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2021-10-12 P&E Agenda - Item 2 - Attachment 6 - Cost Benefit Analysis
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Planning & Environment Committee Agenda
12 October 2021
Attachment 6 to Item 2
COST BENEFIT ANALYSIS
PROPOSED LOCAL LAW AMENDMENT:
SHORT STAY LETTING & HOME HOSTED
ACCOMMODATION
NOOSA SHIRE COUNCIL
SEPTEMBER 2021
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Section 2
COST BENEFIT ASSESSMENT – PROPOSED LOCAL LAW AMENDMENT: SHORT STAY
LETTING & HOME HOSTED ACCOMMODATION
DOCUMENT CONTROL
Job ID: J002195
Job Name: Cost Benefit Analysis of Short Stay Accommodation Local Law
Client: Noosa Shire Council
Client Contact: Anita Lakeland
Project Manager: Gavin O’Donovan
Email: [email protected]
Telephone: (07) 3831 0577
Document Name: Cost Benefit Analysis of Proposed Short Stay Accommodation Local Law FINAL DRAFT
Last Saved: 13/9/2021 3:30 PM
Version Date Reviewed Approved
Working Draft V1 03/09/2021 GO GO
Final Draft Report 07/09/2021 GO GO
Disclaimer:
Whilst all care and diligence have been exercised in the preparation of this report, AEC Group Pty Ltd does not warrant the
accuracy of the information contained within and accepts no liability for any loss or damage that may be suffered as a result of
reliance on this information, whether or not there has been any error, omission or negligence on the part of AEC Group Pty Ltd
or their employees. Any forecasts or projections used in the analysis can be affected by a number of unforeseen variables, and
as such no warranty is given that a particular set of results will in fact be achieved.
i
Section 3
COST BENEFIT ASSESSMENT – PROPOSED LOCAL LAW AMENDMENT: SHORT STAY
LETTING & HOME HOSTED ACCOMMODATION
EXECUTIVE SUMMARY
Noosa Shire Council (Council) is proposing a local law to manage the operation of short stay letting and home
hosted accommodation across Noosa Shire to better manage the adverse effects on predominantly permanently
occupied residential communities from the increased utilisation of residential properties for short stay
accommodation.
A cost benefit analysis has been undertaken to demonstrate the benefits and costs – and the overall net benefit or
cost – to the community from the proposed local law using available information and market assumptions where
information is not publicly available.
It is presently estimated that there are nearly 5,000 properties operating short stay letting or home hosted
accommodation. Some of these properties are located in designated short stay accommodation precincts and
locations and as such will not be subject to the local law.
The costs of the proposed local law (in real terms) are estimated as:
• Council administration costs of $0.68 million in 2022, $0.70 million in 2023, $0.46 million in 2024 and $0.31
million thereafter, passed through to short stay accommodation property owners via initial application fees and
ongoing general rates.
• Additional property management and complaints administration costs for short stay let premises (not home
hosted accommodation) of $6.12 million per annum, with $0.25 million incurred within Noosa Shire, $0.63
million incurred elsewhere in Queensland and $5.24 million incurred interstate or overseas.
There is a significant impact on traditional residential neighbourhoods from the increased level and type of activity
associated with short stay accommodation, much of which is focussed on noise disturbances, amenity, safety and
security. Placing effective local controls on activity and behaviour will reduce the extent and type of adverse effects
on permanent residents in locations where short stay letting and home hosted accommodation are provided.
Much of these impacts relate to resident health and residential amenity, with amenity referring to the ability for
residents to enjoy their homes in a peaceful manner with feelings of community and safety. Residential homes
should allow their occupants the ability to wind down, relax and sleep with minimal disturbances. Such residential
amenity maximises resident health and wellbeing.
Potential beneficiaries within Noosa Shire from the proposed local law include 10,610 residential properties
consisting of an estimated 26,525 persons, and as such represent a significant portion of the local community. The
benefits of the proposed local law on resident health and residential amenity are estimated as $9.56 million per
annum.
It is not anticipated that the supply of, nor the demand for, short stay accommodation in Noosa Shire will be
impacted by the proposed local law based on assessed financial impacts on property owners and the potential
impact of passing through increased costs to visitors.
A quantitative assessment has been undertaken, with costs and benefits discounted to present value terms to
estimate the net present value and benefit cost ratio of the proposed local law over a 30-year period. Sensitivity
analysis has been conducted at real discount rates at 0%, 4%, 7% and 10%.
When considering all impacts irrespective of location, the value of identified benefits exceeds the value of identified
costs.
ii
Section 4
COST BENEFIT ASSESSMENT – PROPOSED LOCAL LAW AMENDMENT: SHORT STAY
LETTING & HOME HOSTED ACCOMMODATION
Table E.1. Quantitative Assessment – All Impacts Irrespective of Location
All Impacts Discount Rate
Impact 0% 4% 7% 10%
Costs
Council Administration $ 13.0 $ 7.9 $ 5.9 $ 4.6
Property Management $ 183.6 $ 110.1 $ 81.3 $ 63.5
Total Costs $ 196.6 $ 117.9 $ 87.1 $ 68.1
Benefits
Health and Amenity $ 286.9 $ 172.0 $ 127.0 $ 99.2
Total Benefits $ 286.9 $ 172.0 $ 127.0 $ 99.2
Net Present Value $ 90.2 $ 54.1 $ 39.8 $ 31.1
Benefit Cost Ratio 1.46 1.46 1.46 1.46
Source: AEC.
When considering impacts only within Queensland, the value of identified benefits exceeds the value of identified
costs by an even greater extent.
Table E.2. Quantitative Assessment – All Impacts in Queensland
Queensland Impacts Discount Rate
Impact 0% 4% 7% 10%
Costs
Council Administration $ 6.4 $ 3.8 $ 2.9 $ 2.3
Property Management $ 26.5 $ 15.9 $ 11.7 $ 9.1
Total Costs $ 32.8 $ 19.7 $ 14.6 $ 11.4
Benefits
Health and Amenity $ 286.9 $ 172.0 $ 127.0 $ 99.2
Total Benefits $ 286.9 $ 172.0 $ 127.0 $ 99.2
Net Present Value $ 254.0 $ 152.3 $ 112.4 $ 87.7
Benefit Cost Ratio 8.73 8.72 8.71 8.68
Source: AEC.
