Using a new law, Hawaii goes after scofflaws and drafts rules for 1,700 new B&Bs

Over the next year, Kathy Sokugawa, acting director of the city Department of Planning and Permitting, faces the mammoth task of rooting out illegal vacation rentals that have proliferated on Oahu, in defiance of a three-decades-old ban.

That part is going slowly but surely, she said, aided by the enactment of an ordinance that makes it possible to cite an operation on the basis of a mere advertisement for guests. The same advertising provisions are being used to track down anyone trying take advantage of an allowance for 30-day rentals, she said, but who are renting more frequently than that.

The other part — developing regulations and permits to legalize 1,700 more bed-and-breakfast operations — is the great unknown. The DPP has begun drafting the rules (see Page F4 for a summary on where things stand) — but the public reaction to the process is uncertain, because the new allowance is only for bed-and-breakfasts (B&Bs).

“We don’t know if we’re going to get 25 applications or 2,500,” Sokugawa said. “As the mayor has said, not everyone is willing to share their home.”

Before 1989 the city issued nonconforming use certificates (NUCs) for a mix of B&Bs and “whole home” rentals, also called transient vacation units (TVUs), where a host does not share the premises. Clearly, she said, the TVU has always been the preferred option.

“Right now we have 777 nonconforming use certificates for TVUs,” she added. “The number of B&Bs is 38, and that number might be dropping.”

Don Eovino bought a property that came with a certificate and has run a vacation rental there for 11 years (he declined to disclose its location). He plans to keep the certificate renewed on that.

But the prospect of applying for a new B&B permit for his own residence — under the new law, the host must qualify for the city’s property tax exemption for owner-occupants — is far less appealing. A couple of negatives spring to mind.

“They have to live in the house with the person in there,” he said. “They’d be renting out one or two of their bedrooms.… and then they get taxed at the higher rate. You can’t make the money to make it worth the effort.”

Eovino has a point: There may be considerable effort required of prospective B&B owners come October if they want to set up a legal operation under city rules.

Even before detailed rules are written, they already know their home could need to be configured properly under the ordinance. One or two bedrooms in a house where they live themselves can be rented out, she said; the rooms must be connected to the living area of the main house and “cannot function as an independent living unit.”

Ordinance 19-18, introduced and debated for months as Bill 89, is Oahu’s law that lays out the parameters of a legal B&B. Bedrooms can have a separate entrance, but they can’t be walled off from the principal dwelling as “ohana” units, or separate “accessory dwelling units,” can be.

The only TVUs will be those permitted before 1989, as well as those in resort-zoned areas.

“And you have to be a ‘natural person,’ and that means Outrigger or some other company may not apply,” Sokugawa said.

A new complication appeared last year when the Kokua Coalition, a nonprofit doing business as Hawaii Vacation Rental Owners Association, sued the city in U.S. District Court. At issue was the practice of renting for the legal minimum term of 30 days, even if the guest stayed for less time.

The court fight ended with a settlement that allowed 30-day rental agreements. What is not allowed, though, is a separate rate charged for a shorter stay; the agreement entitles the guest to stay for 30 days.

And yet there are advertisements that hint at a possible lower rate. One ad on vrbo.com lists a minimum stay of 15 nights at the top; below, the following appears:

“In compliance with the Revised Ordinances of the City & County of Honolulu, the property will be made exclusively available to the renter for a full period of 30 days and no one else may occupy the property during that period. The 30-day rental period will be communicated to guest upon booking. If you have any questions please feel free to contact me.”

So, which rental term is being offered?

Sokugawa said the law now enables DPP inspectors — there are currently three, working part-time — to get a lot done right from their desks, finding violations through an online search.

“We’re going to rely on tech rather than warm bodies,” she added. “That’s a huge savings in enforcement cost.”

The neighbors can do their surveillance work at their desks, too. Last month DPP posted an online form for complaints on its website, www.honolulu.gov/dppstr (click the “Online Complaint Portal” link on the bottom). The form allows space for logging the time and date of the violation observed as well as for a link to the advertisement that, by itself, may qualify for a citation.

“We thought as soon as the bill was adopted we would see miraculous changes,” Sokugawa acknowledged, “but now we’re realizing it’s not as easy as that.

