Lakes Business May 2023

LAKES BUSINESS

Rachel Buckley (Associate, AWS Legal)

Business community pushing for solutions to housing crunch

With the ski season due to get underway next month, thousands of workers are headed for the Southern Lakes region for what’s expected to be the busiest winter since 2019.

But when they arrive, they’ll find there’s cutthroat competition for the dwindling number of beds in rental accommodation, with both Queenstown and Wānaka in the grip of the worst housing crisis for decades.

Local and central government have struggled to find short-term solutions to the deep-rooted problem, so businesses are now taking it upon themselves to find work-arounds.

Many of those workers who’ve landed a job up the mountains, for example, will find their employer is also their landlord.

NZSki recently bought the Sir Cedrics Tahuna Pod Hostel on Henry St, which will house up to 80 staff who work at its skifields, The Remarkables or Coronet Peak. It owns seven other houses and is working on another development for next season, which should accommodate 40 more.

RealNZ, meanwhile, which operates Cardrona Alpine Resort and Treble Cone, has secured space for 120 staff in The Bothy Central Hostel in Wānaka. It also leases several houses and has a staff village separately for workers at Walter Peak Station, housing 50.

Downtown, Skyline is also taking the plunge,

by Paul Taylor

converting 20 of the rooms in its Blue Peak Lodge to house staff around 50 staff.

Chamber chief executive Sharon Fifield says with hundreds of other workers expected to take up seasonal jobs, many other businesses are becoming property managers.

“Bigger businesses are now outright purchasing accommodation, to secure somewhere for their staff, while medium-sized businesses are taking on leases,” she says. “We’re finding hospo businesses especially are doing that, renting on behalf of their staff.”

Providing accommodation for workers has a myriad of its own challenges, however, and the Chamber has been running an info series to help businesses.

“There are four key areas,” Fifield says. “There are the financial implications, the tax and all of that; the legal situation with housing staff, with regards to employment law, how you manage employment contracts versus tenancy contracts; the property management itself; and then also the wellbeing of staff, both those in businessprovided accommodation and those who can’t find any housing at all.”

The Chamber is also lobbying over the residential tenancy legislation, particularly for the reinstatement of mortgage interest deductibility for landlords, which many believe has pushed

property owners towards short-stay Airbnb-style letting.

Fifield believes there’s also a need for some kind of build-to-rent development or purpose-built worker accommodation, which is something Porter Group at Remarkables Park has been investigating recently.

“There are a lot of barriers to that in terms of density, red tape, and previously developers just haven’t been able to make it make financial sense. So, from a lobbying point of view, that’s something we can look at.”

Colliers director Alastair Wood says it’s difficult to make the numbers stack up for dedicated newbuild worker accommodation.

“The problem is the construction cost,” he says. “You could be given the land and the build costs mean you just wouldn’t get a realistic commercial return to make it feasible.

“You’re going to need a return of much more than $300-a-room per week.”

Building costs in Southern Lakes are 36% higher than the national average.

Wood says the commercial property sector is unlikely to provide solutions to the residential crisis.

“The backpacker-style properties have been obviously attractive, and we’ve had quite a few

NZSki is converting a downtown hostel into worker accommodation.

gone into longer-term accommodation during Covid and not come back.

“But it hasn’t got to the point where it’s worthwhile converting office buildings into accommodation. We’ve seen that in other main centres, such as Wellington, with older blocks repurposed, but it’s not like we’ve got an oversupply of office accommodation in town.”

Other solutions are just as difficult to muster.

NZSki tried housing staff in Cromwell in 2016 and bussing them the 60km each day to the slopes, but it didn’t prove popular among the workforce. It now billets dozens of workers with Queenstown families, who offer up a room in their homes.

That idea is something Wānaka entrepreneur Carmen Blackler hoped would scale into a full business. Her start-up The Workforce Accommodation Network (The WAN) used tech to connect businesses to people with rooms to let. But the business failed to take off and Blackler pulled the pin last year.

“I still believe in the concept,” she says. “We did get some traction but to run a business it has to be economically viable and the reality was there weren’t enough people willing to pay for the service, so it couldn’t continue.

The WAN was focused on rooms available in people’s homes, many of which now go on Airbnb, although she recognised, as do NZSki, that many families would prefer a single long-term tenant. But what of the quarter of homes that, according to the 2018 census, are empty most of the year?

Blackler, like many others including Queenstown MP Joseph Mooney, believes the Healthy Homes Standard and Tenancy Act changes are acting as a disincentive to bring those properties into rental stock.

“The introduction of the Healthy Homes standard is a very good thing, making sure rental properties have proper heating, insulation and ventilation,” she says.

