Auckland Council's bed tax has been labelled a "cruel" punishment on "people struggling to make ends meet".
The tax - a targeted rate on accommodation providers - was voted in 11-8 by the council last year, with the funds raised going to council-controlled organisation Auckland Tourism, Events and Economic Development, for tourism promotion and events sponsorship.
But around 1100 Auckland homeowners who rent out properties on sites like Airbnb have been stung too. NZME reports one Waiheke Island homeowner's rates have gone from $4191 a year to $13,628.
Jordan Williams of the Taxpayers' Union says he's heard of rates bills going as high as $25,000.
"It's quite a cruel policy because most people who are into Airbnb or rent out their spare bedroom on long weekends are those people struggling to make ends meet," he told The AM Show on Monday.
"Here the council is in some cases raising rates of $3000 a year up to, I've seen examples of $25,000. That's pretty cruel."
According to Auckland Council, owners who rent out a room are exempt from the new rates - they only apply to people renting out "an entire dwelling" or "a self-contained unit".
Mr Williams told Newshub in a follow-up phone call there was debate over what constituted a "self-contained unit". He provided a spreadsheet which appeared to show how Airbnb providers could be paying much more in rates as a percentage of revenue than traditional commercial accommodation providers.
The council has so far identified 828 properties which are rented out for more than half the year, NZME reported in August, and would be rated as businesses. Based on the average rate of $213 a night, it's estimated some owners could be making $80,000 a year.
Homes rented out fewer than 28 times a year would continue to be rated as residential. Between 29 and 135, it's 25 percent business and 75 percent residential, and from 136 to 179, it's 50-50.
Mr Williams says if Airbnb providers are charged more in rates, they might pull out and "effectively close down a lot of the Airbnb market".
"They're doing exactly what you want them to do - provide some holiday accommodation... yet the Auckland Council wants to whack them."
The number of people renting out rooms or properties on Airbnb is estimated to be between 8000 and 12,000 - yet the number of properties hit with the targeted rate so far is about 1100.
Despite this, hotels still think the tax is unfair because it doesn't hit Airbnb providers enough.
"Exempting the room-only providers excludes a significant proportion of the market, as it can be reasonably assumed that some of these room-only providers are generating significant annual income," Tourism Industry Association chief executive Chris Roberts said in July.
- Tenant forced to hand over profits after subletting rental on Airbnb
- Beware before you Airbnb your place over summer
Mr Williams says if Mr Goff stuck to his promise of cutting costs by 2-4 percent, the council wouldn't need to implement new charges.
Mr Goff says by targeting people making money from their homes, bigger hikes for all ratepayers can be avoided.
"Our city has a limited ability to borrow," he told Newshub in June. "We are at the limits of our debt to revenue ratio. Borrowing by itself cannot be the answer to our problems."
He said homes rented out for more than half the year are "obviously are business" and would be treated as such.