Honolulu City Council committee advances vacation rental bills

The City Council Planning Committee on Monday advanced two bills that allow for an estimated 1,700 more legally permitted short-term vacation rentals on Oahu while giving city officials more tools to crack down on thousands more unlawful ones.

Final full Council votes on bills 85 (2018) and 89 (2018) are now slated to be heard May 8.

Whatever the Council decides that day will be considered historic by all parties and could have ramifications that could last for decades.

The Council and a string of mayors have been trying unsuccessfully to tackle the complex vacation rental issue since the city stopped issuing permits for them in 1989. The Department of Planning and Permitting estimates there are only 816 legal units outside of resort zones but between 6,000 and 8,000 illegal units on Oahu.

Supporters of bed-and-breakfast establishments and transient vacation units say they represent a new phase of the visitor industry that Hawaii must embrace if it intends to stay competitive with other tourist destinations. Opponents say vacation rentals have wreaked havoc with the character of traditional Hawaii neighborhoods and jacked up the prices of sales and rental units to the point where residents can’t afford them.

The latest draft of Bill 89 allows for up to about 1,715 newly permitted vacation rentals on the island. They would be limited only to operators who own their units and operate the vacation rentals, what the city also refers to as a bed-and-breakfast establishment. So new “whole home” vacation rentals, also known as transient vacation units, would not be allowed. Applicants would need to show proof of a homeowner exemption in order to qualify.

Prohibiting whole-home vacation rentals would be a major setback for Airbnb, the Expedia Group and other vacation rental hosting platforms, which lobbied heavily for them to be included. An effort to allow them, but only for those operated by longtime Oahu families, failed to garner enough support to move out of the committee.

On the opposite end, heavy hitters from the hotel/resort industry as well hotel workers union Unite Here Local 5 joined with the Hawaii Appleseed Center for Law and Economic Justice and frustrated neighbors of vacation rentals in calling for stricter enforcement.

How many and where the new units would be allowed would be based on the city’s eight regional development plans, also known as development or sustainable communities plans. The bill says no more than 0.5% of the number of housing units in each of the eight areas could obtain short-term vacation rental permits.

Under current calculations, that would mean 895 allowable vacation rental units in the Primary Urban Center Development Plan region between Waialae and Pearl City, including Waikiki; 165 in the Ewa Development Plan area, including Kapolei and Makakilo; 255 in the Central Oahu Sustainable Communities Plan region from Waipahu to Wahiawa; 90 in the East Honolulu Sustainable Communities Plan area; 185 in the Koolau Poko Sustainable Communities Plan region from Makapuu to the north end of Kaneohe Bay; 25 in the Koolau Loa Sustainable Communities Plan section; 35 in the North Shore Sustainable Communities Plan area; and 65 in the Waianae Sustainable Communities Plan region.

Another provision prohibits a permitted vacation rental from being within 1,000 feet of another one.

Vacation rental advocates said such a drastic reduction in some areas such as the North Shore could have devastating impacts on both the local and statewide economies.

The latest draft of Bill 85 requires those advertising their short-term rentals to list their permit numbers or, if in hotel-resort zones, their street addresses.

Both Planning Committee Chairman Ikaika Anderson and Councilman Ron Menor, who authored or co-authored the latest draft of the two bills, called the legislation a reasonable compromise.

“I think they strike a balance,” Menor said.

Anderson pointed out that many of the more than 40 people who testified Monday supported both bills.

Menor said that in anticipation the bills will be legally challenged, both were worded to mirror language in a Santa Monica, Calif., ordinance that was upheld by the U.S. 9th Circuit Court of Appeals.

Menor said he expects some Council members will try to include whole-home rentals in the final bills.

Council interim Chairwoman Ann Kobayashi proposed two different drafts of Bill 89 that would have allowed whole-home vacation rentals to be part of the newly permitted total. An idea she offered last week would have allowed whole-home vacation rentals if their owners lived on Oahu and had a home exemption for another house on island.

After that failed, Koba­yashi, along with Councilwoman Carol Fukunaga, sought to have “legacy” homes, those under the ownership of the same local families for generations, made eligible for whole-home vacation rentals. But that plan failed to gather enough support after DPP and city property tax officials said it would be difficult for them to determine such eligibility.

Anderson said he would have supported a plan allowing legacy homes to be permitted, “but I’m not confident today that we have sufficiently defined that term.”

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