“But it means it would take significant capital to bring some of Queenstown’s holiday homes up to code. They’ve been used by families for many, many years, but can’t be used for tenants.

“The properties that do meet the code are multimillion properties and the people who own them don’t need the cash and want them available to use for their own purposes.”

That’s compounded by the Tenancy Act changes.

“There are very strict requirements around whether you can actually ask a tenant to leave. To be fair to the Government, they’ve tried to protect long-term tenants, to stop them being victimised, thrown out for no reason, but it’s another disincentive for people to offer up properties, and a hurdle for an economy that relies on seasonal workers, or transitional workers who may come in for a couple of years.”

Longer term, Queenstown Lakes District Council has developed a Queenstown Lakes Homes Strategy and Action Plan with central government, Kāinga Ora and the Queenstown Lakes Community Housing Trust.

QLDC’s Strategic Growth Manager Anita Vanstone says there’s the demand to double district’s the housing stock over the next 30 years, a further 17,000 homes, including 7000 affordable homes.

“The draft outcomes are affordable housing options for our community our increased, a

MEET THE FAMILY LAW

range of housing choice exists for everyone, homes in the district, a healthy, warm, secure, and sustainable and stronger partnerships that accelerate delivery,” she says.

Her team’s remit has also been extended to look at the rental market too and it is in the process of appointing a dedicated housing officer.

QLDC has scored a recent success with the streamlined planning process approval for the rezoning of Ladies Mile from rural to urban but its bid to reign in Airbnb was dealt a fatal blow in the Environment Court.

So while long-term solutions slowly grind through the corridors of power, it will be up to Queenstown businesses to continue to provide nimble short-term solutions, or face losing staff they’ve battled to recruit post-Covid.

Last month, Nomad Safaris owner/operator David Gatward-Ferguson told the audience at the Chamber housing workshop that he’d had five hires unable to continue because they couldn’t find anywhere permanent to move locally from their hostel accommodation.

Fifield says it’s usually worse than that; people who are recruited by the resort’s under-pressure business don’t even make it to town because there’s nowhere to live.

Carmen Blackler

Sharon Fifield

Economist: A problem we can’t build our way out of

Arrowtown-based economist Benje Patterson is calling on Queenstowners to invite a lodger into their homes this winter to help ensure the town is adequately staffed this ski season.

Desperate Queenstown workers may have pitched a tent or slept in cars during the hot summer months, says Patterson, but we face losing them if a temporary fix isn’t found by winter.

“Many of them just won’t stay. They’ll pack up and leave as the chill of winter bites in, worsening the town’s already crisis-point worker shortages.

“We’ve struggled to get a full workforce and it’s starting to build up again now. We can’t afford to lose those valuable workers,” says Patterson. He’s urging local homeowners to consider renting out a room short-term to get the town through its busy winter peak, and at the same time, help pay the mortgage.

“A lot of families are struggling with higher living costs and increased mortgage interest rates so I’m saying invite a short-term lodger to stay and help pay for all that.”

“It’s not like we need thousands of people to do it – a couple of hundred households spread throughout our suburbs would make a huge difference,” he says.

“If the budget’s squeezed and you have a spare bedroom it may be something you can consider for a couple of months. There’s no difficult compliance and there don’t need to be any tax implications.”

For example, according to the Inland Revenue Department website, Patterson says homeowners can avoid declaring short-term rental income for up to four consecutive weeks at a time and up to 100 nights a year.

“People can charge up to $55 a night, that’s $385 a week, tax-free. That’s potentially more than $5,000 a year.”

by Sue Fea

It’s only a temporary measure, but one that’s advantageous for both parties until a suitable long-term solution is found, says Patterson. Any permanent fix will require “extensive consultation” with the government, local government, developers, businesses and the community.

MBIE Bond Centre data shows that the Queenstown area lost 100 rental properties during the past year.

“Those could house three, four or five people, meaning several hundred people are affected,” says Patterson.

“In December alone we lost more than 30 properties out of the rental pool.”

A Queenstown Chamber of Commerce pulse check reported that just 15 per cent of local businesses said they had no problems with staff housing.

Patterson says it’s not a problem we can build our way out of.

“In Queenstown, we’re superstars at building. We’re a small town that builds like a big city. Around 1,400 building consents for new dwellings have been issued across the district during the past year – close to 4,000 during the past three years.”

The rate of new building in the Whakatipu Basin is well ahead of the current population growth, he says. The region gained an estimated 2,000 extra new homes in the last three years than was needed to keep pace with population growth.

“We’re building more homes than we need to house our growing population, but are they suitable for workers and those wanting to downsize and retire?

“[…] We have fewer rental houses, we’re building way more houses than we need, yet our staff can’t find housing, so where is it going?”

