Short-term rental bill for Oahu advances despite confusion

The Honolulu City Council is considering a measure that would alter the rules for short-term rentals, notably increasing the minimum stay to six months from 30 days for short-term rentals without a special permit.

However, the bill submitted by the city Department of Planning and Permitting was the incorrect version, which further confused members of the public who testified on the measure.

During the past few months, the Honolulu Planning Commission has been considering a proposed bill by the DPP to adjust the current short-term rental rules. The commission made its decision at the end of September, amending the original measure to submit to the Council for consideration.

The DPP accidentally submitted the original version of the bill to the Council instead of the version that was approved by the Planning Commission. By the time the error was realized, it was too late to change it before the bill’s first reading. The DPP has submitted a request to amend the bill to the version with the recommendations from the Planning Commission.

Testifiers expressed their confusion and wondered what happened to the changes agreed upon by the Planning Commission.

“The Planning Commission made the recommendation to only advance the section of the bill that relates to the residential areas and to leave the resort areas out for further discussion, but the Bill 41 does not reflect that,” said Michelle Yel, a local transient vacation unit owner in the Waikiki resort area.

“We work very hard to operate our business to support my family. I’m asking you to not take away my family’s livelihood, to not take away my legal business.”

As written, Bill 41 only allows hotels to operate in a Waikiki resort-mixed-use area. However, transient vacation units will be allowed under the potential amended bill submitted by the DPP, reflecting the Planing Commission’s recommendations.

Another aspect of the bill that was adjusted in the Planning Commission recommendation’s version is exemptions to the 180-day rule for “transient occupants,” such as military personnel, full-time students and travel nurses.

One of the main intentions is to cut down on the number of illegal vacation rentals in residential areas that DPP says are taking permanent housing away from local residents.

Under Bill 41, new permits for short-term rentals would be issued only in resort areas such as Kuilima, Ko Olina and Waikiki. Changes also would require properties to display their certification registration number on all advertisements. The Planning Commission recommendation version also includes Makaha.

The measure also plans to charge bed-and-breakfasts and transient vacation units in residential areas at the B&B property tax rate, which is higher than the residential rate. The new nonconforming units would be taxed at the resort rate, which is even higher. The real property taxes from the B&B, hotel and resort tax classifications would then be used to staff the city’s DPP special short-term rental enforcement unit.

The funding for enforcement was a key provision of the new rules, but the amended version that DPP is proposing removes the provision of diverting funds directly to short-term rental enforcement because the Department of Budget and Fiscal Services discovered that city taxes cannot be diverted into a special fund without a City Charter amendment. The amended version does include adding a special fund, but would have to go through the charter amendment process to be created.

A charter amendment requires a super majority Council vote to put a question on an election ballot, where over 50% of Oahu voters would need to be in favor of the measure for it to pass.

Despite the confusion over the versions of the bill, it passed with a 7-2 majority. Council members Heidi Tsuneyoshi and Augie Tulba voted with reservations, and Council members Andria Tupola and Radiant Cordero voted against the measure.

Tsuneyoshi, Tulba, Tupola and Cordero had concerns about the wrong version of the bill being voted on.

Bill 41 is expected to be heard in the Zoning and Planning Committee, chaired by Councilman Brandon Elefante, in January.

DPP Director Dean Uchida was pleased that the bill passed first reading, but acknowledged the issues with the different versions of the bill.

“We understand that there was some confusion over the different versions of the bill that were considered by the Planning Commission and what was ultimately sent to the City Council. We are working internally to make sure we can correct that process going forward,” he said in an emailed statement.