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The free ride could soon be over for Airbnb operators as the Dunedin City Council considers higher rates for the city’s booming residential short-term visitor accommodation market.

While the Otago Motel Association, which has been lobbying for change since 2014, is welcoming some form of first step, the Otago Property Investors Association says there could be unknown consequences, including a stifled property market and a reduction in accommodation for visitors while the city prospers from a growing visitor market.

Dunedin Mayor Aaron Hawkins said addressing the issue had "proven to be more complicated" than the council expected, which had slowed down change, "but I think it needs addressing".

At tomorrow’s council meeting, councillors will decide whether to create a new rating category for residential short-term visitor accommodation for the 2020-21 financial year; incorporate changes in a rates review for the 2021-31 long-term plan; or maintain the status quo.

"At the moment, we have a situation where some accommodation businesses are rated as a business, like bed and breakfasts, and others being let as [residential short-term visitor accommodation] are simply rated as a house," Mr Hawkins said.

"This creates an uneven playing field, but also puts pressure on the supply of rental properties where these places otherwise could be let as flats year round."

Otago Motel Association president Alex Greenan, who owns Dunedin Palms Motel in High St, said the influx of residential short-term accommodation was doing more harm than simply taking a bite out of motel association members’ revenue — it was affecting the rental market and creating social issues in the city.

"We’ve got a housing crisis and at the same time we’re selling ex-rental homes to Airbnb people, so that is one more rental that can’t be sold as a rental. It’s a huge social impact — rents are going through the roof," Mr Greenan said.

"I don’t think the council understands the numbers involved. If the city’s residential short-term visitor accommodation properties were registered, then they would understand the scale of the problem."

The report to be tabled states council staff had compiled a list of 261 qualifying residential short-term visitor accommodation properties and about 100 properties that required further investigation.

Earlier reports to councillors stated there were up to 790 Airbnb-type properties in the city, but the criteria the council is now using has narrowed the scope.

It recommends councillors allow staff to review "all general rate differentials" in time for the 2021-31 long-term plan.

This would keep the status quo for the 2020-21 rating year while the council takes on a full review of all general rate differentials as part of the development of the 2021-31 plan.

Otago Property Investors Association president Kathryn Seque said as increasing pressure was expected from changes to the Residential Tenancies Act 1986, "more and more landlords" were moving to the residential short-term visitor accommodation market "solely because they’ve got more control".

But the council had gathered limited information and had a limited understanding of the potential flow-on effects for the Dunedin economy if it "substantially" increased the rates for residential short-term visitor accommodation providers.

The association, having more than 1000 members in the Dunedin area, would "definitely suggest" keeping the status quo for the next 12 months "while an investigation can be done further into different groups it could affect".