Trying to get a handle on the burgeoning problem — some say boon — of in-home vacation rentals will be a daunting task, but it’s one that must be tackled. The issue is complicated by a mix of legal and illegal operations, so quantifying its scope has been difficult — but now, thanks to new data, it’s time for officials on both state and county levels to act.
A new study commissioned by the Hawaii Tourism Authority is a revelation: Hotels account for 50 percent of all visitor lodging units, but home-based rentals account for an astounding 25 percent. What’s unknown, though, is how many of those rentals are permitted and legal uses.
It’s suspected that thousands of extra rooms in homes here are rented out to tourists under the radar. That means homeowners in residentially zoned areas are operating businesses without paying the proper taxes — some quietly and unobtrusively, but others loudly and disruptively to neighbors. In areas such as Kailua and the North Shore, for example, where bed-and-breakfasts (B&Bs) and transient vacation units (TVUs) proliferate, tension is palpable.
HTA’s new survey found as many as 22,238 in-home vacation rental units statewide: 4,411 on Oahu, 4,986 on Hawaii island, 8,840 on Maui, 3,614 on Kauai, 365 on Molokai and 22 on Lanai. That’s more than three times HTA’s estimate of 6,943 last year.
Unless the market is better regulated, it’s not known how many millions of dollars are lost from homeowners not paying the required taxes.
George Szigeti, president and CEO of the Hawaii Lodging and Tourism Association, got it right when he said: "We aren’t trying to put anyone out of business. If people want them, I say give them to them. However, they need to pay their fair share of fees and taxes. We want a level playing field."
No doubt the proliferation of in-house vacation rentals is bolstered by the ease and access provided by Internet sites such as AirBnB and VRBO (Vacation Rentals by Owner). For visitors looking for options outside traditional tourist areas and lodging, these popular websites can yield relatively affordable digs for the savvy shopper.
Laws governing vacation rentals vary from island to island — and it makes sense that each county government works to reform and enforce its own ordinances based on unique island needs. On Oahu, for example, many of these short-term vacation rentals are illegal. Since passing an ordinance in 1989, the city has not issued permits for new transient vacation units — but that’s only caused much of the home-based vacation rental industry to go underground. In residentially zoned areas known for B&Bs — or worse, transient vacation units run by absentee homeowners — conflicts arise over noise, parking and traffic, and other nuisances caused by a constant revolving door of visitor tenants.
On a statewide level, taxation to even the playing field must occur. Traditional hotels and other legal establishments that provide visitor lodging pay a 9.25 percent transient accommodations tax (TAT) on gross rental proceeds; for time-share vacation units, the TAT is 7.25 percent of fair market rental value. Clearly, it’s only fair that anyone doing business as a lodging entity also pay some form of accommodations tax.
Supporters of home-based vacation rentals say entrepreneurs are merely filling a demand for tourist lodging that traditional hotels alone wouldn’t be able to meet.
Fine — so pay the full freight of doing business, which means proper permitting and taxation.
HTA’s new study has outlined the scope of this booming cottage industry; now, county and state officials must catch up with fair but firm regulations for it.