While Airbnb and Book a Bach are being slammed as the culprits in ‘the Court of Public Opinion’, Patterson says it’s unfair to solely apportion blame there.

“Queenstown has gained about 400 additional short-stay accommodation listings during the past year, but that’s still below pre-Covid times. In December 2021 we had about 2700 short-stay accommodation listings. That had risen to about 3200 by December last year, still well below 2019.” We don’t need an oversupply of Airbnb properties, but it’s a helpful option for many families feeling the pinch, he says.

Patterson says there’s been some potentially wellintentioned tightening of government legislation like the Tenancy Act and Healthy Homes standards, however, these may have inadvertently exacerbated the rental housing shortage by pushing homeowners into short-stay options or leaving the home vacant.

Ultimately, Patterson adds, the difficulty with lobbying the government is that the problem is more acute in Queenstown than elsewhere in New Zealand. The community needs regionally tailored solutions.

Photo by Katelyn Greer

Queenstown accommodation crisis – issues and solutions?

by Rachel Buckley (Associate, AWS Legal)

Plans to increase housing supply and affordability in Queenstown have continued to fall short despite desperate appeals from within the community. The framework for tackling the issue includes sector-specific legislation, national policies and independent entities. We summarise some of these efforts and consider the practicalities of these alternative solutions to the housing crisis facing Queenstown.

Over the years, a series of amendments have been made to the Resource Management Act 1991 (“RMA”). The once 382-page RMA has evolved into a complex piece of legislation, spanning 896 pages. The RMA currently fails to facilitate the availability of affordable housing to New Zealanders – an issue becoming increasingly relevant in the Queenstown Lakes District.

The operation of processes within the RMA, and the way in which territorial authorities exercise their regulatory functions, have become major barriers to fast and effective responses to the demand for affordable housing. The costs for large-scale developments to obtain resource consent, notice requirements and requiring affected party approvals delay and decrease the availability of affordable housing. The cost to residential landowners to subdivide larger parcels of land also acts as a deterrent. In response to ongoing calls for reform to the RMA, new legislation has been proposed to replace the RMA which will make resource consent applications easier and more predictable.

In a bid to tackle the national housing crisis, the National and Labour parties jointly announced the Resource Management (Enabling Housing Supply and Other Matters) Amendment Act 2021 (“Act”). The Act aims to remove overly strict planning rules which limit the heights and density of housing in residential areas. While it was mandatory to modify the District

Plan for a number of “Tier 1” local authorities, the Queenstown Lakes District Council (“QLDC”) was delegated to “Tier 2”, meaning it is not automatically captured by the Act. Notwithstanding this, the Minister for the Environment can require Tier 2 councils to adopt the Act if they are suffering from an acute housing crisis. As of the date of writing, QLDC has not publicly notified any proposed modification of the District Plan to amend density rules.

The Queenstown Lakes Community Housing Trust (“QLCHT”) is an independent, not-forprofit organisation, which tackles the issue of a lack of affordable housing in the Queenstown Lakes District. The QLCHT is funded by grants from central government together with contributions of land, buildings and/or funds from local developers. QLCHT assists local Queenstown residents who meet the eligibility criteria with their first home through a variety of different programs. Once accepted, applicants will remain on a waitlist until an appropriate housing opportunity arises. A great opportunity for those wanting to settle in Queenstown long-term but unfortunately, despite best efforts, supply is limited and doesn’t keep up with demand.

The Build to Rent (“BTR”) model is an emerging sub-market which has shown successful results internationally. It acts by providing affordable rental accommodation to those who have no desire or financial means to own their own home. The model involves the development of multi-unit residential buildings for long-term rentals, rather than sales to individual owners. The properties themselves are typically owned by investors and independently managed. Investors who purchase shares in BTR projects are incentivised by dividends received relative to their shareholding. The appeal to tenants is the establishment of long-term high-quality housing

without fears of their home being converted into an Airbnb.

Measures are being implemented to facilitate the growth of the BTR sector, including reform of the Resource Management Act 1991 and the Overseas Investment Office producing guidance for entities interested in the BTR model.

First Home Partner (“FHP”) is a shared ownership scheme by Kāinga Ora. FHP is designed to assist aspiring first-home buyers who are unable to meet deposit thresholds for home ownership. The scheme works by engaging Kāinga Ora to co-purchase a new home. The maximum contribution Kāinga Ora will make towards a purchase is either 25% or $200,000, whichever is lower. Successful applicants will own a property alongside Kāinga Ora as tenants in common. Properties that meet the FHP criteria in Queenstown are few and far between. While these creative schemes provide excellent opportunities for individuals to own an interest in property, with waitlists, lack of supply and planning constraints, we are seeing more and more posts on the Queenstown Trading Facebook page from families and individuals struggling to put a roof over their heads. Not to mention rising interest rates, compliance with the Healthy Homes Standards and the appeal of Airbnb returns for Landlords. Business owners are investing in properties to house their staff to ensure their businesses can operate, putting themselves under more financial strain. These are all long-term facilitators which will ultimately ease the accommodation crisis in the future but only for some fortunate few. Is there anyone out there with a short-term solution? Vacant House Tax?

