Honolulu councilman wants to close loophole in 30-day vacation rentals

It’s generally not legal to rent out a house or apartment for less than 30 days at a time, unless specifically permitted to do so by the city.

But a little-known settlement agreement reached between a group of vacation rental operators and the city — and approved by a federal judge — allows for a rental agreement of 30 days, even if a renter stays for only a few weeks or days, so long as the renter has the exclusive right to stay up to 30 days. No one else, not even the owner, is allowed to occupy it.

Honolulu City Councilman Ron Menor said he wants to close what he believes is a loophole in the law. He included language in the latest draft of Bill 89 (2018), the comprehensive vacation rental bill, that specifically would bar the practice.

But Greg Kugle, the attorney who represented the Kokua Coalition in the lawsuit that led to the settlement agreement, said even if the law is changed to what Menor is proposing, the many current operators of the 30-day rentals need to be allowed to continue operating as they have done under the current law.

It’s just another twist to the multifaceted subject of vacation rentals and the city’s attempt to regulate them in the roughly 30 years since permits were last issued.

The Council was scheduled Wednesday to vote on a bill allowing for 1,715 permits for “hosted” bed-and-breakfast establishments, and none for rental of an entire home. But after more than 100 people testified over a span of over five hours, Council members delayed action and referred the measure to the Zoning, Planning and Housing Committee for further work.

The Department of Planning and Permitting estimates there are only 816 legal vacation units outside of resort zones but between 6,000 and 8,000 illegal units on Oahu.

Menor told the Honolulu Star-Advertiser that the settlement agreement specifically does not prohibit the Council from enacting new legislation regarding 30-day rentals.

“I believe this is a loophole in the current law that allows operators of vacation rentals to be able to enter into these 30-day agreements and thereby be able to skirt the law and avoid the regulations that apply to short-term rentals of less than 30 days,” Menor said.

He said he wasn’t even aware of the settlement agreement allowing 30-day rentals until it was brought to his attention by an opponent of vacation rentals.

Kugle acknowledged that the settlement agreement allows the city to change the law, but believes those who can prove they’ve been operating 30-day rentals would need to be allowed to continue. State law says specifically that if a new zoning ordinance precludes a party from doing what was previously legal, it’s a nonconforming use that has to be protected, he said.

If Menor’s language is adopted, it would raise new questions about “the many hundreds or thousands who were doing legal 30-day rentals and had … made their investments, bought a house, or supplemented their income, whatever it is through that process and are now told they cannot do that,” Kugle said.

That could mean hundreds, perhaps thousands, of whole-home rentals still would be allowed to operate even as the Council passes a law that whole-home rentals for less than 30 days are not permitted.

Menor said neither he nor city attorneys agree with Kugle’s analysis and believe that any language prohibiting 30-day rentals would be binding on current operators. The settlement agreement put the operators of vacation rentals on notice that the law could change to disallow the practice. “So I do not believe they have protected rights,” he said.

A number of supporters of vacation rentals who testified Wednesday cited the 30-day rental rule and urged Council members to leave it out of any legislation.

Andreea Grigore, vice president of Kailua-based Elite Pacific Vacations, said her company operates more than 100 rentals under the 30-day rental rule and likely would be forced to shutter operations on Oahu if it could no longer rent in that manner.

“Each of our properties on Oahu accommodates eight to 10 visiting families per year and we have never done more than one rental every 30 days,” Grigore told Council members. “Why are you trying to make illegal the one way that up until now has made it legal to have and operate a (transient vacation unit)?”

Under the settlement terms, “all agree that as long as a property is provided for the exclusive use of the tenant for 30 days or longer, there’s no requirement that the tenant actually has to stay on the property for the full 30 days,” she said.

Larry Bartley, head of the anti-vacation rental group Save Oahu’s Neighborhoods, calls the 30-day rental agreements “30-day fake contracts.”

The city Department of Planning and Permitting has neither the personnel nor the subpoena power to ensure there is no overlap in 30-day periods, Bartley said.

Meanwhile, the vacation rentals take away needed housing options from Oahu residents and instead introduces a slew of strangers into neighborhoods, ruining the neighborhoods’ character, Bartley said. Opponents of short-term rentals aren’t just worried about noisy tourists or the loss of street parking, “it affects the entire community, not just a next-door neighbor.”