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Luxury rentals rile residents

Vacation homes, many in legal limbo, are crowding the North Shore

By Timothy Hurley

LAST UPDATED: 3:06 a.m. HST, Dec 15, 2013

Louise Sausen frowns when she's asked about her Wainiha neighborhood. That's because she remembers when it was a laid-back beach community, a family-friendly place where folks knew their neighbors and relied on them for help if needed.

"Now it's like a resort," she said in front of her Alealea Road home as a late-model sedan roared up the street. "The guests fly up and down here all the time. You have to deal with the dust and the noise. You gotta put up with the leaf blowers. Every day you hear this all day long."

Sausen's neighborhood is ground zero in the rising tide of transient vacation rental homes that have engulfed communities on the North Shore of Kauai over the past decade and a half.

The character of remote shoreline neighborhoods in places like Haena, Wainiha and Hanalei has morphed from small, local-style beach enclaves into visitor destinations jammed with million-dollar-plus commercial properties, some apparently operating under dubious vacation rental permits and others operating outside the law.

It's been estimated that as many as 80 percent of the homes in some neighborhoods have been taken over by vacation rental businesses.

Journalist Joan Conrow lived in a "funky" house in Wainiha when she first moved to Kauai nearly 27 years ago. She said she can't believe what's happened to her old neighborhood, and she fumes when she thinks about how Kauai government officials failed in their mandate to bring the problem under control.

Conrow contends the county fell under the spell of "corruption, cronyism and incompetence."

"Working together they've created a monster," she said.


» 55 percent of Kauai's transient vacation rentals outside visitor destination areas are on the North Shore.

» 65 percent of the North Shore vacation rentals are in the island's coastal zone Special Management Area yet have no SMA permit.

Transient vacation rentals, or TVRs as they are sometimes called, began to proliferate on Kauai about 15 years ago when the economy started to heat up and the North Shore and its pristine terrain became a big tourist draw.

With relatively few hotels in the area, property owners tried to meet demand by, in many cases, transforming their aging homes into shiny new vacation rentals.

Vacation rentals are found all over Kauai, but the majority outside the visitor destination areas are on the North Shore. Many are advertised on the Internet, including a 3-acre estate that will "bathe you in every luxury" for $2,000 a night, a "stunning Balinese-inspired masterpiece" in Kilauea that rents for nearly $50,000 a week, and one with 300 feet of "semi-private beach frontage" that goes for $45,000 for six nights (or $57,600 during the holidays).

Joel Guy, president of the Hanalei-to-Ha'ena Community Association, grew up in a rented beach house on the North Shore in the '70s and has witnessed how the area has changed over the years.

Five years ago it really hit home. His son's mother was evicted from her house across the street from the beach in Haena, Guy said. At the time she was pregnant and caring for her three children, one of them Guy's son.

"The next thing you know, it's a vacation rental," he said.

Guy said TVRs are driving up the cost of housing for residents, and they make finding a place to live much harder.

It's one thing when a local family wants to create some income from their property, he said. It's another when off-island, big-moneyed interests show up looking to make a killing.

One fear, Guy said, is that resort corporations and investment groups will start snapping up oceanfront property.

"And then they'll be right there on the edge of the beach with a full-blown resort."

The TVR problem was formally acknowledged in the 2000 Kauai General Plan when it recommended that "permitting processes should consider the cumulative impacts that a large concentration of alternative visitor units can have on a residential neighborhood."

Five years later, a study as part of a county zone update concluded that single-family visitor rentals can have a significant impact by altering the character of a neighborhood. It also acknowledged existing illegal conversions of single-family homes into multifamily dwellings.

In an attempt to address the growing problem, the Kauai County Council in 2008 passed a law limiting future TVRs to Kauai's primary tourist accommodation areas in Princeville, Kapaa, Lihue and Poipu. The bill offered existing vacation rental owners the opportunity to win legal standing as long they could prove they were operating in compliance with the law.

