The state and county governments have struggled to come to terms with vacation rentals operating in residential neighborhoods, a practice that has flourished in the absence of enforceable regulation.
On Oahu in particular, enforcing the 26-year-old city-imposed moratorium on permitted bed-and-breakfast and transient vacation units (TVUs) has been frustrated by the difficulty of documenting violations. There should be a way to allow this activity within set boundaries, but repeated attempts at regulation have gone down in flames whenever the volatile land-use issue comes up at the City Council.
But none of this should preclude the state from claiming the taxes payable by businesses, while each county decides how much of this activity its zoning laws should accommodate.
And the proposal to allow the private sector to play a part in tax collections, a plan that has willing partners in the online booking brokers, such as VRBO.com and airbnb.com, merits support from state lawmakers.
The vehicle for this change, Senate Bill 2693, has passed its first joint-
committee review and is heading to the Senate Ways and Means Committee.
The counties have raised some concern that its wording expressly excuses brokers from liability for “helping facilitate violations of county ordinances,” as Kauai County Planning Director Michael Dahilig put it in his written testimony.
However, it’s unrealistic to expect a commercial website to police the separate zoning requirements of each county and to add language explicitly holding them liable, as Dahilig and other county officials have requested.
Deleting the exemption language seems to be a reasonable compromise lawmakers should consider for the final bill.
The hearing on SB 2693 drew a heavy response from those engaged in renting out their homes or parts of their homes to visitors. Much of their testimony contained uniform wording, suggesting this was a campaign orchestrated by the industry, the booking agents that also profit from the increase in business that would result.
If sites such as VRBO or Airbnb take charge of collecting the transient accommodations and general excise taxes from the guests booking the rooms, that’s a perk it can offer to homeowners registered with the site.
But the state clearly benefits as well. Gov. David Ige has made tax modernization — improving on revenue collections through information technology improvements — a priority of his administration. This would leverage that effort by outsourcing part of the responsibility to those who stand to gain from the business.
The more conventional visitor industry also supports this move because it furthers the “goal to establish a level playing field for all visitor accommodations,” said Mufi Hanne-mann, the former Honolulu mayor who now serves as CEO of the Hawaii Lodging &Tourism Association.
He’s correct that ensuring vacation rental operators pay their fair share of taxes spreads the burden more fairly.
However, enacting this bill should be paired with strict enforcement of Act 204, which took effect Jan. 1 but still awaits rules promulgation. This statute requires owners and managers of Hawaii vacation rentals to post tax identification numbers on any online advertisements or face steep fines.
The state Department of Taxation should fast-track implementation of the needed rules to enforce this requirement. That should make it easier for the counties to track the operators who lack the permits to run their businesses in non-resort-zoned districts.
At the municipal level, the City Council is due today for second reading of Bill 6. That measure, which should be moved along, would provide one-time relief to permitted vacation rental operators who missed a deadline to renew their permits.
It’s encouraging also to see that the city has hired two full-time and three part-time inspectors to step up enforcement against illegal operators. Once enforcement is better established, the Council should revive its discussion of rational ways to regulate rentals so that more could come out of the shadows.
The administration’s show of enforcement resolve should help persuade this sector of the visitor industry the city is serious about its rules. And SB 2693 should ensure that the state is serious about collecting its due.