Lawsuits pile up over short-term rentals

The city’s month-old, short-term rental law is still in its infancy in terms of enforcement, but it’s already drawn widespread legal attention and three lawsuits.

Ordinance 19-89, which took effect Aug. 1, makes it illegal to advertise a vacation rental that is not properly permitted or not located inside a hotel-resort zone. It also raised fines for recurring short-term rental violations to $1,000 to $10,000 per day.

The Association of Apartment Owners of Waikiki Lanais, which is represented by Honolulu Attorney Terry Revere, on Tuesday became the latest entity to sue over the new ordinance. Filed in First Circuit Court, the complaint names the city, the city Department of Planning and Permitting and its acting director Kathy Sokugawa as defendants.

In the meantime, DPP is slowly ramping up enforcement. Sokugawa said the city has issued 18 notices of violation since Aug. 1 to owners advertising unpermitted short-term rentals with more expected to come this week.

DPP hasn’t issued any fines related to the 18 notices of violations sent to property owners. Additional action, including fines, may be pending.

The premise of the Waikiki Lanais’ lawsuit is that the law’s fines and restrictions violate the due process and equal protection provisions of the Hawaii Constitution and constitute excessive punishment — especially given that the law treats “similar situated properties differently without any legitimate reason.”

The suit claims that the city’s ban on home-sharing runs counter to Waikiki’s long history of tourism. To be sure, there has been broad pushback from some owners in resort districts like Waikiki who say they were blindsided by the new law. DPP ruled that properties mauka of Kuhio Avenue, which are in apartment and apartment precinct zones, must have nonconforming use certificates to operate short-term rentals legally. Even the Hawaii Lodging and Tourism Association, a staunch supporter of the new law, objected to the broad scope in areas like Waikiki and Turtle Bay, which many view as hotel-resort zones.

Sokugawa said last month that the department is “open to further discussion” on whether to allow short-term rentals in buildings in Waikiki that aren’t zoned for resort.

But the issue is complicated. Even the AOAO Waikiki Lanais board’s recent decision to spend at least $40,000 to hire Revere only passed by a controversial 6 to 3 vote.

While the general ownership of the Waikiki Lanais wasn’t offered a chance to vote on funding a short-term rental legal battle, certainly some supported the move. They argued that the new city law puts owners of short-term rentals in danger of losing money that keeps them afloat. They and other opponents of the new law say it favors the interests of corporations and unions over individual owners and ultimately could remove so many of Oahu’s short-term units that it hurts the tourist economy.

But passage of the ordinance has been cause for celebration for the anti-short-term rental crowd, some of whom reside in the Waikiki Lanais. They say illegal short-term rentals deplete affordable housing, strain infrastructure, harm natural resources and change the fabric of local communities. Also, they argue owner occupants could have much to lose if the Waikiki Lanais and other buildings like it are rezoned into the resort category, a move that would raise property tax rates from residential to hotel use.

The Waikiki Lanais suit piggybacks on issues raised last month in separate suits filed against the city by the Kokua Coalition, a group of “30-day rental” operators also known as the Hawaii Vacation Rental Owners Association, and the Association of Apartment Owners of the Waikiki Banyan, a twin-tower, 876-unit condominium.

Kokua Coalition filed a lawsuit Aug. 1 arguing that renters should be allowed to continue renting to a single tenant every 30 days, regardless of how long the tenant actually stays.

The AOAO of the Waikiki Banyan’s suit sought a permanent injunction preventing the city from imposing its new ordinance on its owners. Plaintiffs claim 89% of the units in the complex operate as short-term vacation rental units, which they allege has been operating as a condominium hotel since it opened in 1979.

The DPP said it hasn’t seen the Waikiki Lanais suit and has no updates on the other two.