If you’d like further information on any of the above schemes, please contact Rachel Buckley, Alice Hoogvliet or Kyle Galbraith at AWS Legal.

Rachel Buckley

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Kyle Galbraith

Strong demand for Industrial leasing continues at a record rate

by James Valentine

At the conclusion of the first quarter of 2023, the commercial property market in Queenstown has maintained a steady level of activity, resulting in strong sales and leasing activity which buck the national market trends. In this article I will cover off some key trends we are seeing in the market, as well as an indication on what we see to come over the course of the year. These predictions are only a few of the many indicators we are seeing from the commercial property activity year-to-date, so for the most accurate and up to date advice, be sure to reach out for further information.

Recovery signs are optimistic

by Glenn Peat, General Manager Ignite Wanaka, Chamber of Commerce

It is very encouraging to see the business levels year to date, with visitor numbers remaining positive. While we are certainly not out to the woods yet, figures to date this year versus 12 months ago are a positive sign. It was pleasing to see the latest business confidence results for New Zealand. The results indicate that businesses across the country are feeling optimistic about the future, which is great news for the economy.

However, it is important to note that there are still some challenges facing businesses in our region. One of the biggest issues is the ongoing accommodation situation in the Queenstown Lakes area. This is a complex issue that has been building for some time, and it is having a significant impact on local businesses.

So far this year…

Across all asset classes, purchase demand has remained strong. Colliers is pleased to be able to report a near 100% success rate for commercial properties taken to market in 2022. The beginning of 2023 has seen a similar response, albeit with transactions taking slightly longer, often being held up with enhanced due diligence being required by lenders as part of property purchases.

Industrial and warehouse stock leasing opportunities remain at a record low rate through Queenstown. Predominantly driven by trades and tourism-related businesses, there is currently no available stock for storage, manufacturing or workshop/warehouse use for lease through Frankton. This is putting upward pressure on rental levels as businesses look to maintain their current presence in this area. Following this trend, we are seeing an increase in enquiry levels on any buildings being sold with vacant possession, as businesses prefer to pay mortgages vs increased rental levels. The CBD has seen strong leasing activity, boosted by a return of interest from major overseas brands. The opening of the O’Connells mall has cemented Queenstown’s image of being a premier tourism destination for overseas visitors.

What is to come?

While Queenstown has been well protected to date from much of the happenings around NZ, we are beginning to see the effect of interest rate increases and a shallower buyer pool of investors seeking return. We are expecting that the “flight to quality” trend will become a stronger factor in buyers’ decision making process as prime or A-Grade stock takes preference over second and third tier property. Closely linked to this is the belief that owner-occupation will become increasingly attractive for businesses –particularly with the latest OCR increase.

On the leasing front, the demand for warehouse/storage space will remain strong as businesses continue to benefit from increased interest in Queenstown from domestic and international markets. Office leasing has been active, particularly in the 150-300sqm range, which is another trend we anticipate to continue as remote/hybrid working becomes more popular. Please free to get in touch if you have any questions on commercial activity happening within your area.

The lack of affordable housing in the area is making it difficult for businesses to attract and retain staff and is also driving up the cost of living for those who do manage to find accommodation. This is putting pressure on wages and is creating a challenging environment for both employers and employees. While there is no easy solution to the accommodation crisis, it is important that we continue to work together to find ways to address the issue. This may involve a range of strategies, such as increasing the supply of affordable housing, encouraging more investment in the region, and exploring innovative solutions to the problem.

The accommodation situation in the Queenstown Lakes region has been a concern for many years, with limited availability and high prices making it difficult for residents to find suitable housing. This problem has been compounded by the growth in tourism over the past 12 months and the demand for short-term rentals such as Airbnb. Many property owners have chosen to convert their homes into tourist accommodations, reducing the supply of long-term rentals and driving up prices.

