Nelson, New Zealand Short-Term Rental Regulation: A Guide For Airbnb Hosts

What are Short-Term Rental (Airbnb, VRBO) Regulations in Nelson, New Zealand?

Short-term rentals, commonly referred to as "Airbnb", "home sharing", or "vacation rentals", have become increasingly popular in Nelson, New Zealand. However, launching and operating a short-term rental business comes with certain regulations that property owners must adhere to. This article will provide an overview of the current short-term rental regulations in Nelson.

Starting a Short-Term Rental Business in Nelson

Before using a residential building for short-term accommodation in Nelson, property owners need to consider if the building is changing its use. If so, they must obtain the appropriate resource and building consents from the Nelson City Council. The type of business license required depends on the property's zoning, which can be confirmed using the City of Nelson's Interactive Zoning Map.

For properties in residential zones (R1, R2, R3, R4, R6, MU2, MU3, MU4, CD1, CD6, CD9), a "short-term rental" business license must be obtained and renewed annually. No more than three short-term rentals are permitted per block in residential zones. For properties in commercial zones (C1, C1A, C2, C4, MU1), a "tourist accommodation" business license is required, similar to hotels.

Non-compliance with zoning or lack of a business license can result in a fine of $500 per day.

New Provincial Regulations Effective May 1, 2024

Starting May 1, 2024, the Province of British Columbia is introducing new regulations for all short-term rentals, including a principal residence requirement. These regulations apply to properties rented for less than 90 consecutive days.

Under the new rules, operators in commercial zones will be required to live on the premises for at least half of each year, known as the principal residency requirement. This requirement has already been in place for residential areas in Nelson for years.

The changes aim to free up more vacancies for long-term rentals and will significantly impact the "tourist accommodation" category in Nelson, which the city currently does not regulate beyond requiring a business license.

Short-Term Rental Licensing Requirements in Nelson

To legally operate a short-term rental in Nelson, property owners must obtain the appropriate business license from the Nelson City Council. The type of license required depends on the property's zoning, which can be confirmed using the City of Nelson's Interactive Zoning Map.

For properties in residential zones (R1, R2, R3, R4, R6, MU2, MU3, MU4, CD1, CD6, CD9), a "short-term rental" business license is required. This license must be renewed annually and can be obtained from the Development Services department on the 2nd floor of City Hall. Applicants should use the designated short-term rental application form.

For properties in commercial zones (C1, C1A, C2, C4, MU1), a "tourist accommodation" business license is necessary, similar to hotels. This license is automatically renewed annually and can be obtained from the customer service representatives on the first floor of City Hall using the standard business license application form.

Short-term rental licenses in Nelson must be renewed annually, with costs ranging from $200 to $1,634, depending on the space offered. Cheaper alternatives for four-month and 31-day licenses are also available.

Non-compliance with zoning regulations or operating without a valid business license can result in a fine of up to $500 per day. The City of Nelson has been actively enforcing these regulations, issuing numerous fines to unlicensed short-term rentals that continue to operate.

To apply for a short-term rental license, property owners should visit the Development Services department at Nelson City Hall with the appropriate application form and any required documentation. The process typically takes a few weeks, depending on the completeness of the application and any necessary inspections.

It is crucial for short-term rental operators in Nelson to obtain and maintain the proper business license to avoid penalties and ensure compliance with local regulations. More information on the regulations, licensing, and an interactive map of all licensed short-term rentals can be found on the City of Nelson's website.

Required Documents for Nelson Short-Term Rentals

To apply for a short-term rental business license in Nelson, property owners must submit the following documents to the Development Services department at Nelson City Hall:

