Secondary kitchen `tax' stopping rental options
OPINION: Tourism in the Nelson-Tasman area is booming, but residential households are excluded from sharing in the gains by a prohibitive regional tax. The same tax also inhibits the development of affordable rental housing in decent residential areas in our region.
The tax in question masquerades as a "development contribution" on second kitchens : $25,000 in Tasman and $10,000 or more in Nelson. A second kitchen in one residential dwelling is "deemed to be" an actual second dwelling in each region's District Plan, and therefore subject to a full, second development contribution.
Homeowners can and do choose to have as many bedrooms, bathrooms, toilets, living rooms, study spaces, recreation rooms, garages and workshop spaces, as they want and can afford. But try to have a second kitchen and you'll have to pay an extortionary tax, if you meet all other requirements for a second dwelling on your property. Since a renovated/new second kitchen might cost anywhere between $10,000 to $25,000 homeowners effectively pay a sales tax well over 100 per cent of actual costs. Naturally, few homes with second kitchens are ever built (at least legally).
This distortionary, and extortionary, tax is as inefficient as it is inequitable. Inefficient because it is "value destroying" for our residents and our visitors, and inequitable because the foregone value is disproportionately born by those less well off.
Imagine adding thousands of bedrooms, bathrooms, toilets, kitchens, living rooms and laundries to the useful stock of rental housing accommodation in Nelson-Tasman. All fully insured, privately developed and financed, up and running within the next year, and in prime residential locations? How? Follow the example of Canadian cities like Vancouver and Edmonton. Planners there have embraced a wide range of initiatives to legalise and encourage secondary suite accommodation in residential areas.
A secondary suite is a self-contained dwelling unit that has been created "within" a larger principal dwelling. A unit typically shares the main dwelling's yard, parking area, laundry, and storage space, but has its own kitchen/cooking facilities, living area, bathroom and entrance.
In Vancouver almost half of all new residential homes now contain one or more secondary suites. And many older houses in well established residential areas have built secondary suites within their homes. A major policy change came in 2004 when City councillors reformed the zoning laws to legalise the large and growing stock of "grey market" secondary suites in the city. In Edmonton, new policies involved subsidising - not taxing or prohibiting - secondary suites in residential houses.
Benefits accrue on both the supply and demand side of the rental markets in these cities, whether in holiday stay or for longer term rental accommodation markets. Younger families starting out (and their bank managers) welcome a weekly rental of $300 or more to help pay large mortgages. Seniors who have lived in their home and communities for decades welcome extra rental income, both to augment low post-retirement funds as well as to be able to earn a return on the increases in their property values without having to cash up and move away from their familiar communities.
Singles or couples, or solo parents with children, looking for longer term rental accommodation can avoid high rise tenement blocks and instead live close to good schools, public transport, and green spaces, in decent residential areas where they would never be able to afford to buy. Likewise visitors have the opportunity for private self-catering/self-contained accommodation at a wide variety of prices and qualities. Not just in motels and holiday parks, but in the best residential areas of Nelson-Tasman and right along the Great Taste trail.
Why shouldn't residential home owners throughout Nelson-Tasman be able to develop holiday accommodation options with second kitchens for the many tourists that visit our region? As it stands now the District Plans permit B&B style accommodation as a residential " right". But sacrificing privacy to, and making cooking commitments for, unfamiliar visitors inside ones own home, B&B style, is not something many people want to do.
With the explosion of online accommodation agencies like Air BnB, running and marketing a small holiday stay from home is easy. Remodelling an existing family home with a second kitchen in a secondary suite, might cost as much as $20,000 to $30,000 up front. But it's an economic no-brainer as an investment if seasonal income of $3000 to $10000 year can be made. The second kitchen tax in Nelson-Tasman is killing these sorts of valuable economic opportunities.
To the scare mongers who would cry that such a change would lead to the destruction of local family residential neighbourhoods, I can only say- visit Vancouver, year after year rated in the top three most desirable cities to live in in the world. The beauty and social diversity of residential neighbourhoods in Vancouver testifies to the power that a less regulated market in secondary suites has to create value in accommodation: for homeowners, for renters, for tourists.
If legalisation of secondary suites in residential areas can happen with the stroke of a regulatory pen in Canadian cities, surely we can do the same in Nelson-Tasman?
John Fountain is a semi retired academic economist living in Mapua. He has a PHD in economics from Stanford and has taught at several universities in New Zealand. He is currently employed as a member of the NZ Human Rights Review Tribunal. He runs a small holiday stay business in Mapua with his partner.