City panel rejects vacation rentals bill

After more than eight hours of divided testimony spread across two days, the Honolulu Planning Commission voted unanimously Wednesday to reject Mayor Kirk Caldwell’s proposed short-term vacation rental bill.

Because the commission is only advisory, the bill still will go to the Council for a final decision. But under city law, six of the nine Council members must now give the thumbs up for the bill to become law instead of the typical five.

Short-term vacation rentals refer to bed-and-breakfast establishments and transient vacation units. B&B units are rented for less than 30 days by an owner living in the same dwelling. TVUs are units rented for less than 30 days where the owner does not live in the same dwelling at the same time. The city stopped issuing permits for both in 1989-90, except in hotel-­resort zones.

City officials have struggled for years to come up with a compromise to an intricate and multi- faceted issue that has split the community for more than three decades. Last year, the Council submitted four separate resolutions calling on the administration’s Department of Planning and Permitting to draft bills reflecting their ideas. DPP chose to draft its own omnibus bill that incorporated ideas from the resolutions.

On Wednesday, the commission voted “non recommendations” for not just Caldwell’s bill, but the four resolutions as well.

The decision came after often-emotional testimony from the public that also was divided.

Those who support having more bed-and-breakfasts and transient vacation units argued that the omnibus proposal is too restrictive for families just trying to eke out a few extra dollars. Backers of the units also said they provide visitors to Hawaii a different experience from a standard hotel stay.

But those opposed to more short-term rentals said the proposed bill goes too far by allowing an unlimited number of B&Bs in residential districts when there are already too many illegal vacation rentals being allowed to operate in their neighborhoods with little DPP enforcement. They also argued that they overburden a neighborhood’s infrastructure and reduce the city’s housing supply.

Commissioner Art Challacombe said he made the motion to reject the plan “based on the numerous concerns that we heard both from the public and the board members.”

Challacombe, a former DPP deputy director, said he didn’t like that vacation rentals approved under the existing law could become illegal under the department’s draft. Other commissioners said they were bothered that the bill would allow unlimited number of B&Bs but no TVUs in residential zones while pushing TVUs into business districts.

Kathy Sokugawa, the city’s acting planning director, said DPP receives few complaints about B&Bs in residential neighborhoods compared to TVUs, likely because they are based on different operational models.

Commissioner Steven Lim said, “While some things were good, some things weren’t good.” But the 20-page bill is so large in scope, “I don’t think we’re constituted in such a way (that we could) redraft it while we’re sitting here” in a way that would reflect all the viewpoints of the commissioners, he said.

The commission has no staff of its own and relies on DPP for administrative help.

Commission Chairwoman Kai‘ulani Sodaro applauded DPP for its “multiyear effort” to produce a compromise. “Unfortunately, I think I really worry about how we can caveat so much into the proposed language,” she said.

The proposal “would be creating a very different future … for a lot of neighborhoods,” Sodaro said. “I think maybe (the proposal) tried to achieve too much, it’s so broad.”

Sodaro said she was bothered by the continuing divisiveness over vacation rentals. “We received significant written testimony … ,” she said. “I find it very sad that there is so much emotional distraughtness in our community that pits locals against locals.”

Among the major components of the draft bill:

>> It allows for the permitting of an unlimited number of B&B establishments in residential districts, but only for owner-occupants with home exemptions. It bars TVUs in residential neighborhoods, allowing a limited number of them in apartment and business districts, also only for those with home exemptions. Permits would need to be renewed annually.

>> It creates new property tax classifications for both B&Bs and TVUs, which more than likely would require the owner-operators to pay at a higher rate than standard residential property owners.

>> It makes it illegal to advertise without displaying the number from one’s approved registration permit. It also establishes stiff penalties for those who violate vacation rental laws — a minimum of $10,000 for violating B&B provisions, a minimum of $25,000 for TVUs.

Sokugawa said that while the bill and two accompanying measures would not solve all the issues tied to vacation rentals, it would improve enforcement and reduce their impact on residential communities while allowing homeowners the chance to provide some vacation units.

As the number of illegal vacation rentals has grown exponentially in the nearly 30 years since the city stopped issuing permits for vacation rentals, successive mayors and City Councils have grappled with a new model to balance the different interests. According to DPP, there are only 816 legally recognized B&Bs and TVUs on Oahu, but there are between 8,000-10,000 illegal vacation rentals.