A good start on vacation rentals

In the late 1980s, the City Council adopted a measure that banned the opening of new bed-and-breakfast establishments or transient vacation units in all zoning districts except in hotel-resort zones. As a result, Oahu’s current legal inventory includes nearly 820 TVUs and B&Bs. The illegal inventory: an estimated 8,000 to 10,000 operations.

In years past, the Council’s efforts to address the growing problem have dithered into deadlock between those who support vacation rentals as a means of providing homeowners a way to earn extra cash, and opponents who rightly argue that the increasingly popular alternative to traditional hotel stays is straining a sense of established structure in neighborhoods.

Last week, Mayor Kirk Caldwell presented the city’s latest plan to bring balance to the matter. It includes an omnibus bill that would open the door to unlimited owner- occupied B&Bs in single-family residential zones as well as apartment, resort and mixed-use zones. Operators would be required to provide one off-street parking stall per rented bedroom, and enforce quiet hours.

TVUs — defined as dwellings rented to guests for less than 30 days when owners are not present — would be banned from residential zones except through a permit system in apartment, business, resort and mixed-use zones. There they would be capped at 1 percent of the number of dwelling units within each of the city’s eight development plans or sustainable community plan areas. The envisioned upshot is an islandwide limit of about 4,000 of these absentee-owner units.

A tight grip is needed on TVUs, as they’re the culprits in most of the noise- and traffic-related headaches as well as other lodging-related troubles in otherwise quiet neighborhoods. That part of Caldwell’s proposal is clearly a step in the right direction. Less clear is whether uncapping the islandwide count of B&B permits will serve Oahu well. Council members need to take a close look at how such a change would affect the districts they represent.

Nearly three decades of weak regulation and poor enforcement, along with the emergence of online advertising through brokers like Airbnb, and various other reasons — spurred by a record-breaking streak in visitor arrivals now stretching into a seventh year — fuel the inventory of illegal rentals, which are often much less expensive than a hotel stay.

By failing to either crack down on the underground operations or expand the legal inventory, the city has missed out on megabucks in fines or tax revenues, respectively.

If the city could shut down the outlaws, the inventory of vacation rentals would decrease significantly, possible slowing the flow of visitor arrivals and decreasing spending in our tourism-dependent state. Expanding the legal inventory has more appeal as it could reap piles of cash for city coffers, in general excise and transient accommodations taxes, which could flow to improving city services burdened by tourism.

Under Caldwell’s plan, drafted by the Department of Planning and Permitting, operators would see property taxes set at a steeper rate than the $3.50 per $1,000 of value they now pay as single-family-class property owners. B&B operators would pay $6.45 per $1,000 of value. And TVU operators would be taxed at the hotel/resort-class rate at $12.90 per $1,000.

Illegal operators would be slapped with hefty fines, starting with $25,000 a day for a first offense. Subsequent violations could lead to liens, and allow the city to claim an illegal operation’s profits. Caldwell has said “draconian type of fines” are in order to send a clear message about complying with the law. He’s right about that — assuming the law will be enforced more vigorously than now.

In seeking a viable balance between the money-making demand for vacation rentals and well-founded concerns that a clustering of too many of these short-term rentals can quickly erode neighborhood charm, the city should set a high bar for both taxes and fines.

Whether this plan pans out in practice, however, will hinge on swift and consistent enforcement of stepped-up regulation.