Opinion piece on Holiday Homes, Apartments, Bed & Breakfasts etc
by Michael Baines| Chief Executive, Motel Association of New Zealand
January 28, 2014
Like all issues, the debate over creating some controls on the commercial operation of baches by local authorities is
the tip of the iceberg. It is a case of seeing the symptom as the problem and not looking at the underlying causes.
The growth of the internet has placed the ability to market all sorts of things in everybody’s hands. The first thing
that disappears is the safeguards that have been created to protect the consumer. Who is accountable and where are they?
In the accommodation sector commercial properties are required by law to build to stringent standards. These are
monitored and enforced by the local authorities. Commercial accommodators are required to meet strict fire safety
standards, provide disabled access units, fixed numbers of car parks per unit, adhere to noise levels and many other
standards that are required to be met. All these standards are designed to protect the customer and it shows a duty of
care to the travelling public a laudable sentiment. These standards ensure that the cost of building commercial
accommodation, as opposed to domestic accommodation, are far higher. Further there is an on-going cost for most
commercial accommodation providers having to show constant compliance to gain an annual building warrant of fitness.
Commercial accommodation providers are designated as commercial rate payers and as such pay a premium for that privilege
and if they live on-site in most cases they are required to pay commercial rates on their private accommodation. They
pay to have their rubbish removed, for trade waste, water, toilet taxes, amenity taxes, tourism levies and any other
rate or tax that the councils’ deem appropriate. These are not costs borne by domestic accommodation offering their
rooms or properties in a commercial environment.
At the heart of the problem is the way councils’ define “permitted use” in domestic dwellings through their district
plan. In other words it defines at which point an “at home business” becomes too big to operate from home and needs to
move to commercial premises. This includes home-based businesses like accountants, dressmakers etc. and it allows a
certain number of people to stay or rooms to be used for short term accommodation; boarding houses etc.
The permitted use clause allows bed and breakfast businesses to operate without having to comply with commercial
business operations. It also allows residential houses to be used as short-term accommodation. This brings us to
apartments; “strata title” apartment complexes are all individually owned and as such are separately titled and rated
properties and therefore fall under the permitted use clause. As domestic accommodation they are built to a domestic
standard but if they become commercial accommodation and operate under a single marketing strategy and brand, they do
not need to apply for a “change of use” because they are single, separately rateable entities. This does vary from Local
Authority to Local Authority but on the whole it is the fact. They do not have to comply with the same Council imposed
safety regulations and still pay domestic rates this makes them significantly cheaper to build and operate. Of course
they also have far more latitude in their pricing strategies which gives them a distinct advantage over those compelled
to operate as commercial accommodators.
To summarise the outcome of the way that councils’ “permitted use” clauses effect the accommodation sector is that,
domestic accommodation is built to a lower standard than commercial accommodation, there is no need to upgrade them to
the same standard as commercial accommodation providers, there are no on-going checks as to standards and they do not
bear the same council-imposed charges that commercial accommodation does.
It matters not whether they are baches, cribs, holiday homes, apartments or bed and breakfasts they can all operate at a
distinct financial advantage because of the “permitted use” clause in councils’ district plans. Requiring them to have
“resource consent” is a start but there is a long way to go before we will have all travellers staying in consistently
safe buildings. Likewise before all those offering accommodation to the public for short-term stays are making an equal
contribution to the administration of their cities, towns or districts.