Get control of vacation rentals

Hawaii’s rental housing market has changed, and those who track it have a sobering message for those worried about the shortage of affordable long-term rentals. Landlords have a tempting alternative that they are choosing with increasing frequency — vacation rentals.

The City and County of Honolulu has been grappling with the issue for several years, and now is especially motivated to come to a resolution, given new efforts to enable transient accommodations tax (TAT) collection from those that are legally registered.

There is a particularly high hurdle to clear on Oahu, which last authorized vacation rentals in 1989 but has seen them proliferate anyway. What makes the problem more difficult is the clash between residents who anxiously watch tourism make inroads into their neighborhoods, and homeowners who’d like to be able to offer this unconventional form of lodging without hiding from the law.

A pair of similar measures are in the Capitol hopper, although House Bill 2605 appears to be the one picking up steam. It seeks to get taxes collected and to enforce county regulations of the rentals. Lawmakers and the vacation rental industry need to come to terms on both goals.

A new report from the nonprofit Hawai‘i Appleseed Center for Law and Economic Justice underscores the importance of the enforcement piece — and how soon compromise needs to be struck.

The report, “Hawai‘i Vacation Rentals: Impact on Housing & Hawai‘i’s Economy,” asserts how ineffectual regulations have been.

Among the more chilling observations from the report: The number of vacation rentals has increased by 35 percent over the past two years, with about 23,000 being advertised statewide.

Appleseed garnered this figure, and some others, from government and industry publications, including studies done for the Hawaii Tourism Authority (HTA), a 2016 report from the Department of Business, Economic Development and Tourism, and DBEDT’s Rental Housing Study from 2014.

Other statistics the Appleseed center culled from such studies:

>> As much as 93 percent of the vacation rental advertising is for entire homes, not for a B&B-style shared accommodation. This runs counter to the image presented by online advertising-and-booking platforms such as Airbnb, depicting the “hosts” on its site as residents merely needing the extra income to help them cover costs and stay in their own homes.

>> An estimated 52 percent of home sales on Maui have a nonresident buyer. This doesn’t mean the new owner is running a vacation rental, but points to the shrinking housing supply for local residents.

>> One out of every 24 housing units in the state is used as a vacation rental. Madison DeLuca, Appleseed policy analyst, said this estimate is based on an HTA report titled “Individually Advertised Units in Hawaii,” its data based on ads from Airbnb, Vacation Rental By Owner and other sites.

>> A 2015 survey study by the Honolulu Office of Community Services indicated that at 80 percent occupancy, the average Airbnb unit would bring in 3.5 times as much revenue as a long-term rental.

Of course, if the vacation-rental option is prevented, that doesn’t mean the homeowner necessarily would offer his or her home to a long-term tenant. But in high-priced Hawaii, where many people may be property-rich but cash-poor, some of them would opt in.

Appleseed advocates much more rigorous enforcement of the rules governing the state’s bed and breakfast (B&B) homes and transient vacation units (TVUs) that increasingly cater to Honolulu’s tourists. That includes increasing staffing at county enforcement offices and generally cracking down on advertisements of illegal rentals.

In its current form, HB 2605 would get at that issue by enabling rental brokers such as Airbnb to serve as tax-collection agents; rightly, it would require that the brokers verify compliance with county laws.

However, Appleseed also recommends the crackdown based on existing restrictions before counties decide whether or not to expand the number of allowable vacation rentals. That’s not a very practical approach on Oahu, where there are a lot of “hosts” who are, in fact, opening their homes as a means of paying bills. It would be wise policy to enable those who can meet set criteria to come in out of the shadows and operate legally.

The city Department of Planning and Permitting is working on the details of new regulations for Honolulu, which would be an essential element in any solution.

HB 2605 is not the only step needed to address Hawaii’s housing and homelessness crisis, but it’s a start. Clearly, taking any significant number of rentals out of long-term availability is heading in the wrong direction.

The latest report merely gathers up the facts to show that time is running out for a course correction.