Appleseed Center urges tough vacation rental rules

A local nonprofit focused on poverty issues is urging that Hawaii follow several cities around the world in getting tough on regulating the use of homes as short-term vacation rentals.

The Hawaii Appleseed Center for Law and Economic Justice released a report filled with recommendations Monday as the Honolulu City Council prepares again to debate a bill addressing the issue after years of public frustration.

“It is time for Hawaii’s counties to tackle our VRU (vacation rental unit) challenges responsibly and thoughtfully,” said the report that focuses on limiting the number of such units and having strong rule enforcement.

The city stopped issuing certificates for vacation rentals in 1989, and the city Department of Planning and Permitting estimates there are between 6,000 and 8,000 illegal vacation rentals on Oahu compared with 816 legal ones outside of areas zoned for resort use. Other counties have similar issues with weak regulations that have allowed illegal VRUs to flourish.

Vacation rental industry supporters contend that such units, which are rented for less than 30 days, help many local residents survive Hawaii’s high cost of living while also supporting the biggest industry and employer in the state. Opponents argue that rooms or entire homes rented to visitors reduce the supply of housing for residents, increase housing costs and ruin the character of residential neighborhoods.

A few recommendations in the Appleseed report titled “Priced out of Paradise” align with provisions in the bill that was drafted by DPP and accepted by the City Council earlier this month after contentious public hearings at the Honolulu Planning Commission earlier this year.

For instance, the report and Bill 89 recommend limiting VRU operators to one unit, prohibiting VRUs in certain neighborhoods based on zoning and imposing fines over $20,000.

Other recommendations in the report include holding online platforms such as Airbnb liable for unit owner violations, and focusing enforcement actions on those who rent out multiple properties.

The report held out San Francisco as a good example of how to ensure VRU operators register with the city. In 2015, San Francisco required registration and after a year 1,647 VRUs had registered even though 7,046 listings were on Airbnb, according to the report. But after making online platforms liable for unregistered operations this year, the number of VRU listings dropped to 3,500 from 10,000, the report said.

In New York City, the report said cracking down on illegal VRU operators was made much easier this year when the city required online platforms to submit information from their listings including property addresses and operator contact information.

Regarding fines, the report recommends penalties over $20,000 and notes that VRU listings dropped 49 percent in Berlin after that city instituted $100,000 fines in 2016. Under Bill 89, initial fines can be up to $1,000 a day but for recurring violations can run up to $100,000 a day.

Limiting who can operate a VRU is also recommended in the report, which noted that Miami and San Francisco require that a VRU be the primary residence of its operator. Under Bill 89, a VRU owner would be limited to one unit and would have to have a property tax exemption as the owner of the home.

Appleseed contends that 73 percent of Hawaii vacation unit hosts operate more than one unit and that 52 percent of VRU owners are nonresidents.

The nonprofit said the 23,000 vacation rentals estimated by the Hawai‘i Tourism Authority to exist in the state reflect 35 percent growth in inventory since 2015 and represent one out of 24 homes in Hawaii. These vacation rentals include legal units at resorts along with illegal units advertised online.

“Without imposing enforcement measures that have been proven successful, cities simply cannot strike a successful balance between protecting residents and protecting the tourism industry,” Victor Geminiani, co-director of the nonprofit, said in a statement.