August 31, 2021
When Hawaii tourism stalled in 2020, Honolulu residents could feel what the island was like before the advent of short-term vacation rentals – and the millions of tourists it attracted.
Mayor Rick Blangiardi wants to hold on to this feeling and suggests what he calls aggressive action against the industry.
“Our plan here and what we’re going to do is to close this deal,” the mayor said at a press conference last week. “We think this is absolutely critical for our communities, so we don’t feel overwhelmed. It’s about the city’s efforts to manage tourism while meeting housing needs.”
The Blangiardi administration is proposing new rules for short term rentals. They are due to be discussed at the Planning Commission meeting on Wednesday before being presented to Honolulu City Council.
Part of the plan is to further reduce the number of short-term rentals on Oahu.
Vacation rentals can be operated anywhere on Oahu for a booking period of 30 days or more – regardless of whether the guest actually stayed there all the time. The new rules would require guests to book for at least 180 days, a less desirable time frame for tourists and hosts.
The new proposal would also ban all new short-term rentals in residential areas, regardless of whether the owner lives on-site or not.
A law passed in 2019 allowed around 1,700 units to be allowed in residential areas if the owner lived on site. An approval process for bed and breakfast stays was due to begin in October 2020, but the Blangiardi government delayed this registration. A lottery system was considered but the administration decided not to pursue it any further.
The fines, currently up to $ 10,000 per day, would be increased to $ 25,000 per violation per day under Blangiardi’s plan.
The Blangiardi government proposal also addresses taxation.
Bed and breakfast properties where the owner lives on site would be taxed at the bed and breakfast rate. Whole home rentals, also known as temporary vacation units, would be taxed at a higher hotel and resort rate.
All new bed and breakfasts and temporary vacation units would be required to have a general excise and temporary lodging tax license and would be required to maintain at least $ 1 million commercial liability insurance at all times, the proposal says.
The city estimates the new tax revenue will bring in over $ 3 million a year, which will be directed to a new DPP short-term rental enforcement department.
The legislation has already received support from civic groups like Keep It Kailua, who have railed against the spread of illegal rentals for years.
Matthew Luchinskas, who has lived on the North Shore for about 50 years, said vacation rentals have changed his community over the years.
“It used to be a healthy mix of school teachers, Kahuku nurses, carpenters and all kinds of people,” he said. “So many people have had to move out and investors have had to come and make it a vacation rental. There’s a lot going on on the North Shore.”
He said the proposed changes could have a significant impact.
“This is beneficial in terms of improving the quality of life for the people of Oahu, the limited resources we have, and it is generating revenue through the taxes and funds they will have set up,” he said.
Max Sword, the Hawaii policy advisor to Expedia Group, which runs the VRBO rental site, said the mayor’s proposal was better than an earlier iteration under Blangiardi that would have restricted rentals even in vacation spots.
“We support them and are here to work with them to enforce the legal operations and identify the illegal ones,” he said.
It’s important for the city to strike a balance with restrictions, he said, because if the rules are too strict, operators could find underground alternatives to platforms like Expedia’s VRBO.
Inspector positions were not funded
Blangiardi’s proposal aims to tackle a problem that has transpired for years.
Community members said the rentals would bring disruptive tourists to their quiet streets and occupy parking spaces.
Housing advocates said short-term vacation home owners – some of whom didn’t even live in Hawaii – were depriving the community of much-needed long-term housing for a lucrative and illegal source of income.
And economists said the rents had a detrimental effect on the state as a whole, and enabled a tsunami of tourists to the state who cost more to carry than they are spending.
“That created an incredible amount of tension before Covid. Our beaches were overrun,” said Blangiardi on the online program “Spotlight”. “The locals felt totally subordinate.”
Meanwhile, operators of units advertised on Airbnb and VRBO argued that it was their right to do what they wanted with their property, that they needed the income to survive in Hawaii, that many of them paid taxes on their earnings and that they had built an ecosystem of subcontractors who relied on them. Some suggested that the 2019 legislation was a ploy to help the hotel industry.
Two years ago, Honolulu City Council attempted to address the issue by unanimously approving Bill 89. He threatened island owners who illegally use their homes as short-term renters with fines of up to $ 10,000 a day.
Then-Mayor Kirk Caldwell signed the law and almost immediately announced “digital sting” operations to catch violations and sent thousands of warning letters to suspected owners.
“We are entering a new era of enforcement and we are excited about it,” said Kathy Sokugawa, acting director of the Department of Planning and Approval, in July 2019.
To some extent, the law has been successful in combating illegal rentals, according to DPP deputy director Dawn Takeuchi Apuna.
Regulation 19-18 gave DPP the power to cite individuals only for advertising short term rentals without a current registration number or certificate of non-compliant use. It also made that advertisement itself enough evidence of illegality.
As a result, DPP has been better able to identify illegal rentals and has reported 744 violations since the law was passed, Apuna said. That’s compared to just 166 violations in the four years before the 2019 law.
“However, illegal owners and operators (short term rentals) have proven creative in circumventing restrictions on (short term rentals) and bypassing DPP enforcement,” she said in an email. “The proposed law will channel more resources and focus on these types of violators.”
Since the law came into force in 2019, there have been far more complaints than violations: 2,075 complaints and 607 violations, according to the DPP website.
According to DPP director Dean Uchida, seven posts created to enforce short-term rental laws were never funded by the Honolulu City Council.
The 17 inspectors currently in charge of enforcing rental law violations are also charged with reviewing land use and building violations, but the process of reviewing rents is more time consuming. DPP is in the process of hiring a third party vendor to help, Apuna said.
Still, proving a violation is a challenge, she said.
“Inspectors have difficulty contacting people on the property who manage, operate or own the property who may receive evidence of violations, as well as dealing with conflicting information on (short-term rental) advertisements,” Apuna said. “It is also difficult to produce evidence that the tenant is renting the property for less than 30 days.”
An agreement signed by Honolulu, Expedia and Airbnb in 2020 would be helpful, Apuna said. Starting in February, the platforms had to create two mandatory fields for new bed & breakfasts and temporary holiday homes on their platforms: the tax card key for the property and the tax number of the host’s temporary accommodation.
However, it is not certain whether these rentals are legal as the rest of the terms of the agreement never went into effect, Apuna said.
The proposed bill would require all new short-term rental offers to have a municipal registration number provided by DPP so that a unit that does not have a registration number would be considered illegal by default, she said.
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