Planning panel endorses Caldwell’s new plan on vacation rentals

The Honolulu Planning Commission on Wednesday gave its thumbs-up to the latest version of Mayor Kirk Caldwell’s omnibus short-term vacation rental bill, adding its own suggestions for the City Council, which will make a final decision on the proposal.

It was the third time the commission was asked to consider a vacation rental bill in the past two months. An initial draft submitted by Caldwell’s Department of Planning and Permitting was rejected on Sept. 19. Caldwell’s in-person plea for the commission to reconsider that decision was also denied on Oct. 17 so that draft was forwarded to the Council without a favorable recommendation.

Caldwell appeared before the commission at its meeting in Kahaluu Wednesday to again press the board for a favorable recommendation, this time armed with a new version that attempted to take into account issues raised by commissioners and the public about the previous draft.

The cornerstone of the Caldwell proposal is that it allows for permits to be issued for new bed-and-breakfasts and transient vacation units — TVUs — while making it tougher for those who operate illegally or otherwise don’t comply with the rules.The city stopped issuing certificates for vacation rentals in 1989 and DPP estimates there are only 816 legal ones outside or resort zones, but between 6,000-8,000 illegal ones.

DPP estimates its new proposal would cap the number of permitted B&Bs and TVUs at about 4,000 by requiring that the combined number of vacation rentals totals no more than 1 percent of all dwelling units in each of the island’s eight Development Plan areas. The previous draft allowed for an unlimited number of B&Bs in single-family residential properties and a limited number of TVUs, but only in non-single family residential areas.

The Caldwell plan also proposes stiffer penalties for violators and that legal B&Bs and TVUs now be taxed at their own rates rather than residential rates, making it likely they would be assessed closer to the higher rates of resort properties

This time, the commission voted 7-0 to send forward to the Council a favorable recommendation, but tacked onto it a list of several of its own suggestions for Council members to consider. Among the suggestions that commissioners want the Council to consider is removing language from the draft bill that requires both the “hosted” bed and breakfast establishments and “non-hosted” transient vacation units seeking a vacation rental permit first show proof of a homeowner exemption.

Commissioners also asked the Council to consider: directing all vacation rental-related fees and fines to DPP’s enforcement division; requiring owners of vacation rentals in resort areas to pay property taxes at the same rate as hotels and resorts; taking a broader look at how property taxes are calculated for vacation rentals rather than creating new tax categories for B&Bs and TVUs.

While the commission is advisory to the Council on the matter, an administration-initiated proposal that’s supported by the commission needs only five votes of the Council to pass. Failure to win a favorable recommendation from the commission requires six votes from the nine-member Council.

Caldwell conceded to the commission that the Council vote tally factored into the administration’s decision to try a new bill. “It’s important (for the commission to give a favorable recommendation) because it’s going to be hard enough to get the Council to make a decision on this issue at all,” the mayor said.

Honolulu mayors and councils have struggled for decades to carve out a middle ground on an issue that elicits strong emotions and a vast divide of opinions.

Supporters of short-term vacation rentals — both B&Bs and TVUs — say they provide an alternative type of overnight accommodation for Oahu visitors while allowing property owners a chance to earn some money to help make ends meet. But opponents say they ruin the ambience and character of neighborhoods, overtax sewer lines, street parking and other infrastructure, take away valuable units that could be used as long-term rentals and jack up property assessments.

Commission Vice Chairman Cord Anderson presided over Wednesday’s meeting as acting chairman because former Chairwoman Kai‘ulani Sodaro submitted her resignation sometime during the past two weeks.