The Honolulu City Council voted unanimously Monday to impose stiffer fines and harsher regulations on Oahu’s vacation rentals, tossing the entire short-term rental industry on the island on its head.
The vote was 9-0, and Mayor Kirk Caldwell said that, subject to a usually routine legal review, he will sign the bill.
The bill does allow for the permitting of 1,715 new vacation rental units, but only of the “hosted” bed-and-breakfast variety where the owner-occupant must be present. No “whole home” rentals, which the city refers to as transient vacation units (TVUs), would be permitted. Additionally, vacation rentals would need to be at least 1,000 feet apart from each other.
On Oahu, B&Bs and TVUs collectively are short-term rentals — leased to parties for less than 30 days.
On the enforcement side, the bill allows the Department of Planning and Permitting to require advertisements, including those on giant online hosting platforms like Airbnb and Expedia, to include either the permit numbers or addresses of the dwellings they list, and then for the hosting platforms to submit monthly reports to DPP disclosing the name, address, length of stay and price paid for each listing as well as its transient accommodations tax identification number.
Violating that provision would result in hefty fines — of up to $10,000 — for both the platform company and the operator. The hosting platforms have raised strong objections to the reporting provisions.
Councilman Ron Menor, one of the two authors of the bill’s final draft, said the issues associated with vacation rentals have grown exponentially in recent years as thousands of illegal ones have sprouted.
“Illegal short-term rentals have gone unchecked for too long,” said Menor, who chairs the Zoning, Planning and Housing Committee, which last reviewed the measure.
“The spread of vacation rentals has resulted in huge societal costs,” Menor said. “It has negatively affected the character of our residential neighborhoods, depleted our stock of affordable rentals, hurt our economy, placed excessive stress on our environment and led to a decrease in visitor spending, weakening our tourism infrastructure while placing it under greater pressure.”
Opponents of vacation rentals hailed Bill 89 (2018) as long overdue and badly needed regulation on the thousands of illegal units, while the operators and major online platforms like Airbnb and Expedia warned that it could result in the loss of jobs and possibly pose grave consequences for the visitor industry as a whole.
The platform companies and other vacation rental advocates said most operations on Oahu are of the “whole home” variety, which means the new law could spell trouble.
Operator Ken Middleton suggested legal action may be forthcoming. The Council should ditch Bill 89 and an accompanying measure, Bill 85 (2018), and “start over,” Middleton said. “Let’s stay out of court.”
Bill 85 (2018) would impose higher fines for illegal units and provide DPP with a new enforcement tool but offer no path for any new permits.
In an odd last-minute twist, the Council voted 7-2 to approve Bill 85 despite advice from Deputy Corporation Counsel Duane Pang’s warning that doing so could pose problems since the two bills call for different language in the same areas, thus creating “major conflicts — and they both might not be enforceable.”
Members Ikaika Anderson and Heidi Tsuneyoshi voted “no.”
Pang indicated, however, that those issues would be moot if Caldwell were to sign only one of the bills. “The mayor does have the authority to veto one or both,” he said.
Caldwell made his feelings on the matter known after the votes by issuing a statement that praised the passage of Bill 89 but didn’t even mention Bill 85.
During a rare appearance testifying before the Council, Caldwell pointed out that his original Bill 89 was different: It included double the number of units, would have allowed home rentals and called for creating new property tax classifications for B&Bs and TVUs.
“We shouldn’t let the perfect get in the way of the good,” the mayor told Council members.
Council members themselves said little as more than 150 people testified over a span of nearly eight hours.
As at previous meetings, proponents of vacation rentals warned of dire consequences to their businesses and the economy if either bill were to pass. They warned also that because they rely on the additional income of renting out their homes to make ends meet, they might need to sell their homes if either law were to pass.
Opponents of vacation rentals, including representatives from the hotel industry and a slew of members of the hotel union Unite Here Local 5, said one of the bills needed to pass because of the negative impacts they are having on both hotels and the housing market. They said the proliferation of vacation rentals is causing many of them, and their children, to move away due to high housing costs.
Kailua resident Lisa Cates said her house is surrounded by vacation rentals, which has had huge ramifications for her once “established, middle-class kamaaina neighborhood.” Ten percent of the 140 houses in her subdivision are now vacations, she said. The situation has caused Enchanted Lake Elementary School to experience a huge drop in enrollment, which amounts to a significant loss in funding for the campus.
But Ana Gilberti-Ippel said home-sharing is the only way her family is able to survive. The single mother rents out her Waikiki condominium unit while living elsewhere. “This is my small family business that allows me to be a homeowner, finally, and live a modest and comfortable life.”
Waters said the two bills did not take away any existing rights. “They simply make existing law enforceable,” he said.
But some vacation rental operators said they currently are allowed to operate so-called 30-day rentals, where they can rent to a party for less than 30 days so long as they agree not to rent to anyone else during that 30-day period. They said Bill 89 would take that way.
Attorney Loren Seehase, representing Elite Pacific Properties, said her clients have vested rights to a pre-existing lawful use of their properties and that those aren’t guaranteed in either of the two bills. If either bill becomes law, her clients likely would have valid claims against the city for violating their constitutional rights, she said.
Councilwoman Kymberly Pine was absent through most of the meeting because she had to go to the emergency room after several centipede bites to her foot overnight resulted in severe allergic reactions that left her nauseous and dizzy. She entered Council chambers in a wheelchair as final discussion on the bills began, and she voted with her colleagues.