Property owners providing short-term accommodation in Rotorua are contemplating selling their houses or converting them back to long-term rentals should a new proposal that will charge holiday lets higher commercial rates is accepted.

Agents told OneRoof they were already fielding requests for appraisals from holiday homeowners with some considering selling up and others looking at becoming long-term landlords again.

The move comes after Rotorua Lakes Council proposed in its 2024 Long Term Plan that properties advertised as short-term accommodation for a minimum of 60 days or more be rated as commercial properties to “ensure they contributed a fair share towards the district and to tourism promotion”.

It was estimated to generate an extra $900,000 in income a year for the council.

But the controversial proposal has caused a stir with short-term accommodation owners, which the council estimated to be between 800 and 1000, who could see their rates go up by up to 180% under the rating change.

Bayleys Rotorua branch manager Beth Millard says she’s already been contacted by a handful of holiday homeowners requesting appraisals as a result of the proposal.

They were holiday homes mainly by the lakes that were rented out to help support the holding costs.

Figures she had seen showed some property owners would be paying more than double the amount in rates than what they currently were, with some going from about $5000 a year to over $10,000.

Professionals Rotorua owner Steve Lovegrove, whose company sells houses and manages rental properties, had seen a sharp rise in requests for rental appraisals more than sales appraisals as a result of the council's proposal.

Steve says this was because holiday homeowners were considering converting their holiday lets back to full-time rentals to evade the hefty rate hike.

The proposal would impact property owners, he says, because there were people who bought a holiday home when the interest rates were low and had propped it up with Book a Bach income.

“It was quite a popular thing to do three or four years ago. Hey, you can borrow a million dollars at 2% – what’s that $400 buck a week – and if you could rent it out over the holiday period or every so many weekends when you are not using it, well it was quite a good little money spinner.”

Rotorua lakeside properties have proven popular as short-term holiday lets. Photo / Getty Images.

However, it would not be such a lucrative cash cow if they suddenly had to shell out thousands of dollars more in rates.

While the move could see more rental properties available for locals, it would also significantly reduce the number of short-term lets, he says.

“Even if there’s 10% of properties that convert back to either sale or full-time permanent rentals then that’s probably quite a significant movement in housing stock.”

He also questioned how the council would monitor it and says it would have to do some extensive work to find out what was being used as a short-term rental.

“There’s always going to be those who push the boundaries of the rules. They will do what they need to do until they get caught and there will be other people who will be completely compliant and just not go there.”

Harcourts Rotorua director Wayne Pamment says it was the topic of a lot of conversations happening in Rotorua and would have a big impact if it went ahead.

He says he wouldn’t be surprised if people were already starting to weigh up their options and expected a lot of people would sell.

“I think you would find a lot of people that have properties that are there as holiday homes / Airbnbs – because they need the Airbnb income to try and offset some of their standing costs will look at a rate rise of 160% and say ‘I’m still going backward’. With interest rates climbing and lifting, I think that might be the catalyst for a lot of people to start making that decision.”

Rotorua Lakes Council chief financial officer and group manager of corporate services Thomas Collé says the proposed rating change relating to short-term rental accommodation was only a proposal at this stage and would be deliberated on by elected members as part of decision-making on the 2024-34 Long-term Plan.

The council had written to 912 property owners who it identified as being impacted by the proposal and as of early May had received 70 enquiries back - many of which were understood to have disputed being in that category.

Under the proposal, homeowners that rented out only part of their home would not be exempt, but those using properties solely for short-term rentals would be commercially rated. The deadline to give feedback on the plan closed on May 10.

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