When considering impacts only within Noosa Shire, the value of identified benefits exceeds the value of identified
costs by an enormous margin.
Table E.3. Quantitative Assessment – All Impacts in Noosa Shire
Noosa Impacts Discount Rate
Impact 0% 4% 7% 10%
Costs
Council Administration $ 1.8 $ 1.1 $ 0.8 $ 0.7
Property Management $ 7.6 $ 4.5 $ 3.3 $ 2.6
Total Costs $ 9.4 $ 5.6 $ 4.2 $ 3.3
Benefits
Health and Amenity $ 286.9 $ 172.0 $ 127.0 $ 99.2
Total Benefits $ 286.9 $ 172.0 $ 127.0 $ 99.2
Net Present Value $ 277.5 $ 166.3 $ 122.8 $ 95.9
Benefit Cost Ratio 30.57 30.54 30.47 30.38
Source: AEC.
Based on the assumptions underpinning the cost benefit analysis, the quantitative assessment highlights that the
benefits associated with the proposed local law significantly outweigh the costs associated with the proposed local
law. Short stay accommodation operators – 86% of which are located outside of Noosa Shire and 51% of which
are located outside of Queensland – are currently receiving commercial benefits at a significant cost to local
resident health and residential amenity.
In addition to the quantitative outcomes, it is also envisaged that the proposed local law would result in the following
qualitative benefits:
• An enhanced feeling of safety and security for residents in their homes.
• The creation of additional local employment through the requirement to have a local contact person on call for
all short stay accommodation premises.
iii
Section 5
COST BENEFIT ASSESSMENT – PROPOSED LOCAL LAW AMENDMENT: SHORT STAY
LETTING & HOME HOSTED ACCOMMODATION
TABLE OF CONTENTS
DOCUMENT CONTROL .................................................................................................................................... I
EXECUTIVE SUMMARY .................................................................................................................................. II
TABLE OF CONTENTS.................................................................................................................................. IV
1. BACKGROUND....................................................................................................................................... 1
2. PROPOSED LOCAL LAW AMENDMENT ................................................................................................ 2
2.1 IDENTIFYING THE ISSUE ........................................................................................................................... 2
2.2 CURRENT ENVIRONMENT ......................................................................................................................... 4
2.3 PROPOSED LOCAL LAW AMENDMENT ENVIRONMENT .................................................................................... 4
3. ESTIMATED COSTS ............................................................................................................................... 6
3.1 COUNCIL COSTS .................................................................................................................................... 6
3.2 ACCOMMODATION PROVIDER COSTS ......................................................................................................... 6
3.3 SUPPLY OF, AND DEMAND FOR, SHORT STAY ACCOMMODATION..................................................................... 8
4. ESTIMATED BENEFITS ........................................................................................................................ 10
4.1 ADVERSE EFFECTS THAT MAY BE ADDRESSED BY THE LOCAL LAW ............................................................... 10
4.2 POTENTIAL BENEFICIARIES ..................................................................................................................... 11
4.3 RESIDENT HEALTH AND RESIDENTIAL AMENITY.......................................................................................... 11
4.4 RELOCATION COSTS FOR PROPERTY OWNERS DECIDING TO MOVE .............................................................. 14
4.5 LOCAL EMPLOYMENT BENEFITS .............................................................................................................. 14
5. COST-BENEFIT ANALYSIS FINDINGS ................................................................................................. 15
5.1 QUANTITATIVE ASSESSMENT .................................................................................................................. 15
5.2 FINDINGS ............................................................................................................................................ 16
REFERENCES ............................................................................................................................................... 17
iv
Section 6
COST BENEFIT ASSESSMENT – PROPOSED LOCAL LAW AMENDMENT: SHORT STAY
LETTING & HOME HOSTED ACCOMMODATION
1. BACKGROUND
Noosa Shire Council (Council) has recently publicly notified a proposed local law to manage the operation of short
stay letting and home hosted accommodation across Noosa Shire to better manage the adverse effects on
predominantly permanently occupied residential communities from the increased utilisation of residential properties
for short stay accommodation.
All short stay let properties will require an approval under the proposed local law (exemptions exists for certain
precincts and sites), with conditions placed on the approval including appropriate use and site requirements, a
code of conduct for guest behaviour and the need for a local contact person who manages the property and deals
with complaints. The proposed local law does not aim to address potential issues with housing rental supply or
affordability potentially arising as a result of the use of traditional residential premises for short stay accommodation.
As part of the public consultation process, a list of likely anti-competitive provisions were identified in each of the
amending local law and the amending subordinate local law in the Public Interest Test Plan, which was prepared
in accordance with the requirements of the National Competition Policy guidelines.
The possible anti-competitive provisions identified in the Public Interest Test Plan include:
• Administration (Amendment) Local Law (No. 1) 2021, Section 5 (Amendment of Schedule 2 (Prescribed
Activities)).
• Administration (Amendment) Subordinate Local Law (No. 1) 2021, Section 5 (Insertion of a new Schedule 21A
– Operation of short stay letting and home hosted accommodation).
Under Clause 5(1) of the Competition Principles Agreement (CPA), legislation should not restrict competition unless
it can be demonstrated that the benefits to the community as a whole outweigh the costs, and the objectives of the
legislation can only be achieved by restricting competition.
To support Council’s Public Interest Test Plan, AEC Group Pty Ltd (AEC) has been commissioned to assess the
socio-economic costs and benefits of the amending local law and the amending subordinate local law. The
assessment is required to demonstrate the benefits and costs – and the overall net benefit or cost – to the
community from the proposed amendments.