“We are slowly upping our game,” she said. “We did those courtesy letters, the website, and put the complaint form online,” which brought in a few hundred reports in the first week or so.

Some of the outspoken opponents of illegal vacation rentals are taking encouragement from these efforts. Chuck Prentiss, Kailua Neighborhood Board chairman, said records have been kept, and past complainants are being contacted and urged to track advertisements and file reports using the online form.

And he said he’s pleased by the city’s declarative statements that vacation rentals cannot be booked more frequently than one group per 30 days.

“That was one of the areas that would be the most difficult to enforce,” he said.

Those in the business don’t hide their dismay at the approach being taken. Eovino believes the city could have cracked down on the ones causing the problems without discouraging “an economical business that allows people to stay in their homes.

“It sure performed a lot of functions, employing to the benefit of people who would otherwise be homeless,” he said. “This whole thing is upside-down and backwards.”

Matt Middlebrook, Hawaii policy manager for the rental booking platform Airbnb, agreed. The restriction barring multiple B&Bs within a 1,000-foot radius is an effective ban, he said — although Sokugawa underscored that grandfathered, NUC-bearing vacation rentals won’t be counted.

And the tax increase that would be imposed is another barrier, Middlebrook added.

“I’m sure that the average occupancy for B&B homes is less than 100 days,” he said. “Is that worth having your property tax increase forever?”

There are some residents who don’t believe the law is a total ban, or any real change in the status quo. Susan Dowsett of Kailua is a retired police investigator who has her doubts that the 30-day minimum will be enforced at all. Like cities elsewhere, the minimum term should be lengthened significantly in order to be effective, she said.

Dowsett said she’s seen the city inspectors respond to complaints and be rebuffed too easily when the homeowner denies wrongdoing — claiming, for instance, that the “guests” are family friends. She overheard a patron at an adjacent restaurant table propose doing exactly that.

“She said, ‘I have no intention of paying all that money … I’m just going to keep doing it and say this is a wedding party who is here for a month.’

”It’s sad that it’s gone on so long that to put a lid on now, it’s too late,” Dowsett said.

But Sokugawa insists that the city is committed to the mission, and that Ordinance 19-18 has made enforcement possible.

“We’re in it for the long term,” she said. “We want to make a difference. If neighborhoods are being overwhelmed by short-term rentals, we want to put a stop to it.”

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2 TYPES OF VACATION RENTALS

Bed and Breakfast (B&BS)

The homeowner or permanent resident must live on premise during the guest’s stay. Up to two rooms may be rented, with four guests maximum.

Transient Vacation Units (tvus)

These are whole-home or unhosted rentals. TVUs are allowed only in resort and certain apartment-zoned districts, unless they have been grandfathered in under a nonconforming use certificate (NUC).

Source: honolulu.gov/dppstr

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TIMELINE OF NEW REGULATIONS

Here are key dates in the implementation of the new vacation rentals regulation for Oahu (Ordinance 19-18, formerly Bill 89):

>> June 25, 2019: Mayor signs the bill.

>> Aug. 1, 2019: Ordinance 19-18 becomes effective. The Department of Planning and Permitting begins enforcement. Also on Aug. 1, the Hawaii Vacation Rental Owners Association (also known as the Kokua Coalition) file a lawsuit in U.S. District Court over advertising for rentals that meet the city’s 30-day minimum term.

>> Oct. 4, 2019: Following weeks of negotiation, U.S. District Judge Derrick Watson signs a court order settling the case, spelling out terms under which 30-day rentals can be advertised and when enforcement can begin on the affected properties.

>> Dec. 20, 2019: DPP posts a form online for the community to report of violations (honolulu.gov/ dppstr/report-a-violation.html).

>> January 2020: 242 warning letters, or “notices of violation,” and 15 citations and fines, totaling $183,000, have gone out. DPP continues work on drafting rules, which will define how the 1,700 permits for newly legalized bed-and-breakfast units will be issued, the reporting requirements for the booking platforms, the appeals process and other issues. Meetings with interest groups may be scheduled, said Kathy Sokugawa, acting DPP director.

>> Summer 2020: Public hearing on the draft rules will be held; work begins on setting up the preregistration system.

>> Oct. 1, 2020: Deadline for registration to begin.