• Completed Application Form: Fill out the designated short-term rental application form for properties in residential zones or the standard business license application form for properties in commercial zones. These forms can be obtained from the Development Services department or downloaded from the City of Nelson's website.
• Proof of Property Ownership or Lease Agreement: Provide a copy of the property title or a valid lease agreement to demonstrate your right to operate a short-term rental on the premises.
• Site Plan: Submit a detailed site plan of the property, including the location of parking spaces, entrances, and any outdoor amenities available to guests.
• Floor Plan: Provide a floor plan of the short-term rental unit, clearly indicating the number and location of bedrooms, bathrooms, and any common areas accessible to guests.
• Parking Plan: If the property is located in a residential zone, submit a parking plan that shows the location and number of off-street parking spaces available for guests, in compliance with the City's parking requirements for short-term rentals.
• Fire Safety Inspection Report: Arrange for a fire safety inspection of the short-term rental unit by the Nelson Fire Department. Submit the inspection report confirming that the property meets all fire safety requirements, including the installation of smoke detectors, carbon monoxide detectors, and fire extinguishers.
• Insurance Certificate:Provide proof of liability insurance coverage for the short-term rental operation, with a minimum coverage of $2 million.
• Good Neighbor Agreement: Sign and submit the City's Good Neighbor Agreement, acknowledging your responsibility to ensure that guests comply with noise, parking, and occupancy regulations to minimize the impact on neighboring properties.
• Application Fee: Pay the required application fee, which varies depending on the type of license and duration. Short-term rental licenses in Nelson must be renewed annually, with costs ranging from $200 to $1,634, depending on the space offered. Cheaper alternatives for four-month and 31-day licenses are also available.

These documents are essential for ensuring that short-term rental operations in Nelson comply with local zoning regulations, building codes, and safety requirements. Failure to provide the necessary documentation may result in the denial of the business license application or fines for non-compliance.

Nelson Short-Term Rental Taxes

Short-term rental operators in Nelson are subject to various taxes, depending on their income and GST registration status. The primary taxes to consider are Goods and Services Tax (GST) and income tax.

Goods and Services Tax (GST)

As of April 1, 2024, all short-term accommodation providers in New Zealand, including those in Nelson, are affected by new GST rules. Under these changes, online marketplaces like Airbnb and Bookabach are required to collect and remit 15% GST on all accommodation services provided through their booking platforms, regardless of the property owner's GST registration status.

If you are not GST-registered and your short-term rental income is below the $60,000 annual threshold, the marketplace will collect GST on your behalf. For example, if you charge $230 per night (including GST), $30 of GST will be split, with $17 returned to you and $13 passed on to the IRD.

If you are GST-registered, you will continue to claim GST on expenses and treat the income received from the marketplace as a "zero-rated" supply, meaning no additional GST is paid on the net receipt.

Income Tax

Short-term rental income is subject to income tax in the year it is earned. However, if you use the "short-stay standard-cost" method and charge up to the fixed nightly rate ($61 for homeowners and $55 for non-homeowners in the 2023-24 income year), the income is considered exempt, and no tax return is required.

If you charge more than the fixed nightly rate, you must pay income tax on the amount above the standard-cost rate and file a tax return.

Deductions and Write-offs

If you use the "short-stay standard-cost" method, you cannot claim deductions for rental expenses, as the standard-cost rate is designed to cover typical expenses.

However, if you use the "actual cost" method, you can deduct allowable rental expenses from your gross rental income when calculating your taxable income. These expenses may include:

1. Mortgage interest
2. Insurance
3. Rates
4. Repairs and maintenance
5. Depreciation on chattels (e.g., furniture and appliances)

It is essential to keep accurate records of your income and expenses to support any deductions claimed on your tax return.

In conclusion, short-term rental operators in Nelson must be aware of their GST and income tax obligations, particularly in light of the new GST rules effective from April 1, 2024. Consulting with a tax professional can help ensure compliance and optimize your tax position.

New Zealand Wide Short-Term Rental Rules

While short-term rental regulations in New Zealand are primarily governed by local councils, there are a few key state-wide rules and upcoming changes that hosts in Nelson and throughout the country should be aware of.

GST Changes from April 1, 2024

Starting April 1, 2024, all short-term accommodation providers in New Zealand will be affected by new Goods and Services Tax (GST) rules. Under these changes, online marketplaces like Airbnb and Bookabach will be required to collect and remit 15% GST on all accommodation services provided through their platforms, regardless of the property owner's GST registration status.

Income Tax Obligations

Income received from providing short-term accommodation, including through websites like Airbnb or Bookabach, is taxable. This includes any payment for one-off or irregular rentals. Special tax rules apply to calculating income and expenditure from short-term rental accommodation, depending on the type of property and its use.

Healthy Homes Standards

The healthy homes standards, which set minimum requirements for heating, insulation, ventilation, moisture ingress and drainage, and draught stopping in rental properties, also apply to short-term tenancies of 90 days or less. However, the compliance deadline for new tenancies is July 1, 2025.

Proposed Changes to Tenancy Laws

While not directly targeting short-term rentals, proposed changes to New Zealand's tenancy laws under the new National government could have an indirect impact on the STR market. These changes include restoring no-cause evictions, allowing renters under 30 to use KiwiSaver for rental bonds, and adjusting notice periods for periodic tenancies.