1
Section 7
COST BENEFIT ASSESSMENT – PROPOSED LOCAL LAW AMENDMENT: SHORT STAY
LETTING & HOME HOSTED ACCOMMODATION
2. PROPOSED LOCAL LAW AMENDMENT
2.1 IDENTIFYING THE ISSUE
Council indicates that the number of residential premises being purchased and used for short stay letting and home
hosted accommodation within traditionally permanent residential areas has increased due to the rise of online
booking platforms. It is presently estimated that there are nearly 5,000 properties operating short stay letting or
home hosted accommodation. Figure 2.1 on the following page highlights the number and location of currently
identified short stay accommodation premises across the Shire.
Although short-term letting and home hosted accommodation offers the opportunity for owners of premises to earn
extra income by renting out all or part of their homes, it also has the potential to lead to adverse effects on quality
of life for permanent residents given the conflicting use of traditional residential premises as short-term holiday and
event celebration accommodation versus permanent occupancy for working or retired households.
Further, many premises are managed from a distance with no local presence, management structure or regulation
to ensure appropriate use and behaviour. There is also no consistent code of conduct for guest behaviour nor for
resolving resident complaints in a timely manner 1 across the different booking platforms for short stay letting and
home hosted accommodation. Further, while the Queensland Police Service may attend to address an issue on a
particular night, the revolving doors of occupancy mean that there is no lasting effect of such a response.
Key issues identified as requiring addressing in the operation of short-term accommodation include:
• Lack of regulation and enforcement.
• Lack of local complaints management and resolution.
• Number of guests and overcrowding.
• Frequency and turnover of guests.
• Noise disturbances.
• Times and type of use of outdoor space.
• Waste disposal and waste management.
• Number of vehicles and parking.
• Safety and security.
• Pet nuisance management.
• Conflict between permanent residents and visitors.
A regulatory approach to short stay letting and home hosted accommodation seeks to ensure the ongoing benefits
of short-term letting and home hosted accommodation for users and owners of premises, while minimising the
adverse effects to permanent residents and residential amenity through the lawful and safe provision of short stay
letting and home hosted accommodation and the creation of a formal avenue for timely, effective complaints
management and resolution for adversely impacted residents.
1 For example, while Airbnb has launched an Australian support line that provides a call back service for affected neighbours within 10 minutes, this
is not an industry standard and also does not necessarily mean that issues raised will be appropriately resolved.
2
Section 8
COST BENEFIT ASSESSMENT – PROPOSED LOCAL LAW AMENDMENT: SHORT STAY
LETTING & HOME HOSTED ACCOMMODATION
Figure 2.1. Map of Short Stay Accommodation by Type
Source: Council.
3
Section 9
COST BENEFIT ASSESSMENT – PROPOSED LOCAL LAW AMENDMENT: SHORT STAY
LETTING & HOME HOSTED ACCOMMODATION
2.2 CURRENT ENVIRONMENT
The following characteristics define the current operating environment for short stay letting and home hosted
accommodation:
• No requirement for Council approval for, and no conditions are applied to, the provision of short stay letting
and home hosted accommodation premises.
• Short stay letting may be managed without the need for any local contact person.
• The enforcement of appropriate guest behaviour at short stay letting and home hosted accommodation
premises is reliant on the individual policies of accommodation companies, property managers, individuals
self-managing their premises and the Queensland Police Service responding to noise and safety complaints.
• There is an ongoing risk that short stay letting and home hosted accommodation is operated in a manner which
does not have proper regard for appropriate health, safety and amenity standards in residential
neighbourhoods, as desired by Council and the community.
2.3 PROPOSED LOCAL LAW AMENDMENT ENVIRONMENT
Council’s proposed local law aims to regulate and manage the ongoing use of short stay letting and home hosted
accommodation to reduce the adverse effects of such activity on permanent residents and residential amenity.
The proposed local law will introduce the following requirements:
• Mandatory approval process (including initial application and annual renewal) for all premises providing short
stay letting and home hosted accommodation across Noosa Shire, subject to exemptions for certain precincts
and sites where such activity would normally be expected 2.
• Imposition of conditions on approved premises to reduce the adverse effects of short stay accommodation on
residential amenity in the vicinity of the premises and to ensure safety for residents and users, including (but
not limited to) the following requirements:
o Prominent display at the exterior of the premises of contact person details for queries and complaints.
o Prominent display at the interior of the premises and on booking websites of the code of conduct for guest
behaviour.
o Must not constitute a nuisance, including unacceptable behaviour such as loud aggressive behaviour,
yelling, screaming or arguing, excessively loud cheering, clapping or singing, and nuisance pets.
o Registers of use and complaints.
o Premises kept in safe and tidy condition, including clean, tidy, sanitary and hygienic waste containers.
o No sleeping or camping on the premises in tents, caravans, campervans or similar.
o Adequate onsite vehicular space and parking on premises so as to not cause a disturbance to adjoining
residents.
o Formal compliance with necessary safety protocols (e.g., pool safety, electrical safety).
o Sufficient public liability insurance (>= $10 million).
• Provision of a local contact person that:
o Is available 24 hours a day / 7 days a week.
o Is located within 20 minutes travel of the premises by vehicle.
o Is responsible for supervising and managing the premises, including addressing complaints about the use
of the premises and visitor queries.
2 Council estimates that approximately 1,241 of the unit/townhouses and proposed to be exempt from the local law, including 807 properties in the
Hastings Street mixed use precinct and 434 properties on visitor only approved sites.
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Section 10
COST BENEFIT ASSESSMENT – PROPOSED LOCAL LAW AMENDMENT: SHORT STAY
LETTING & HOME HOSTED ACCOMMODATION
o Responds to and resolves complaints within 30 minutes of receipt of notification of each complaint,
including ensuring compliance with the requirements of the code of conduct for guest behaviour.
• Council has the power to:
o Access premises for inspections.
o Access information on use and complaints on request.
o Issue compliance notices where non-compliance is found.
o Have work carried out and seek to recover costs following non-compliance with a notice.
o Stop an approval holder from providing such accommodation for non-compliance following issue of a
notice or where premises are operating without approval.
o Close premises summarily if there is a serious risk to health or safety.