This has had a significant impact on the local workforce, as many employees are unable to find affordable housing in the area. This has led to a high turnover rate in some businesses, as employees are forced to leave due to the cost of living. This not only affects the businesses themselves but also the wider community, as the loss of jobs and the turnover of employees can have a negative impact on the local economy. Being part of the Mahi Queenstown Lakes Workforce Strategy Steering Group, this issue is at the forefront of our discussions. The Steering group is comprised of representatives from both regional Chambers of Commerce and both RTOs, MSD, MBIE, RSLG along with local economic experts to formulate action plans to counter our workforce challenges including the accommodation concerns at present. The Wanaka Business Chamber is committed to addressing this issue and has been working with local authorities and businesses to find solutions that will benefit both residents and businesses in the region and is working closely with local authorities and community organisations to achieve this goal.

With the right approach, we believe that we can build a stronger, more resilient economy for the future.

Glenn Peat General Manager

Cell 027 257 8708

Email gm@ignitewanaka.co.nz

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Staff housing success: how it’s done in Aspen

by Sue Fea

“Be brave. Be bold.”

That’s the message from the Mayor of Queenstown Lakes’ sister city, Aspen, in the wake of Queenstown’s critical staff housing crisis.

“You’re not alone. It’s a global problem for resorts and it calls for strong leadership,” says Mayor Torre, freshly re-elected for his third term.

“Queenstown can learn from us – our successes and our mistakes.”

Aspen was very fortunate to have had leaders with incredible foresight, who put slow growth and land use policies in place 50 years ago, he says. A deed-restricted housing programme also started just over 40 years ago.

Measures include special impact fees and taxes, and real estate transfer taxes, that still ensure any new development is offset or mitigated according to its employee housing impact.

Called ‘inclusion zoning’, this is calculated on a square metre basis, and Torre says they encourage actual units or housing over cash in lieu.

“If someone wants to build, say a 1500sqm, twobedroom condo, that may have to be mitigated by including a 500sqm deed-restricted unit for the local workforce or residents.”

Millions of dollars are also collected from property developers for the city’s Employee Housing Fund and the council both builds its own housing projects and creates public-private partnerships with the free market.

“If people want approval to build a development they may need to build us 10 units under our Deed Restrictions, with sunset clauses, giving us the right to buy and own those in perpetuity if we choose to.”

He says $20m to $30m doesn’t even put a dent in the problem with each unit costing almost $1m to build.

“Our forebears were real pioneers on a county level. They did the necessary land deals and put the mechanisms in place ensuring adequate zoning,” he says.

“Aspen is tiny, only 4 square miles (10.3kms), but

any employee housing has to be within our strict town boundaries. We’re at the end of a 40 mile (64kms) valley which has five other communities dotted along it, but we didn’t want to expand that zone in case we put pressure on them,” he says. “We’re now looking at whether we can expand our urban growth boundary as part of a more regional programme as those communities need it too.”

Some employees and service families live there in the likes of Snowmass, Basalt and Woody Creek, but Torre says workers don’t want to commute any more than 30 minutes. “We’ve tackled that with a real robust transit system.”

Torre encourages Queenstown’s leaders to look at nearby towns as satellite options but to also ensure that easily accessible public transport is offered day and night for the younger workers wanting to enjoy the nightlife in Queenstown.

Aspen has adopted a Growth Management Quota System through which the council and community set a growth rate based on how much development will be tolerated.

Submissions are reviewed annually and while they’re capped Torre says the number of applications rarely reaches its limit. The best quality proposals are chosen in a system designed to attract the best competition.

Employee housing is a problem that Torre says he hit head-on when he first got elected to council 20 years ago with a controversial 250-unit development.

“As a young councillor it was one of the first things I had to vote on and I argued it was important to ensure adequate employee housing for that project,” he says.

Many employers who, back then, didn’t agree have since changed their minds, says Torre.

“I was in Telluride recently for meetings and we heard on the radio two restaurants were closing in two days due to staff shortages so we went to offer support. They closed the doors while we were walking in, saying employees wanted it closed now,” says Torre.

“It was a real eye-opener. This worker shortage problem is hitting and it’s hitting fast.

In Aspen, we’re very fortunate we’ve weathered the storm.”

Torre says Aspen’s keen to help other resorts like Queenstown tackle these serious issues and directs them to Aspen’s Housing Strategy Plan which is publicly available on the Aspen City Council website.

Former Queenstown Lakes Mayor Jim Boult and CEO Mike Theelen were due to visit Aspen and learn more about its solutions in 2020, but the trip was cancelled due to Covid, a council spokesperson says.

QLDC economic development manager Peter Harris points out that councils and individual states in the US have a wider range of power than NZ councils, such as introducing sales taxes.

Queenstown Lakes District Council Acting CEO Meaghan Miller says Queenstown and Aspen have a long history.

“Council became a sister city with Aspen (in 1992) because of the potential shared learnings between resort towns, but particularly because of the challenges and learnings which Aspen has already been through, such as worker accommodation and affordable housing,” she says.

