Accommodation Provider Target Rate (APTR) to Short Term Rental (STR) properties. The APTR is a special targeted rating levy introduced to hotels/motels in 2017. It’s purpose is to fund Auckland Tourism, Events and Economic Development (ATEED).
Council proposes that STR properties, where the entire residence is let, not just a room in home, will be rated depending on the number of nights booked, as follows:
|Nights rented p.a.||Effective occupancy||Residential Rates||Commercial Rates + APTR|
Up to 28 days
|0 to 8%||100%||0%|
|Medium occupancy: |
29 to 135 days
|8% to 37%||75%||25%|
|Moderate occupancy: |
136 to 180 days
|37% to 49%||50%||50%|
Over 180 days
|49% to 100%||0%||100%|
The APTR applied depends on the zone - A, B, C, dictated by the distance from Auckland CBD - and the type of accommodation, with serviced apartment style accommodation seeing hotel APTR rate and other residential properties seeing the motel APTR rate applied. Properties in Zone C would not incur the APTR.
Why Council made these changes
Auckland Council looks to realise commercial rates whenever commercial activity occurs on residential lots. This is true across all industries, from hairdressers who have a home salon to tradespeople that run their businesses and workshops from home. Council is also sensitive to arguments from the traditional accommodation sector that, as it stands, there is an “unlevel playing field” between Short Term Rental (STR) and hotels/motels. Hotels/motels pay commercial rates and have been paying the Accommodation Provider Targeted Rate (APTR) since this was introduced last year. The APTR was established to provide tourism funding for Auckland Tourism, Events and Economic Development (ATEED). Council argues that STR, once it reaches a certain scale, becomes a commercial activity and STR operators benefit from ATEEDs work in the same way that other accommodation providers do - think major events, arts festivals, trade assemblies, etc.
Council appreciates that STR is a scalable activity and ranges from occasional rental through to more active renting, and near hotel-like occupancies (70%+). After the consultation process they made the following changes to their proposal:
- Added the additional Moderate Occupancy 50% residential/50% commercial tier (136 to 180 days)
- Removal of APTR on properties in Zone C.
We want to create a long-term sustainable future for the STR industry in NZ. One that balances the rights of property owners to earn an income from their properties, protects choice for travellers, especially families and groups, and is as free as possible from over-regulation. In the process we are having to balance arguments around the benefit of STR to tourism vs. the impact STR has on permanent housing availability/affordability, residential amenity / social cohesion and health and safety. As we go about this process it does not serve our purpose to create inequities in the way traditional accommodation providers are treated vs. STR providers.
Like the traditional accommodation industry, we are NOT in favour of the Accommodation Providers Targeted Rate (APTR). The APTR levy unfairly targets accommodation providers when many other businesses - restaurants, bars, transport, activity providers - benefit from tourism.
Auckland Council’s attempt to position the APTR as a “Bed Tax” confuses the matter. A proper bed tax can be passed on as a line item to a traveller. The traveller sees the charge and understands what it is for. Rates are an overhead and an accommodation provider would have to put up their nightly rates to compensate for it.
Our core position is then:
- We agree that short-term visitor accommodation rental is a commercial activity. As such, it is a fundamentally different activity than providing permanent residential rental, which has a social purpose in addition to providing income to a property owner.
- Like the traditional accommodation industry, we are NOT in favour of the Accommodation Providers Targeted Rate (APTR). But, we believe that having a level playing field with hotels/motels is important (for the reasons mentioned above).
- In “leveling the playing field” between hotels/motels and short-term rental properties Council have excluded hosted accommodation providers. This creates an inequity (a new unlevel playing field) between whole home and hosted short-term rental, when the activity is largely the same (accommodation provided in a residence).
In the long term, we look to central government to work with the tourism industry and local government to determine better ways to allocate funding for tourism and infrastructure.