Standard-Cost Household Service Rates

Each year, the Inland Revenue Department updates the standard-cost household service rates for short-stay accommodation providers. For the 2024 income year (April 1, 2023, to March 31, 2024), the daily standard cost per guest is $61 for an owned dwelling and $55 for a rented dwelling.

It's important to note that while there are currently no comprehensive national regulations specifically targeting short-term rentals in New Zealand, Airbnb has been pushing for such rules to provide clarity and consistency for hosts across the country. In the meantime, hosts in Nelson and other parts of New Zealand should stay informed about local council regulations and any updates to state-wide rules that may affect their short-term rental businesses.

Does Nelson Strictly Enforce STR Rules?

Based on discussions in online forums and recent news reports, it appears that Nelson has been ramping up enforcement of short-term rental regulations amid the housing crisis. In 2022, the Nelson City Council received around 150 complaints about short-term rentals from Hospitality NZ. The council has stated that many entire-home Airbnb listings in Nelson are potentially operating without the required consents, and they plan to initiate rule enforcement to address this issue.

Compared to other cities in New Zealand, Nelson seems to be taking a stricter stance on short-term rentals. Queenstown Lakes and Christchurch have also proposed changes to homestay regulations, which Airbnb has criticized. However, the enforcement actions in Nelson appear to be more proactive and comprehensive.

Despite the rules, some hosts continue to operate short-term rentals in Nelson without proper licensing or consents. As one Reddit user pointed out, the entire business model of Airbnb is based on avoiding regulations, and making them comply with the normal regulations and taxes of short-term accommodation providers could cause them to collapse overnight.

In conclusion, Nelson cannot be considered an Airbnb-friendly city, as the local council is actively enforcing short-term rental regulations and cracking down on non-compliant listings. While some hosts may still operate under the radar, the risk of fines and penalties is increasing as the city prioritizes addressing the housing crisis and the impact of short-term rentals on the local rental market.

How to Start a Short-Term Rental Business in Nelson

Starting a short-term rental business in Nelson, New Zealand, can be a profitable venture, but it's essential to follow the proper steps to ensure compliance with local regulations and set yourself up for success. Here's a step-by-step guide to getting started:

1. Research local regulations: Before investing in a property or listing your current home, thoroughly research Nelson's short-term rental regulations. Check the Nelson City Council's website for information on zoning restrictions, licensing requirements, and any other rules that may apply to your property.
2. Obtain necessary licenses and consents: If your property is located in a residential zone, you'll need to obtain a "short-term rental" business license from the Development Services department at Nelson City Hall. For properties in commercial zones, a "tourist accommodation" business license is required. Additionally, ensure that your property has the appropriate resource and building consents.
3. Prepare your property: Make any necessary repairs or upgrades to your property to ensure it meets safety standards and provides a comfortable experience for guests. Consider the needs of your target audience when furnishing and decorating the space.
4. Set up your listing: Choose a platform like Airbnb or Bookabach to list your property. Create an attractive listing with high-quality photos, a detailed description, and clear house rules. Be transparent about any potential drawbacks or limitations to manage guest expectations.
5. Establish pricing: Research similar listings in your area to determine a competitive nightly rate. Consider factors like seasonality, events, and demand when setting prices. Don't forget to account for cleaning fees, service fees, and any other expenses when calculating your overall pricing strategy.
6. Implement a cleaning and maintenance plan: Develop a thorough cleaning checklist and schedule to ensure your property is always guest-ready. Consider hiring a professional cleaning service to maintain high standards. Regular maintenance, such as replacing air filters and checking for any repairs, should also be part of your plan.
7. Manage bookings and communication: Respond promptly to inquiries and booking requests to maintain a high response rate and secure reservations. Communicate check-in instructions, house rules, and any other important information to guests before their arrival. Be available to answer questions and address concerns throughout their stay.
8. Comply with tax obligations: Short-term rental income is subject to income tax and GST in New Zealand. Familiarize yourself with the tax rules, including the new GST changes effective from April 1, 2024. Keep accurate records of your income and expenses, and consult with a tax professional to ensure compliance.
9. Promote your listing: Utilize social media, local tourism websites, and other marketing channels to promote your short-term rental. Encourage satisfied guests to leave reviews on your listing, as positive reviews can help attract future bookings.
10. Adapt and improve: Regularly assess your performance and guest feedback to identify areas for improvement. Stay informed about changes in local regulations and industry trends to ensure your business remains compliant and competitive in the Nelson short-term rental market.