“A visit to Aspen informed strategic discussions which in turn led to the establishment of the housing trust.”

Photo by Caleb Jack

5 minutes with Beth Chisholm from Ray White Queenstown

by Jessica Allen

Property Manager Beth Chisholm has been working in real estate for more than 18 years and with Ray White Queenstown for 13 of those. She has a strong knowledge of the local rental market and has seen many changes over time. Chisholm believes that there are many factors contributing to the current state of Queenstown’s rental market beyond just an increase in population post-Covid. Chisholm noted that in the past there would be an influx of properties available in the months leading up to winter, but with seasonal workers opting to stay on during the summer this availability decreased slightly. She says that rent prices returning to pre-Covid levels or slightly above due to inflation, but noted that homeowners took a hit for the duration of the pandemic.

“There are some really desperate people out there and I feel sad,” says Chisholm. “I like to involve my owners in the selection process, too. Years ago, if you applied for a rental, the first question asked was ‘Do you have a job?’, now if you apply for a job they ask ‘Have you got somewhere to live?’. It’s totally reversed.”

While exact figures on empty properties in Queenstown are hard to find, reports vary from 20% to more than a quarter of homes sitting unoccupied. Chisholm believes that this is, in part, due to the government’s strict legislation around rental agreements – there are only certain circumstances in that tenants can be given notice, such as the homeowners selling or moving into the property for at least 90 days. She says this means people are less likely to rent out their holiday homes when they’re not using them.

Recently, Chisholm received an email for one of her advertised long-term rentals from someone who ran Airbnbs, boasting about the returns that could be made and how much more beneficial it would be for the homeowner to do this. It made her wonder how many other rental properties are receiving this kind of attention.

“Owners may not know the implications of going Airbnb and the GST when you earn over so much, as well as the implications if you sell the property. I don’t know if the council need to do some research on individual Airbnb properties, just making sure they’re consented. Another thing that attracts people to Airbnb is that they don’t have to have Healthy Homes Standards.”

Region’s housing requires an integrated future-focused infrastructure plan

by Joseph Mooney MP for Southland and Shadow Spokesperson for Tourism

Housing affordability and accommodation availability are complex issues in the Queenstown-Lakes District. They can significantly impact the local economy, the success of businesses like yours and the health and well-being of communities in the region.

As a previous business owner in Queenstown, I know how important it is to be aware of the long-term sustainability of our region to ensure businesses remain profitable while creating jobs in their local communities.

Our sustainability goals should include a solid, future-focused housing infrastructure plan, requiring investment by local and central Government, as housing affordability and accommodation availability considerations directly affect decisions by people and families to come to live, work or visit the region.

If people can find affordable places to live, it can make it easier for businesses to attract and retain talented staff. Some business owners are already telling me that provision of worker accommodation as part of their business’ longterm workforce strategy has become critical to the survival of their business. While the housing issues in the region is not new, and the QueenstownLakes district has been affected for decades, what has become apparent, is that finding timely solutions that address the complex root causes of the problem such as supply, choice, availability and quality, has become critical. Addressing the root causes of the housing crisis will require a multi-faceted approach.

Over the past two years, I’ve spent considerable time talking to a diverse range of stakeholders seeking to understand the complexities of the problem and what can be done about it.

So what can we do about it? Businesses like yours, can play a crucial part in solutions. Some are already offering employee accommodation as part of their employment package. Other options could include exploring alternative housing solutions such as co-living spaces and modular housing for employees.

Partnering with local accommodation providers for discounted rental rates could help reduce the cost of employee accommodation, while connecting employees looking for housing with local providers is often valuable to people new to the area.

Actively participating and having your say in council-initiated or community discussions around housing development in our region particularly for affordable and social housing, is another way to help make a difference. At local and central Government levels, potential solutions could be restoring interest deductibility for landlords to reduce costs and increase rentals supply, taking the bright-line test back to 10 years, unlocking Buildto-Rent developments, freeing up more land for housing with cheaper and faster resource consents processes, ensuring infrastructure funding and financing isn’t a barrier to new housing developments, a more competitive building materials market and making sure communities share in the benefits of housing growth.

I am hosting Chris Bishop MP, National’s Spokesperson for Housing, on 27 April public meeting at noon at the Salvation Army, 71 Gorge Road. We’ll also meet with accommodation providers, property developers and social services agencies on the day.

Tackling this problem requires a collaborative effort to ensure the long-term success of your business and our region, and I look forward to engaging with you more on this in the coming weeks and months.

Funded by the Parliamentary Service, Authorised by Joseph Mooney, Parliament Buildings, WGTN

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Confidence shaken by rising costs

The first three months of 2023 left many Queenstown Lakes business owners and managers feeling downbeat about the road ahead.