• Council is responsible for managing the approvals process including initial applications and annual renewals,
in addition to managing a 24 hours a day / 7 days a week complaints hotline which will provide residents a
platform to report any issues and/or misbehaviours of guests, notify contact persons of complaints made and
arrange for security to respond to complaints in the event that contact persons are unable to be reached.
5
Section 11
COST BENEFIT ASSESSMENT – PROPOSED LOCAL LAW AMENDMENT: SHORT STAY
LETTING & HOME HOSTED ACCOMMODATION
3. ESTIMATED COSTS
3.1 COUNCIL COSTS
Council has identified the resources required to implement the local law, and manage the ongoing administration
of, and compliance with, the local law.
The first three years of implementation is anticipated to generate the largest workload to support application
processing for existing short stay accommodation premises. The resourcing effort required thereafter will include
the processing of incremental premise applications associated with growth and change in land use, in addition to
services engaged to manage and operate a complaints hotline accessible 24 hours a day / 7 days a week to receive
calls, notify responsible contact persons and engage security services to attend properties where there is no
response from responsible contact persons.
The estimated annual costs associated with implementing and administering the local law over the first five years
are outlined below. These costs exclude cost indexation and as such are in real (i.e., current day) dollar terms.
Table 3.1. Local Law Implementation and Administration Council Costs, First 5 Years (real terms)
Cost Type 2022 2023 2024 2025 2026
Labour $374,653 $400,694 $244,452 $166,331 $166,331
Materials and Services / Other $305,708 $294,854 $215,666 $147,519 $147,519
Total $680,362 $695,547 $460,118 $313,850 $313,850
Source: Council.
IMPACT SUMMARY:
Council will incur and pass on initial and ongoing application processing costs for existing short stay letting and
home hosted accommodation providers, plus it will also incur ongoing administration costs associated with the
proposal local law, with the costs totalling $0.68 million in 2022, $0.70 million in 2023, $0.46 million in 2024
and $0.31 million thereafter.
3.2 ACCOMMODATION PROVIDER COSTS
3.2.1 Application and Renewal Costs
Under the proposed local law, short stay letting and home hosted accommodation properties will require an initial
approval unless identified as exempt. Approval is required if the premises is short stay let on a permanent basis,
or a principal place of residence which is let for no more than four times and 60 days per calendar year.
Applications must include the following information:
• A site plan and floor plan of the premises.
• Confirmation that the premises can be lawfully used for short stay letting, either by a development approval or
via existing use rights which comply with development approval conditions.
• Written confirmation that the premises is in good condition, will not be used as a party house and appropriate
safety certification has been obtained.
• Contact person information who will be responsible for the premises and be available at all times, including
addressing complaints and visitor queries.
Section 4 of Council’s draft Implementation Plan outlines the following application fees:
• $300 per dwelling house and $100 per duplex or unit for Non-Principal Place of Residence premises (short
stay letting of entire dwelling).
6
Section 12
COST BENEFIT ASSESSMENT – PROPOSED LOCAL LAW AMENDMENT: SHORT STAY
LETTING & HOME HOSTED ACCOMMODATION
• $75 per home hosted accommodation property and $75 per short stay let property four times and no more than
60 days per year for Principal Place of Residence premises.
These fees will be fixed for the first three years of implementation, with indexation applied thereafter.
Approvals must be renewed annually while accommodation continues to be provided, although no fee will be levied
by Council on renewals. Ongoing management and administration of the proposed local law outside of application
fees will be funded via general rates.
The approval costs and higher general rates levied on short stay letting and home hosted accommodation are not
included in the cost benefit assessment as they are already included in the identified additional costs incurred by
Council which are then passed on to accommodation providers through the approval fees and higher general rates.
Council indicates that 86% of short stay letting premises are owned by persons residing outside of Noosa Shire
(35% rest of Queensland, 45% interstate and 6% international), meaning that only 14% of these costs will be
passed on to Noosa Shire residents.
Consideration of the potential impact of the increased costs incurred by accommodation providers on the ability to
continue to operate and attract visitation to the region is included in a subsequent section.
IMPACT SUMMARY:
No additional costs are incurred as these costs represent pass-through costs equal to the financial costs
incurred by Council covered in Section 3.1, noting only 14% of the costs from Section 3.1 will be incurred by
Noosa residents and only 49% of the costs from Section 3.1 will be incurred by Queensland residents.
3.2.2 Property Management Costs
It is estimated that around 3,700 premises will require approval under the local law, with 100 of these being home
hosted accommodation and 3,600 being short stay letting premises.
The proposed local law requires short stay letting properties to appoint a local contact person to the premises who
must be available 24 hours a day / 7 days a week and be located within 20 minutes travel by vehicle, in addition to
responding to complaints within 30 minutes. Letting agents, security firms or property owners themselves can be
the nominated contact person to respond to complaints. Home hosted accommodation will not incur any additional
property management costs as there is no requirement in the proposed local law for a contact person given that
the guest resides at the premises and is able to deal with issues on the spot.
Research indicates that property management fees for short stay accommodation equate to around 15%-20% of
rental revenue depending on the level of service included, with additional fees for linen, call outs, advertising, etc.
Many properties are currently managed by local agents and many property management arrangements already
include after-hours response mechanisms.
The additional costs to short stay letting property owners from adhering to the proposed local law are difficult to
estimate, as they will be dependent on the current property management structure of each premises. The least
cost impact will be on those premises managed locally with an after-hours service, while the greatest cost impact
will be on those premises managed from a distance with a lock box system and no after-hours service.
In the absence of information on property management structures applicable to all short stay letting premises, the
following assumptions are made:
• 50% of premises (1,800) have a 24/7 response currently included.
• 50% of premises (1,800) do not have a 24/7 response currently included.
It is assumed that the following additional property management costs will be incurred as a result of having a local
contact person to deal with complaints in accordance with the required timeframes:
• $2,000 per annum additional annual retainer cost for premises without a 24/7 response currently included.
