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Editorial: Right moves on vacation rentals

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  • DENNIS ODA / 2014

    Unhosted transient vacation units (TVUs), which make up the bulk of Oahu’s rentals inventory, generate the most complaints about neighborhood noise, illegal parking and traffic.

In Honolulu, it’s painfully clear that the inventory of illegal vacation rentals is multiplying at a head-spinning pace, as weak city law and enforcement are outmatched by strong demand. A perusal of online advertising will turn up 8,000 to 10,000 short-term rentals available at any given time. The current count of legitimate, city-permitted rentals hovers at about 800.

Here and in many other cities that see a steady stream of visitors, home-sharing platforms are being blamed for contributing to affordable housing shortages and a disintegration of residential communities, as their online operations sidestep or attempt to avoid local laws pertaining to vacation rentals.

Unhosted transient vacation units (TVUs), which make up the bulk of Oahu’s rentals inventory, generate the most complaints about neighborhood noise, illegal parking and traffic. There also are valid gripes tied to escalating property values due to residences being purchased to serve as income-producing investments rather than home sweet home.

Statewide, more than half of vacation rental units are owned by non-residents, according to a recent report issued by the Hawaii Appleseed Center for Law and Economic Justice. The lure to invest in the underground business is easy to understand.

Given the growing ranks of visitors now opting for residential rather than traditional hotel lodging, thousands of homeowners can book short-term guests for much of the year and rake in two or three times more revenue than a long-term rental would yield.

It’s encouraging then that the City Council Planning Committee last week sent a bill to the full Council that aims to rein in the vacation rental industry’s presence here. The current version of Bill 89 would allow the city to issue up to 4,000 new permits for hosted bed-and-breakfasts; there would be no new TVUs. That move appears to be a sensible step forward.

To avoid a heavy clustering of B&Bs in residential areas, their presence would be limited to 1 percent of the number of dwelling units in each of Oahu’s eight designated development plan areas. The cap would not apply to resort zones or certain apartment districts where they are already allowed without permits.

Also among Bill 89’s provisions: Advertisements for both B&Bs and TVUs would be required to include city registration or nonconforming use certificate numbers; and illegal operators would be hit with stepped-up penalties starting at $25,000, with technology folded in as key to enforcement.

In addition, the measure would establish new property tax classifications rather than allowing units to remain in the residential class. The rates would likely be higher, closer to those paid by resort properties, which seems fair, given the hybrid makeup of the vacation-rental business.

In Hawaii and elsewhere, success in correcting sketchy operations of home-sharing platforms hinges on establishing more transparency in online advertising.

Online platforms have long asserted that they’re exempt from policing their websites for illegal vacation rental operators, citing free speech rights under the First Amendment and the Communications Decency Act (1996). It has shielded web providers from liability for third-party content on their sites. However, recent court challenges are making strides in disputing that protection.

The 9th Circuit Court of Appeals last week reaffirmed a Santa Monica, Calif., ordinance that holds hosting platforms liable for booking short-term rentals that aren’t permitted by the municipality. The panel concluded that Santa Monica’s statute puts only an “incidental” burden on the companies’ constitutional right to free speech.

This ruling should prompt Honolulu and the rest of Hawaii to insist upon securing the same level of responsibility here.

A year ago, Gov. David Ige rejected a proposal, hashed out behind closed doors, to authorize Airbnb to collect and remit vacation-rental taxes on behalf of the state. Through that offer the state would have had access to information allowing it to audit tax dollars Airbnb remits to confirm accuracy.

The offer must have been tempting, given that illegal vacation rentals are not tapped for taxes. Among the snags, though: Airbnb’s offer would not have allowed the state to share with counties any property-identifying data. That continues to be a nonviable condition, as state and county agencies need to work in tandem to accurately sort out inventory.

Competing with the growing call to crack down on the thriving underground are compelling stories about longtime residents opting to operate illegal rentals as they grapple to make financial ends meet in high-cost-of-living Hawaii. Further, there are visitor industry warnings that dismantling illegals could disrupt the flow of tourists here.

But outweighing such matters are looming big-picture concerns for residents. The Council must now do the right thing: Move forward with careful examination of the proposal and take action. Delay would be a disservice to constituents and Oahu’s future.

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