Honolulu City Council advances short-term rental bill

More than 100 people testified over alterations to the rules for short-term rentals at the first full City Council meeting of the year on Wednesday.

The most notable change the Council is considering is increasing the minimum stay to three months from 30 days for short-term rentals without a special permit.

Edward Jones was one of those who testified against the measure. He explained that he is a kupuna on a fixed income that rents rooms in his house to supplement funds.

“We’ve been renting for the last 30 years,” he said.

“Others who rent for 30 days have legitimacy. Local residents rent for a month, and then use our good reference to elevate to a long-term lease, whether it be here or elsewhere. So this legislation will actually block affordable housing. That will be an unintended side effect.”

The majority of those who appeared virtually through Zoom or over the phone were testifying against the measure.

However, there was also substantial testimony in support of Bill 41.

Doug Seelig, who lives in Kailua, felt that the steep increase in short-term rentals in the area has harmed the community and wanted to see Bill 41 passed.

“Our community is now inundated with transient renters who don’t take care of the community around them who are really here for the most part just to party,” he said.

“When you have lots of strangers coming into a residential area, it’s a different vibe … you have less assurance of security.”

The Hawaii Tourism Authority and the Hawaii Lodging &Tourism Association both testified in support of Bill 41.

In the bill, new short-term rentals would mostly only be allowed in resort-zoned areas on the island in Koolina, Kuilima, Makaha and parts of Waikiki. The only exception is that there are some apartment-zoned areas in close proximity to resort areas that will also allow transient vacation rentals, where short-term guests would be able to rent the entire property, and B&Bs where someone must live on the property long term, but rooms can be rented to others for short periods of time.

However, some short-term rental units are allowed to operate in other residential areas because the land they are on was granted a “nonconforming use certificate,” or NUC, decades ago that sticks with the land, unrelated to who owns it, in perpetuity.

Owners who want to take advantage of the NUC must renew it every two years. Bill 41 increases the fee for renewal from $600 every two years to $4,000 every two years.

The increase of fees was a sticking point for many of the testifiers at Wednesday’s meeting.

“You want to pose these fees and make everyone criminals, but we have people out there, they’re doing the right thing, following the rules and regulations,” said testifier Ed Lawton.

“But you guys continue to walk down this path, imposing really strict guidelines to the working class.”

In the measure, for those who live in the areas where short-term rentals are permitted, they can apply for a permit from the Department of Planning and Permitting. However, these permits would not stick with the land like NUCs that were given decades ago, so new owners would have to reapply to become a legal short-term rental after they obtain the property.

The way DPP plans to enforce Bill 41 if it becomes a law is to create an enforcement branch within the department of seven full-time positions. To fund that component, the Council also will consider Bill 4, which would bump up property tax classifications for those operating short-term rentals.

Currently, if people are legally operating short-term rentals in residential areas through an NUC, they are still being taxed at the residential rate. However, under Bill 4, those short-term rental, transient vacation units would be charged at the resort rate. B&Bs would also now be charged at their own special rate, which has not been enforced, despite the structure being set up.

The residential property tax rate that was set in 2021 is $3.50 per $1,000 in property value. The resort property tax rate is $13.90 per $1,000 in property value. The bed and breakfast home rate is $6.50 per $1,000 in property value.

Although the current version of the bill puts the minimum stay at 90 days for short-term rentals without a permit, DPP still wants to see that bumped up to 180 days, as was originally written when the measure was introduced in October.

Bill 41 is a departure from the rules that were established under former Mayor Kirk Caldwell in 2019 where there would be a limited number of short-term rentals allowed in residential areas based on a lottery system.

The law was a compromise between short-term rental operators and the city that included an enforcement component through a memorandum of understanding with rental platforms such as Expedia and Airbnb.

Mayor Rick Blangiardi’s administration never took the memorandum into full effect, instead opting to introduce Bill 41 to again alter the law around short-term rentals.

Ann Simons, Expedia Group Hawaii’s government affairs manager, wanted to see the current laws enforced.

“While we regret that DPP has walked away from the cooperative agreements, we are now producing great results from in Hawaii,” she said.

“We absolutely stand ready to serve as a partner to the Council and other stakeholders to build enforceable and responsible regulations.”

Maui implemented a similar memorandum on Wednesday, although the minimum stay without a short-term rental permit there is 180 days.

DPP Deputy Director Eugene Takahashi listed COVID-19 and a meeting that DPP hosted in April where many people from the public testified against the current short-term rental rules as reasons the administration decided to introduce Bill 41.

The Council voted 7-2 to pass Bill 41 out of second reading.

Council members Heidi Tsuneyoshi and Augie Tulba voted with reservations for Bill 41.

Council members Andria Tupola and Radiant Cordero voted against the measure.

Tupola listed the reasons for her no-vote.

“I can’t support the bill because of the lack of stakeholder engagement … the need for current enforcement right now, the need for consistency and uniformity, the 667% jump for biannual certificate renewal fees, not enough careful consideration of how to support and protect local families operating legally,” she said.

Tupola also noted that the current short-term rental laws took years to pass. In comparison, Bill 41 was introduced three months ago. She wanted to see more engagement from DPP with neighborhood boards.

Council Chairman Tommy Waters praised the robust discussion at Wednesday’s meeting, but reminded the Council that the issues need to be addressed.

“By not doing anything, I think we were failing,” he said.

“There’s a lot of issues on both sides of the fence.”

Bill 41 will next be heard in committee, and then would only need one more vote by the full Council to pass. Blangiardi has made it clear that he is committed to the measure.