• $500 per annum additional annual retainer cost for premises with a 24/7 response currently included.
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Section 13
COST BENEFIT ASSESSMENT – PROPOSED LOCAL LAW AMENDMENT: SHORT STAY
LETTING & HOME HOSTED ACCOMMODATION
• $75 cost per complaint requiring a contact person3.
• 6 complaints lodged on average per premises per annum 4.
The effect of applying the above assumptions equates to additional costs incurred of $2,450 per annum for
premises without a 24/7 response currently included and $950 per annum for premises with a 24/7 response
currently included.
Across 3,600 short stay letting premises, the aggregate cost is estimated at $6.12 million per annum. Council has
indicated that 86% of short stay letting premises are owned by persons residing outside of Noosa Shire, meaning
that $5.26 million would be incurred by property owners outside of Noosa Shire and only $0.86 million incurred by
property owners within Noosa Shire.
Property owners will likely introduce a pass-through fee on users for complaints to be retained from bonds held. A
$250 complaint fee would yield $1,200 per annum assuming the property owner would not be able to levy fees on
20% of occasions due to vexatious/unwarranted complaints5. While this does not reduce the overall economic cost
of additional property management costs, it does transfer costs from within Noosa Shire to users from areas outside
of Noosa Shire (and from within Queensland to users from outside of Queensland).
The end outcome is an aggregate cost of $6.12 million per annum, with $0.25 million incurred within Noosa Shire,
$0.63 million elsewhere in Queensland and $5.24 million incurred interstate or overseas.
IMPACT SUMMARY:
Additional property management costs are incurred totalling $6.12 million per annum, with $0.25 million
incurred within Noosa Shire, $0.63 million incurred elsewhere in Queensland and $5.24 million incurred
interstate or overseas.
3.3 SUPPLY OF, AND DEMAND FOR, SHORT STAY ACCOMMODATION
During the consultation process, some industry respondents indicated that short-term letting activity will be
impacted as a result of the proposed local law given that the cost of providing short stay accommodation will
increase and if costs are passed through to users the relative cost of Noosa accommodation will also increase.
A theoretical average Noosa short stay letting premises was established to determine the financial implications for
property owners from the additional costs incurred as a result of the proposed local law.
A gross rental revenue estimate of $81,650 per annum (with average occupancy of 62%) was produced on the
basis of the following assumptions which were derived from research into available online rates for a 2-3 bedroom
apartment:
• $300 gross rate per night in low season (May to September), with occupancy of 50%.
• $330 gross rate per night in mid-season (October to early December and February to March), with occupancy
of 60%.
• $400 gross rate per night in holiday season (mid-December to January and March to April), with occupancy of
80%.
• $700 gross rate per night in peak season (Christmas / New Years’), with occupancy of 90%.
3 Council received cost estimates for security callouts ranging from $70 on weekdays to $75-$80 on weekends.
4 It is assumed that the code of conduct for guest behaviour, the enforcement of this behaviour through the formal complaints mechanism and the
fee charged to those requiring complaints to be attended to will lead to a reduction in total annual disturbances.
5 The code of conduct for guest behaviour should form part of the terms and conditions of rental and accountability for inappropriate behaviour
could be enforced through levying a charge on users for complaint responses from the bond paid by users of the premises.
8
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COST BENEFIT ASSESSMENT – PROPOSED LOCAL LAW AMENDMENT: SHORT STAY
LETTING & HOME HOSTED ACCOMMODATION
Costs exclusive of financing are estimated at 20% for property management 6 inclusive of listing fees and 17.5%
for other property costs (e.g. cleaning, rates, utilities, maintenance), leaving a net rental revenue estimate of
$51,030 per annum.
The estimated annual cost of the proposed local law on property management costs, as outlined in the preceding
section, is $2,450 per premises without a current 24/7 management arrangement and $950 per premises with a
current 24/7 management arrangement. The average cost of Council-incurred administration costs is an additional
$90 per premises.
Assuming a $250 fee is applied to users for any complaints made to recoup the fixed and variable costs incurred
by affected property owners, and a recovery rate of 80% of these fees from users, these costs are reduced to
$1,340 per premises without a current 24/7 management arrangement and no net cost per premises with a current
24/7 management arrangement. The net cost for those without a current 24/7 management arrangement equates
to 1.6% of estimated gross rental income and 2.6% of estimated net rental income.
Property owners may choose to either pass on these net costs to visitors through increased rental rates or absorb
them within their cost base. In order to recoup the additional costs incurred, nightly rates would need to increase
by an average of $5.71 per night for premises without a current 24/7 management arrangement. Given Noosa’s
attractiveness as a premium tourist destination, it is not anticipated that its competitiveness for short stay
accommodation will be impacted by such a small price increase. Similarly, the additional costs incurred would not
deter property owners from putting properties up for short stay letting, particularly given that short stay letting has
the potential to provide twice the net rental income as permanent rental arrangements (Fairbairn, M., 2017).
IMPACT SUMMARY:
It is not anticipated that the supply of, nor the demand for, short stay accommodation in Noosa Shire will be
impacted by the proposed local law on the basis of assessed financial impacts on property owners.
6 This assumes that all short stay letting premises are managed under a property management agreement which is not the case – however, a
conservative approach is adopted for the purposes of this assessment.
9
Section 15
COST BENEFIT ASSESSMENT – PROPOSED LOCAL LAW AMENDMENT: SHORT STAY
LETTING & HOME HOSTED ACCOMMODATION
4. ESTIMATED BENEFITS
4.1 ADVERSE EFFECTS THAT MAY BE ADDRESSED BY THE LOCAL LAW
The exact frequency and extent of disturbances on residential neighbourhoods within Noosa Shire from short stay
accommodation is unavailable, given there is no current mechanism by which issues and complaints are centrally
received and recorded.
