Tighten scrutiny of vacation rentals

In the debate on how to put right sketchy operations of online vacation-rental brokers in the islands, Gov. David Ige is insisting that transparency is key to a viable solution. He’s right. So why Ige was even pursuing a privately hashed-out deal with Airbnb is a bit puzzling.

Such a deal is likely to hold weighty consequences for the tourism industry — the state’s economic engine — as well as for our local neighborhoods now struggling with a proliferation of illegal vacation rentals. Such a pact demands public disclosure.

It comes as a relief, then, that Ige has rejected a proposal to authorize Airbnb to collect vacation- rental taxes on behalf of the state. And that moves the debate back where it belongs, in a public setting, among state lawmakers.

Apparently smarting from rejection, an Airbnb official pointedly noted that the state just missed out on $30 million in tax revenue that it could have collected in 2017. Ouch. Of course Ige, state lawmakers and county officials want to collect taxes owed. And they would like to see Airbnb take on that task. But there’s a valid holdup: the state should not strike a deal that legitimizes illegal vacation rentals.

It’s no secret that since 1989, when Honolulu placed a moratorium on issuance of new permits for bed-and-breakfasts as well as “transient vacation units,” the inventory of illegal rentals has exploded — fueled, in part, by the easy online advertising.

The state’s 2018 tourism forecast calls for a record-breaking 9.5 million visitors, following a six-year surge in visitor arrivals. Overall seat capacity on Hawaii-bound flights during the first quarter of this year is expected to increase by nearly 11 percent. Yet we are not seeing a surge in new lodging that’s required to pay the state’s transient accommodation tax (hotel room tax). It’s no secret that many visitors are snapping up options offered by Airbnb and other online brokers.

Two years ago, Ige vetoed a bill to allow Airbnb to collect taxes on behalf of the state, in part, because it did not stop the spread of illegal units, and last year the state Department of Taxation began negotiating directly with Airbnb to try to resolve the matter.

The behind-closed-doors bid was described in November by Airbnb as a “voluntary collection agreement,” similar to what it has with various other jurisdictions. Through it, the state would have access to information that allows it to audit tax dollars Airbnb remits to confirm that owed taxes are paid accurately.

Among the snags: It would not allow the state to share with the counties any property-identifying data because state law bars the sharing of taxpayer information. Hawaii lawmakers now convened should take a hard look at whether this law can be tweaked to allow state and county agencies to work in tandem.

After the private negotiations failed, Matt Middlebrook, public policy manager for Airbnb in Hawaii, said: “Despite the governor’s decision, we are committed to being a good partner with Hawaii and will continue our discussions with key decision makers at the state and county level to enact common sense short-term rental regulations and tax policies.”

Well, common sense tells us that if brokers want to operate in Hawaii, they should disclose to government the street addresses of their clients — vacation-rental hosts. That should be a non-negotiable condition of doing business here. With addresses at the ready, city and county agencies could verify whether operations are legal and handle enforcement.

Earlier this week, Ige said he wants to work out a new proposal with lawmakers, while House Finance Chairwoman Sylvia Luke said legislators are already crafting their own proposals. That’s all for the good.

Illegal vacation rentals are touching off complaints in just about every lawmaker’s district, with gripes ranging from unwelcome changes in neighborhood character to loss of potential affordable housing for residents. Luke and her colleagues must work in earnest with the governor to forge a solution.