2021-10-12 P&E Agenda - Item 2 - Attachment 6 - Cost Benefit Analysis

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.




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