Some residents have directly contacted Council to make complaints – with a total of 127 queries and complaints
regarding short stay accommodation received by Council in the past 12 months – however, Council currently has
very limited powers in dealing with such complaints. Other residents will have contacted the Queensland Police
Service in instances where noise and disturbance levels were excessive and outside of the confines of allowable
behaviour and potentially considered illegal and/or dangerous. Many residents would have refrained from making
complaints on the basis that they are aware of Council’s inability to deal with most issues and on the basis that
using the Queensland Police Service is likely to be a last resort where issues were considered extremely disturbing
or very serious. As such, they would generally sit silently ‘in suffering’ and not contact anyone.
As a consequence of the above, available information on actual disturbances is incomplete, under reported and
therefore not representative of actual disturbances on residential amenity. During the local law consultation
process, Council received 300 resident submissions, 2 resident petitions and 6 resident/community group
submissions highlighting the anguish of residents in having to cope with the adverse amenity effects of short stay
accommodation within residential neighbourhoods.
As part of the consultation process pertaining to the proposed local law, residents and community groups indicated
that short-term letting activity impacts residential amenity and the overall liveability of neighbourhoods. Adverse
impacts from short-term letting activity identified during the consultation process included:
• Health and wellbeing.
• Mental health.
• Sleep deprivation.
• Lesser lifestyle and enjoyment of home.
• Loss of sense of community and neighbours.
• Impact on work and school life.
• Reduced safety and security.
• Lack of complaint resolution.
• Noise from activities such as parties, use of outdoor areas and use of pools.
• Unacceptable guest behavior, including swearing and aggression.
• Overcrowding and levels of occupancy.
• Lack of vehicle parking, including the storage of boats and trailers.
• Traffic congestion.
• Inappropriate disposal and storage of rubbish.
• Pets left unattended and causing noise disturbances.
• Turnover of guests and noise disturbances during arrival and departure.
• More regular use of services and trades (e.g., cleaning services) creating additional activity.
The above issues are not unique to Noosa Shire, with numerous studies having identified similar outcomes in other
jurisdictions and the issue of high levels of tourism activity filtering through to residential areas is a known issue of
concern for communities worldwide. A few recent examples include:
• One of the findings of the Western Australian Government’s inquiry into short-stay accommodation was that
“Short-term rentals can cause a range of amenity impacts in residential areas, such as parking, the creation
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and collection of rubbish, the noise and anti-social behaviour of guests, and the behaviour of their pets.”
(Parliament of Western Australia, 2019, p.59)
• Economic Policy Institute (2019) outlines that the economic costs of short-term rental services likely outweigh
the benefits and indicates that absentee owners have less incentive to make sure their renters are respectful
of neighbours or to prevent an excessive number of people occupying their property, with impacts likely worse
for short-term rentals. It noted that as a consequence of these impacts, there has been increasing prevalence
of zoning laws banning short-term travel accommodation in residential neighbourhoods.
• Nieuwland, S. & Melik (2020) indicates that local residents worldwide have started to complain about negative
impacts of short-term letting, with nuisances ranging from noise caused by visitors (e.g. loud parties and
drunken behaviour) to issues with traffic, parking and waste management, and safety concerns when strangers
enter their neighbourhoods and buildings.
IMPACT SUMMARY:
There is a significant impact on traditional residential neighbourhoods from the increased level and type of
activity associated with short stay accommodation, much of which is focussed on noise disturbances, amenity,
safety and security. Placing effective local controls on activity and behaviour will reduce the extent and type of
adverse effects placed on permanent residents in locations where short stay letting and home hosted
accommodation are provided.
4.2 POTENTIAL BENEFICIARIES
Council identified the number of potentially affected residential properties from noise and other disturbances
located within 50 metres of short stay let premises as 10,610 unique properties, noting that some of these properties
are impacted by multiple short stay let properties and may have higher levels of disturbance than properties
impacted by a single short stay let premises.
The 2016 Census, as reported by the Australian Bureau of Statistics, highlights that there were 2.5 persons per
household on average across Noosa Shire. As such, the total potentially impacted population of permanent
residents in Noosa Shire from the adverse effects of short stay accommodation totals 26,525 persons.
IMPACT SUMMARY:
The potential beneficiaries within Noosa Shire from the proposed local law include 10,610 residential properties
consisting of an estimated 26,525 persons.
4.3 RESIDENT HEALTH AND RESIDENTIAL AMENITY
4.3.1 Definition
For the purposes of this assessment, residential amenity refers to the ability for residents to enjoy their homes in a
peaceful manner with feelings of community and safety. Residential homes should allow their occupants the ability
to wind down, relax and sleep with minimal disturbances. Such residential amenity maximises resident health and
wellbeing.
4.3.2 The Issue
Guests of short stay letting properties may be less concerned with maintaining good neighbourly relations, resulting
in negative impacts on residential amenity such as increased noise levels, traffic and waste.
Excess noise is unpleasant as it disturbs and interferes with day-to-day activities and routines and as such can
significantly impact the quality of life and health and wellbeing of affected individuals. Section 4.1 highlights the
significant adverse effects likely to result from the type of activity occurring at short stay accommodation premises
within residential neighbourhoods.
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The requirement for short stay letting premises to adopt a code of conduct for guest behaviour and to appoint a
local contact person to respond to complaints within 30 minutes of notification will result in lesser incidence of
adverse effects due to a combination of Council specifications for use, enhanced understanding of acceptable
guest behaviour and better local resolution of unacceptable guest behaviour. It is anticipated that such controls will
lead to avoided noise disturbances and an improvement in the general health and wellbeing of residents. While not
all of the issues raised by residents in the consultation process will be addressed by the local law (e.g. turnover of
guests, service/trade activity) given that short-term accommodation will still be allowed to take place (if lawful), the
local law does also aim to mitigate these adverse effects through appropriate local controls.
WHO (2011) identified a range of adverse health effects associated with environmental noise, which can be applied
to a residential disturbance impact setting in the following manner:
• Cardiovascular disease – there is concern about the impact of environmental noise on public health,
particularly regarding cardiovascular outcomes and the risk of hypertension.
• Sleep disturbances – noise disturbances significantly impact the capacity of individuals to effectively relax and
achieve the desired length and pattern of sleep.
