Wheels seem to be turning — some of them, headed in the right direction — toward resolution of the longstanding divide over the status of vacation rentals, the overwhelming majority of them currently operating illegally on Oahu.
The reason for a break in the impasse is fairly obvious: The state and counties are incentivized. Both could realize additional tax revenue if one of the competing measures in the state Legislature is enacted in the next few weeks.
But this should happen only if there is a provision to ensure the taxpaying rentals also meet city land use requirements for such operations. Each county maintains its own regulations over such operations.
On Oahu, the issuance of permits for vacation rentals within a residential zone has been on moratorium since 1989. Only those in continuous operation since 1986 were allowed to keep their permits. Ever since, though, the number of illegal operations has skyrocketed, enabled in particular by the establishment of online advertising platforms such as Airbnb and Vacation Rental By Owner.
The two surviving measures are Senate Bill 704 and House Bill 1471, both of which have reached the stage of conference committee review and will undergo negotiations in the next week or so.
HB 1471 appears to be the better vehicle, because it would require some due diligence to improve enforcement of county regulations intended to manage the impact of these rentals on local communities.
If something similar to the most current Senate draft of the bill is enacted, it should be swiftly paired with regulatory legislation at the city level, expected to be introduced later this month.
First, the state action: HB 1471 and SB 704 are measures that arose from a push by Airbnb and other rental online marketplaces to perform a tax-collection function for the state. Under either bill, the web companies could collect the state general excise and transient accommodations taxes while placing online ads for the operators of the rentals.
However, the Senate bill only requires that the operator “attest that the subject property is in compliance with applicable land use laws.” This does not deliver the kind of assurance the public needs.
HB 1471, Senate Draft 2, would require those placing ads to provide tax and transient accommodations numbers, and verification of compliance with state and county land-use laws. Any county that establishes a verification system to handle that would get a percentage of the tax revenue.
According to the latest Senate committee report, the city is developing such a system, but city spokesmen did not have any details this week.
The public can only hope there is such a tracking system, since enforcement of the existing ordinance banning vacation rentals has been very weak. City officials have said it’s difficult to verify that a rental is violating the law by taking in guests for less than a one-month lease period. So enforcement has relied largely on neighbors complaining, and subsequent investigations.
City Councilman Ernie Martin has said the popularity of this form of accommodations must be acknowledged. He has drafts of bills that aim to restart the issuance of permits. The amnesty would be for a limited number of rentals in each Oahu district, and for a limited period of time.
After that point, enforcement would be ramped up with higher fines that would make illicit rentals less lucrative, he said.
Provisions for sufficient parking and other specifications would need to be robust to maintain balance within a residential neighborhood.
The city must come to terms with the reality that regulations governing vacation rentals have to be enforceable and realistic. But at a minimum, that system must be in place before any new mother lode of taxes start rolling into state and county coffers.