By following these steps and maintaining a commitment to providing excellent guest experiences, you can build a successful short-term rental business in Nelson, New Zealand.

Who to Contact in Nelson about Short-Term Rental Regulations and Zoning?

If you have questions about short-term rental regulations or zoning in Nelson, New Zealand, the best place to start is by contacting the Nelson City Council. Here are some key contacts and resources:

1. Nelson City Council: Phone 03 546 0200 (24 hours / 7 days). Normal working hours are Mon – Fri 8.30am – 5pm.
2. Development Services Department: Located on the 2nd floor of City Hall. This is where you can obtain a "short-term rental" business license for properties in residential zones.
3. Customer Service Representatives: Located on the first floor of City Hall. This is where you can obtain a "tourist accommodation" business license for properties in commercial zones.
4. Nelson City Council Website: The council's website has a dedicated page on Holiday Accommodation Resource Consents, which provides an overview of the planning rules for short-term rentals under the Nelson Resource Management Plan (NRMP).

In addition to contacting the council directly, there are several online communities and resources where Nelson short-term rental hosts can connect, share experiences, and seek advice:

r/Nelsonnz Subreddit: This subreddit is dedicated to discussions about Nelson, New Zealand. While not specifically focused on short-term rentals, it can be a useful place to ask questions and engage with the local community.

Airbnb Community - Hosting Forum: Airbnb hosts a dedicated forum for hosting-related discussions. While not specific to Nelson, it can be a valuable resource for connecting with other hosts and learning from their experiences.

Bigger Pockets Forum: Bigger Pockets has a forum thread on real estate investing in New Zealand, which includes some discussion on short-term rentals and the unique challenges of the New Zealand market.

By reaching out to the Nelson City Council and engaging with these online communities, short-term rental hosts in Nelson can stay informed about local regulations, seek advice from experienced hosts, and ensure compliance with all relevant rules and requirements.

What Do Airbnb Hosts in Nelson on Reddit and Bigger Pockets Think about Local Regulations?

While there aren't many discussions specifically about short-term rental regulations in Nelson on Reddit or Bigger Pockets, a few relevant threads provide some insight into the challenges and concerns of local hosts and investors:

r/Nelsonnz Subreddit - "Nelson where to live": In this thread, a user moving to Nelson asks for advice on the best areas to live and rent a property. Commenters discuss various suburbs, schools, and commute times, but do not directly address short-term rental regulations. However, the discussion highlights the demand for long-term rentals and the importance of location for families.

Bigger Pockets Forum - "Investing in Real Estate NZ": A user from Auckland asks about applying the BRRRR (Buy, Rehab, Rent, Refinance, Repeat) strategy in the New Zealand market, where average house prices are high and rental yields are relatively low. While not specific to Nelson, this thread suggests that investors may struggle to find profitable short-term rental opportunities in the current regulatory environment.

Bigger Pockets Forum - "Investing in declining areas": Although not directly related to Nelson, this thread discusses the risks of investing in areas with declining populations. Some hosts in Nelson may be concerned about the long-term viability of their short-term rental businesses, given the city's efforts to crack down on non-compliant listings and prioritize long-term housing.

Airbnb Community Forum - "Air BnB or backpackers?": In this thread, a host asks if others have experienced guests expecting free reign of their home, similar to a backpacker hostel. While not specific to Nelson, this discussion highlights the challenges hosts face in managing guest expectations and maintaining boundaries in a short-term rental setting.

Overall, while there is limited discussion about short-term rental regulations in Nelson on these platforms, the threads suggest that hosts and investors are navigating a challenging market with high property prices, low rental yields, and increasing regulatory oversight. As the city continues to enforce compliance and prioritize long-term housing, hosts may need to adapt their strategies to remain viable in the changing landscape.

Disclaimer: While we here at BNBCalc strive to keep all of our city regulation guides updated and accurate with all the latest local laws, we still do not suggest using them as your sole or primary source for local regulations. We also do not recommend you rely on the third-party sources we link to or reference, and we are not responsible for any of the information on these third-party sites. These guides are for entertainment purposes only and only provide basic information and should not be considered as legal advice.

We highly recommend directly contacting the responsible parties for each city and hearing what their officials have to say. Ultimately, it's your responsibility as an investor to ensure you fully comply with the local laws, and it's best to speak with professionals before making an investment decision.