• Cognitive impairment – as a consequence of impacted sleep, affected individuals may have concentration and
productivity issues in undertaking work and other activities.
• Annoyance – noise and other disturbances can create stress through continued annoyance, which over time
may result in suffering and mental anguish for affected individuals.
• Anxiety – the combined effect of the ongoing turnover of ‘neighbours’, different noise disturbance experiences
and the lack of capacity to ensure appropriate behaviour from visitors creates uncertainty for affected
individuals over the type of visitor that will next arrive, causing ongoing anxiety.
Residential amenity will also be enhanced by ensuring appropriate conduct for vehicle parking, use of premises,
waste management, traffic and safety, etc. Such aspects of amenity are deemed to be impacted by short stay
accommodation in the current environment due to the fact that commercial lodging activity is being undertaken in
traditional residential areas. By establishing conditions on the approval to operate short stay letting and home
hosted accommodation activities (e.g. appropriate waste management, onsite parking capacity), the adverse
residential amenity effects associated with such activities should be reduced.
4.3.3 Assumptions
Jensen, H., et al. (2019) included an assessment of the impact of noise on residents in high density dwellings which
is somewhat related to a residential disturbance from short stay accommodation setting given it considers noise
within a residential context and noise that impacts quality of life and potentially impacts sleep and general lifestyle
patterns. This study identified 35.6% of residents in high density dwellings as being bothered by noise from
neighbours, with:
• 24.5% of very bothered residents suffering from sleeping problems or insomnia, 16.4% suffering from
melancholy, depression or unhappiness and 16.4% suffering from anxiety, nervousness, restlessness or
apprehension.
• 15.5% of slightly bothered residents suffering from sleeping problems or insomnia, 9.7% suffering from
melancholy, depression or unhappiness and 10.1% suffering from anxiety, nervousness, restlessness or
apprehension.
In a study of the burden of disease on people from environmental noise, WHO (2011) indicated disability weights 7
of 0.07 for insomnia and 0.02 for general annoyance. In a study of the burden of mental disorders on people, Vos,
T. (2000) indicated disability weights of 0.23 for anxiety and 0.14 for mild depression.
7 A component to measuring the Disability Adjusted Life Year – a measure of the burden of health problems/risks measured between 0 and 1.
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Given the lack of complete information on the frequency of noise disturbances locally, the following noise
disturbance scenario is considered appropriate:
• In line with Jensen, H., et al. (2019), it is assumed that 35.6% of potentially affected residents are bothered by
disturbances from short stay accommodation premises in the absence of the proposed local law and
experience impacts as a result.
• A once per week noise-disturbance improvement (i.e., 52 per annum) results from the proposed local law
affected residents.
The following assumptions underpin the estimation of potential adverse effects on other aspects of amenity from
short stay accommodation properties:
• There is an identified benefit to residents of improved street quality at approximately $0.05 per minute spent
on, or looking at, the street or neighbourhood (CABE, 20078).
• 5% of short stay accommodation premises do not meet general requirements for parking and waste disposal
and are negatively impacting local street amenity 1 day per week (i.e., 52 days of the year).
• 20% of residents in surrounding properties are negatively impacted by a deterioration in the quality of the
streetscape and residential amenity within the neighbourhood.
• The average duration of the residential amenity impact from affected residents having to view the impacted
streetscape and neighbourhood is 3 hours per day.
No valuation has been assigned to an improved feeling of safety within the home. This should be considered a
qualitative benefit in addition to the quantified benefits derived in the following section.
4.3.4 Quantification of Benefits
With the proposed local law in place and the avoided disturbances, there are fewer instances of insomnia,
depression, anxiety and general annoyance for those bothered by disturbances from short stay accommodation.
These avoided disturbances will result in significant health benefits relative to the status quo, which are calculated
as:
• $1.75 million per annum for insomnia.
• $2.23 million per annum for depression.
• $3.69 million per annum for anxiety.
• $1.76 million per annum for general annoyance.
The combined health benefits from the avoided amenity disturbances is estimated at $9.43 million per annum.
Other amenity improvements experienced by residents from enhanced beauty within residential neighbourhoods
is estimated at an additional $0.14 million per annum.
IMPACT SUMMARY:
The resident health and residential amenity benefits of avoided noise and other disturbances are considered to
be significant for affected residents, with an estimated $9.56 million per annum benefit quantified as being
potentially achievable via the proposed local law. All of the benefits associated with the proposed law are
assumed to be retained within Noosa Shire given the beneficiaries are permanent local residents.
8 The impact was identified at £0.017 per minute in 2007 and has been converted to AUD based on the average AUD/GBP exchange rate in 2007
of 0.42 and indexed to 2021 Australian dollars using Australian CPI.
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4.4 RELOCATION COSTS FOR PROPERTY OWNERS DECIDING TO MOVE
In some instances, short stay accommodation activities may ultimately lead to permanent residents deciding to
move elsewhere at a significant cost when including transaction fees, taxes and moving costs (including lost
productivity). This has not been valued on the basis that it may result in double counting when considering the
benefits already covered in Section 4.3.
IMPACT SUMMARY:
No additional benefits are included from avoided resident relocation costs as these benefits are likely to be
included within the benefits covered in Section 4.3.
4.5 LOCAL EMPLOYMENT BENEFITS
The requirement under the local law to have a local contact person to respond to and resolve complaints will
increase the demand for such services within Noosa Shire. Such increased demand will flow through to increased
local employment either through the increased use of local property managers or the direct use of contact persons.
This benefit has not been quantified on the basis that it is a consequence of regulation. However, it should be
considered from a qualitative assessment perspective.
IMPACT SUMMARY:
Additional local employment will result from the proposed local law due to the need to have a local presence
to respond to all complaints associated with short stay accommodation within Noosa Shire.