Cost pressures, staffing, housing for staff, and the overall economic landscape all impacted confidence, according to the Queenstown Business Survey Q1 2023.

Eighty businesses responded to the survey, which was published last month. Only about a quarter expected conditions to improve for their business. The same number expect conditions to deteriorate, while roughly half expect them to remain the same.

Recruiting staff was again a major headache, with 38% of businesses saying it was the single biggest factor limiting growth.

And lack of accommodation for workers was cited as a new limiting factor by 13% of businesses, as the pressure ratchets up on the rental market.

During the busy summer, the arrival of working holiday visa holders had enabled businesses to

by Paul Taylor

staff up a little, and 71% of businesses were now operating over 75% capacity. However, with costs still rising due to inflationary pressures, profits were expected to decline over the shoulder season.

Arrowtown economist Benji Patterson says: “The reality is that businesses can’t push up their prices to the extent that their costs have increased.

“This is a concern for me in a potentially recessionary environment, particularly when in the shoulder season businesses are chasing more of the domestic dollar ahead of the winter Aussie influx.”

Confidence in New Zealand’s expected economic conditions was bleak. Fifty of the businesses (62.5%) expected conditions to deteriorate across the country, while only six reckoned they’d improve, with 23 expecting them to remain the same.

For Queenstown Lakes, as you would expect, the numbers were very similar to the confidence respondents had in the conditions for their

own business, with about a quarter expecting deterioration, a quarter improvement, and half expecting no change.

More than half the businesses expected to have to increase wages over the three months following the survey; April, May and June. And 63% had increased wages over the first quarter.

A whopping 92% of businesses surveyed said they’re paying their employees at least the living wage, which is $23.65 per hour.

Queenstown was the primary location for 46% of respondents, with 32% in Wānaka, 20% in Frankton/Remarkables Park/Five Mile/ Queenstown Central, 12% in Arrowtown, and the remaining in Glenda Drive, Glenorchy, Kingston, Glenda Drive and Cromwell.

The vast majority, 80%, have been in business for more than five years, but there were three new businesses that responded.

Perks and pitfalls of housing your workers

Businesses need to navigate a minefield of tax, tenancy and employment law to offer workforce accommodation to their staff.

Each field is separate but interlinked and it’s best to get some dedicated, specialist advice from the professionals, both before taking the plunge and throughout the process.

But, as a primer, Jason Smith, of Five Peaks Chartered Accounting, and Sylvie Thrush Marsh, of MyHR, gave Queenstown Business Chamber of Commerce members some broad brushstrokes of advice, at the second Staff Housing Information Series recently.

Smith says businesses who own a property and choose to house their workers in it have an advantage over other landlords, as the mortgage interest is tax-deductible, thanks to an exemption from the new rules governing rental properties. On a $960k four-bedroom Fernhill property, for example, a business housing its workforce could charge them $1000-per-week rent and only need to stump up $3663 extra to pay the mortgage each year (see table), as 100% of the interest would be deductible.

A landlord unable to deduct the interest, in contrast, would either need to put in $16,134 per year or increase the weekly rent to $1,319, to offset the cost - a 30% increase in rent.

“Interest deductibility has a big impact on the landlord’s costs,” Smith says.

“As long as the ownership of the business and the rental is the same, you can claim 100% of the interest. Employers, therefore, have a slight advantage over other property investors.”

Another option for businesses is to consider shared ownership or offering employees accommodation supplements, although that would be taxed through their wages.

by Paul Taylor

Stats showed the rental stock had already decreased by 30% in the past year, as the interest deductibility rules began to bite, making it even harder for workers to find somewhere to live.

“If that carries on the position becomes a lot worse, especially if the rents go up 30% as well.”

Airbnb owners are subject to the same rules as private landlords, i.e. they won’t be able to deduct their mortgage interest, whereas commercial accommodation, such as hotels and motels, operate under different rules.

Sylvie Thrush Marsh says those businesses that choose to become landlords need to have their paperwork sorted, including an employment agreement, tenancy agreement, bond, etc.

And they need to recognise they have two relationships with one person.

“As an employer, you are governed by legislation, like the Employment Relations Act, the Health and Safety at Work Act, and all the guidelines and parameters that protect them as employees don’t magically disappear because they are now also a tenant.

“And you also have a relationship with them as a landlord. So, the Residential Tenancies Act, the Healthy Homes Guarantee Act, the requirements around the types of facilities your accommodation has, the terms and conditions of a tenancy relationship, all those apply.

“You must meet your obligations in both of those different jurisdictions.”

Any issues with the person as an employee, or issues with them as a tenant,

Rental Example

must be dealt with separately.

