Mayor Caldwell signs vacation rental policy bill

It took roughly three decades, but the city now has a broad-ranging policy regulating vacation rentals.

Honolulu Mayor Kirk Caldwell on Tuesday signed Bill 89 (2018), which gives the Department of Planning and Permitting new tools to combat illegal rentals and imposes stiffer penalties on violators.

It also allows, starting in October 2020, for the granting of about 1,700 new permits for “hosted” bed-and-­ breakfast operations but offers no path for whole-home rentals, or transient vacation units.

The new permits would be the first issued for transient vacation rentals in more than three decades. A transient vacation rental is defined as any residential rental of less than 30 days, including both B&Bs and TVUs.

Caldwell said he would’ve preferred the final draft include language allowing a higher number of vacation rentals, including whole-home rentals. But no one is completely happy with the final draft, signaling a good compromise, he said.

“Don’t let the perfect get in the way of the good,” he said. “This is a good bill.”

Various Honolulu mayors and Councils have struggled for decades to come up with a comprehensive vacation rental policy.

The city stopped issuing new permits for vacation rentals in 1989. There are currently 770 legal ones outside of resort zones, where they are legal without permits. The city Department of Planning and Permitting estimates there are 6,000 to 8,000 illegal vacation rentals on Oahu, although some have put the number as high as 20,000.

Supporters of the bill argued that the proliferation of thousands of illegal rentals, fueled largely by the growing popularity of online hosting booking platforms like Airbnb and Expedia, has stolen business from traditional hotels and resorts, ruined the character and overtaxed the infrastructure of Oahu communities, and robbed the island’s residents of valuable housing stock when Oahu needs it badly.

Opponents of the bill said the growth of vacation rentals reflects a growing trend of visitors who want an alternate experience from what’s offered by traditional hotels and resorts. Additionally, they said that vacation rentals also give homeowners a chance to make a little money to help them get by, and they warned that the measure could result in the loss of thousands of jobs in support workers and heavily used businesses, and negatively affect the visitor industry in general.

Matt Middlebrook, head of public policy for Airbnb in Hawaii, earlier pointed to a report by New York-based Wolfe Research on the airline industry that said passage of a vacation rental bill would wipe out 7,000 short-term rentals and could result in an economic hit for Hawaiian Airlines.

Caldwell said at the press conference that some in the business community have expressed worry to him that there would be a reduction in “airline lift” if the vacation rentals were to be eliminated.

“I’ve been assured by the hotel and resort industry that that will probably not happen,” Caldwell said. “But we’re going to watch and see. Should there be a negative impact, then of course we’ll get back together and figure out what we need to do on all of that.”

DPP Acting Director Kathy Sokugawa said the game-changer components of the bill are the requirement that operators include the permit number for their vacation rental units on any advertisements, including those appearing on the hosting platforms, coupled with a new definition of a “bed and breakfast home” that includes advertising, solicitation or offering of a premise for less than 30 days.

Those two provisions, which take effect Aug. 1, makes enforcement easier for DPP officials because they can now go after illegal rentals by scouring websites instead of physically visiting locations to prove operations are illegal, Sokugawa said.

“That is key,” Sokugawa said. “What that means is it’s not just that you have to have an occupancy by someone on your property for less than 30 days; it means just the mere advertising, by definition, makes it a bed-and-breakfast home.”

“It’s very, very hard to crack down on these folks under the old model,” Caldwell said.

The bill also ups the standard zoning violation fine to a minimum of $1,000 and a maximum of $10,000. Previously, a violator was fined a maximum of $1,000.

The new law is expected to be challenged by the vacation rental hosting platforms as well as groups of Oahu operators.

On Tuesday, Caldwell also vetoed Bill 85 (2018), a separate measure passed by the Council which would have only cracked down on the thousands of illegal vacation rentals and offered no path for them to become legal. City attorneys said language in that bill conflicted with what’s in Bill 89.

Ivan Lui-Kwan, attorney for several hoteliers who supported the bill, said the measure “represents the gold standard in short-term rental regulation throughout the country.”

Turtle Bay Resort Vice President Jerry Gibson said Bill 89 “is something that we can use as a model across the country.”

Representatives of Airbnb, Expedia Group (which includes HomeAway, VRBO and Booking.com) and the Oahu Alternative Lodging Association all voiced disappointment with Caldwell’s actions.

Several noted that Caldwell was flanked by hotel and union leaders during his press conference. “Clearly, their priority is to serve the corporate mainland hotels and its union rather than locals who are trying to make ends meet through short-term rentals,” said Scott Brazwell, a spokesman for the Oahu Alternative Lodging Association.

Meanwhile, vacation rental opposition group Save Oahu’s Neighborhoods applauded Caldwell’s action. “Over the past 15 years dozens of neighborhood groups and neighborhood boards, hundreds of individuals, community associations, housing advocates, homeless advocates, labor organizations, elected leaders and recently the legitimate hotel industry have worked hard, not only to prevent permitting without enforcement on several occasions, but to convince the mayor and the Honolulu Council to step up and return our residential neighborhoods to residents,” it said in a statement.

The 29-page Council bill left some ambiguities. For instance, it states that up to 50% of a condominium could be used for vacation rentals. That would likely conflict, however, with the separate stipulation that vacation rentals must be at least 1,000 feet from each other.

Sokugawa acknowledged DPP has not determined how it will deal with the issue.

For the specifics of Bill 89, go to DPP’s fact page on the issue at 808ne.ws/2X3ffP2.