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5. COST-BENEFIT ANALYSIS FINDINGS
5.1 QUANTITATIVE ASSESSMENT
A quantitative assessment has been undertaken, with costs and benefits discounted to present value terms to
estimate the net present value and benefit cost ratio of the proposed local law over a 30-year period. Sensitivity
analysis has been conducted at real discount rates at 0%, 4%, 7% and 10%.
When considering all impacts irrespective of location, the value of identified benefits exceeds the value of identified
costs.
Table 5.1. Quantitative Assessment – All Impacts Irrespective of Location
All Impacts Discount Rate
Impact 0% 4% 7% 10%
Costs
Council Administration $ 13.0 $ 7.9 $ 5.9 $ 4.6
Property Management $ 183.6 $ 110.1 $ 81.3 $ 63.5
Total Costs $ 196.6 $ 117.9 $ 87.1 $ 68.1
Benefits
Health and Amenity $ 286.9 $ 172.0 $ 127.0 $ 99.2
Total Benefits $ 286.9 $ 172.0 $ 127.0 $ 99.2
Net Present Value $ 90.2 $ 54.1 $ 39.8 $ 31.1
Benefit Cost Ratio 1.46 1.46 1.46 1.46
Source: AEC.
When considering impacts only within Queensland, the value of identified benefits exceeds the value of identified
costs by an even greater extent.
Table 5.2. Quantitative Assessment – All Impacts in Queensland
Queensland Impacts Discount Rate
Impact 0% 4% 7% 10%
Costs
Council Administration $ 6.4 $ 3.8 $ 2.9 $ 2.3
Property Management $ 26.5 $ 15.9 $ 11.7 $ 9.1
Total Costs $ 32.8 $ 19.7 $ 14.6 $ 11.4
Benefits
Health and Amenity $ 286.9 $ 172.0 $ 127.0 $ 99.2
Total Benefits $ 286.9 $ 172.0 $ 127.0 $ 99.2
Net Present Value $ 254.0 $ 152.3 $ 112.4 $ 87.7
Benefit Cost Ratio 8.73 8.72 8.71 8.68
Source: AEC.
When considering impacts only within Noosa Shire, the value of identified benefits exceeds the value of identified
costs by an enormous margin.
Table 5.3. Quantitative Assessment – All Impacts in Noosa Shire
Noosa Impacts Discount Rate
Impact 0% 4% 7% 10%
Costs
Council Administration $ 1.8 $ 1.1 $ 0.8 $ 0.7
Property Management $ 7.6 $ 4.5 $ 3.3 $ 2.6
Total Costs $ 9.4 $ 5.6 $ 4.2 $ 3.3
Benefits
Health and Amenity $ 286.9 $ 172.0 $ 127.0 $ 99.2
Total Benefits $ 286.9 $ 172.0 $ 127.0 $ 99.2
Net Present Value $ 277.5 $ 166.3 $ 122.8 $ 95.9
Benefit Cost Ratio 30.57 30.54 30.47 30.38
Source: AEC.
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5.2 FINDINGS
Based on the assumptions underpinning the cost benefit analysis, the quantitative assessment highlights that the
benefits associated with the proposed local law significantly outweigh the costs associated with the proposed local
law.
Short stay accommodation operators – 86% of which are located outside of Noosa Shire and 51% of which are
located outside of Queensland – are currently receiving commercial benefits at a significant cost to local resident
health and residential amenity.
In addition to the quantitative outcomes, it is also envisaged that the proposed local law would result in the following
qualitative benefits:
• An enhanced feeling of safety and security for residents in their homes.
• The creation of additional local employment through the requirement to have a local contact person on call for
all short stay accommodation premises.
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REFERENCES
Australian Bureau of Statistics (2017). 2016 Census, 2016 Census Quickstats for Noosa Local Government Area.
Accessed via:
https://quickstats.censusdata.abs.gov.au/census_services/getproduct/census/2016/quickstat/SED30065
CABE (2007). Paved with Gold: The Real Value of Good Street Design. CABE, London
Economic Policy Institute (2019). The economic costs and benefits of Airbnb. Washington DC. Accessed via
https://www.epi.org/publication/the-economic-costs-and-benefits-of-airbnb-no-reason-for-local-
policymakers-to-let-airbnb-bypass-tax-or-regulatory-obligations/
Jensen, H., Ramussen, B., and Ekholm, O. (2019). Neighbour Noise Annoyance is associated with various
mental and physical health symptoms: results from a nationwide study among individuals living in multi-
storey housing. BMC Public Health, 19:1508.
Nieuwland, S. & Melik (2020). Regulating Airbnb: how cities deal with perceived negative externalities of short-
term rentals, Current Issues in Tourism, Vol 23 No. 7. Accessed via
https://doi.org/10.1080/13683500.2018.1504899
Noosa Council (2021a). Public Interest Test Plan – Administration (Amendment) Local Law (No.1) 2021 and
Administration (Amendment) Subordinate Local Law (No.1) 2021.
Noosa Council (2021b). Administration (Amendment) Local Law (No. 1) 2021.
Noosa Council (2021c). Administration (Amendment) Subordinate Local Law (No. 1) 2021.
Noosa Council (2021d). Agenda: Planning & Environment Committee Meeting, Tuesday 9th March 2021.
Parliament of Western Australia (2019). Report 7: Levelling the Playing Field – Managing the Impact of the Rapid
Increase of Short-Term Rentals in Western Australia, Economics and Industry Standing Committee, Perth,
September 2019.
Fairbairn, M. (2017). Permanent Rental or Airbnb?, Team bnb, 5th June 201. Accessed via
https://www.teambnb.com.au/airbnb-mangagement-noosa-permanent-rental-or-airbnb/
Vos, T., and Mathers, C.D., (2000). The burden of mental disorders: a comparison of methods between the
Australian burden of disease studies and the Global Burden of Disease study. Bulletin of the World Health
Organization, 2000, 78 (4)
WHO (2011). Burden of disease from environmental noise – Quantification of healthy life years lost in Europe. The
World Health Organisation European Centre for Environment and Health, Germany. Accessed via
https://www.euro.who.int/__data/assets/pdf_file/0008/136466/e94888.pdf
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