And there are added nuances to the relationships too.

An employer cannot exert undue influence to make a potential employee agree to live in the businesses’ accommodation, although that’s not likely to be a problem in Queenstown. Any business deducting rent from the employee’s pay packet also needs to put the amount in the employee contract, otherwise, they can only legally deduct 5% of wages.

Neither can they just kick them out. They can only give notice on the tenancy if the employment is also ending, although there are other ways to exit the tenancy relationship and this does not apply if the accommodation is not their permanent address (an oil rig, for example).

There are scores of different scenarios to deal with, such as housing couples where one is an employee and one isn’t, how to provide shortterm accommodation to help workers get established in town, not to mention what happens if a house full of employee flatmates have a major falling out. So, there’s a lot to consider and having professional help, or an arm’s-length property manager, is always advisable.

Sylvie Thrush Marsh and Jason Smith at the Queenstown Business Chamber of Commerce’s Staff Housing Information Series.

Skyline in Swansea

Skyline Enterprises has secured £4 million ($8 million) from the Welsh government to build a cable car in Swansea. The cable car is part of a £34 million development that will include walks, luge runs, a zipline and a sky swing. The development is set to be built on Kilvey Hill and aims to bring more visitors to the region. Dawn Bowden is the Deputy Minister for Arts and Sport and has responsibility for tourism in the Welsh Government. She visited Queenstown last year and appreciated how Skyline Enterprises use the natural landscape as a beautiful backdrop to a successful business.

“This project is significant in the further development of Swansea as a vibrant city destination. It complements other regeneration projects in the area as well as supporting economic growth and all year-round jobs,” says Bowden.

QT Lakes fund for environment

Queenstown and Wanaka have joined forces to establish two community funding platforms to support the district’s goal of carbon zero by 2030. The Love Queenstown and Love Wanaka platforms aim to drive a unique solution to the challenges and opportunities high-volume visitation poses for the region. They will be raising funds to support localised climate, conservation and biodiversity initiatives, helping to enable visitors to positively impact the two towns through their activities and experiences. Donations can be made through physical and digital points in participating businesses throughout Queenstown and Wanaka with all funds will be spent exclusively within the region.

Queenstown Housing Gap

Quality of Life Survey

Close to 1,500 residents of QLDC have provided their insights on housing, employment, health, the environment and transport. The findings will be used to support improvements to community wellbeing by QLDC and other local organisations. Queenstown Lakes District Mayor Glyn Lewers said, “The headline statistic is that 77% of our residents rate their quality of life as good or better, up marginally from 76% the previous year. But dig a little deeper and we also see our district’s most pressing challenges reflected in these results, particularly when it comes to housing and the lower ratings in life satisfaction reported by people who are generally younger, have less work security, and are renting.”

SQL Angelic Drop-In Session

Startup Queenstown Lakes will host their Flying Kiwi Angels Angelic Drop-In Session on 1 May at Wanaka Recreation Centre. These sessions are held on the first Monday of every month and connect Kiwi startups with angel investor Charlie James. You can book in to pitch an idea –the sessions are open to those wanting to scale up or just starting out. Flying Kiwi Angels are passionate about Kiwi startups and will help with advice, connection and funding. James and SQL board member Wayne Hudson will be there to discuss your ideas and goals.

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Contact 03 409 2800 | info@qmg.co.nz

Catherine Mercer - Account Manager | 027 777 2785 | cat@qmg.co.nz

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Bethany Rogers - Editor | 027 882 5318 | hello@bethanygrogers.com

The council has estimated that 17,000 more homes will be needed over the next 30 years across the district. This information helped to form part of the draft Queenstown Lakes Homes Strategy and Action Plan, which will set out the proposed strategic direction and vision for housing over the next ten years. One of the main goals of the plan is to improve housing affordability and quality and to address the current rental shortage. The draft plan notes that “The Queenstown Lakes District is consistently one of the most expensive places in the country to live in terms of housing affordability.”

QT Business Chamber of Commerce staff housing series

The Queenstown Business Chamber of Commerce will continue their housing series this May to educate and inform businesses about purchasing, leasing and managing worker accommodation. On 18 April they hosted Jason Smith from Five Peaks Chartered Accounting, who discussed an example of Queenstown rental property, interest deductibility and fringe benefit tax of lower-than-market rent, as well as Sylvie Thrush Marsh from MyHR, who discussed the relationship between being an employer and landlord, and how to include this in your employee agreement. On 5 May they will host Queenstown Lakes Community Housing Trust’s Julie Scott who will discuss what role they have and how they can help employees, and Hayley Stevenson from Housemart who will discuss how to do the best by your employees and the business as well as key regulations and the types of housing.

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