Owners were required to present proof they were paying the appropriate accommodations taxes and had previously taken visitor reservations, among other requirements. The TVR nonconforming-use certificate is issued for the life of the property with yearly renewals.

The council tweaked the law in 2009 and then addressed the issue again in 2010, this time attempting to cap the number of vacation rentals in state agricultural zones.

Despite the legislation, officials admit the problem just seemed to get worse.

But Kauai Planning Director Michael Dahilig, who didn't start his job until the end of 2010, after guidelines regulating vacation rentals were already in place, cautioned against people suggesting that anything underhanded was at work.

When the law was first approved, he said, the department was overwhelmed with more than 600 applications. Three employees were responsible for processing the applications, each with an inspection, during a 10-week period.

"It was the perfect storm," he said. "Everything just went wrong."

Conrow, a former reporter with both the Honolulu Star-Bulletin and The Honolulu Advertiser who now writes a popular Kauai blog, said her interest in the TVR issue was further sparked after reading the news in February about a Canadian man who died after jumping off or falling from the deck of a vacation rental on the Wainiha River.

"It got me to dig into some county documents, and I found there were no permits for that rental," she said.

Conrow started looking at the files of other North Shore properties and discovered most had some sort of irregularity with how they obtained their nonconforming-use certificates.

Some were missing tax documents. Others had no reservation records as required by law. Still other certificate-holders had enlarged their building well beyond what their building permit allowed.

Some owners got certificates even though they had enclosed their ground floor in violation of federal flood law. And some had missed deadlines required by the certification law.

Conrow wrote about 25 of the worst violations in her Kauai Eclectic blog under the title: "Abuse Chronicles: TVRs Gone Wild."

"It was a real eye-opener to see the way some people are really dramatically exploiting the system we've got here. Some of these people have a ton of money and aren't afraid of paying a fine or two," County Prosecutor Justin Kollar said on a recent radio show about the vacation rental issue.

Dahilig said that when he came aboard as interim planning director in late 2010, he found that his predecessor had struggled with implementing the new law, apparently overwhelmed by logistical and file management issues. This made enforcement going forward difficult, too.

Amid sharp criticism contending the county is not doing enough to enforce the law, Dahilig said he nevertheless supports the reasons behind the regulation.

He understands, for example, how the jump in vacation rental homes can undercut the island's supply of affordable housing, which is already in shortage.

"Part of Hawaii is its people, and people need a place to live," he said.

Even so, Dahilig's department let stand many noncompliant certificates, including 20 of the 25 certificates identified by Conrow's blog, in part because of uncertain legal standing in light of the fact they were approved previously by the department.

Under pressure from the council, Dahilig began working to fix the TVR-related enforcement problems within his department. He diverted manpower to the program, consolidated the filing system and began creating new inspection protocols.

After going through the files, Dahilig found that 84 percent of Kauai's transient vacation rentals operating outside visitor destination areas had incomplete application files, and about a quarter of them had none of the required documents.

As of October, there were nearly 400 active TVR certificates on file plus 76 cases on appeal for having their certificates denied. The council previously allocated up to $50,000 to hire private attorneys to represent the county in contested case hearings for the denials.

Caren Diamond said she suspects the county might be dealing with only the tip of the iceberg. There could be hundreds more islandwide operating as vacation rentals without bothering to go through legal channels.

Diamond, a 34-year resident of Wainiha, joined forces with former Kauai Planning Commission Chairwoman Barbara Robeson in 1999 to create the group that would become Protect Our Neighborhood Ohana, which has been hammering the county on the vacation rental issue for years.

During a recent visit to her old beach neighborhood, Diamond pointed out scores of large, newly built two- and three-story vacation rentals stretching from one side of the beach to another.

"They made a resort out of the sweetest neighborhood on Kauai," she said. "My kids grew up on this street. They used to sit under that tree."

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