Short-term rental rules up for final vote at Honolulu City Council

The Honolulu City Council is expected to cast a final vote today on new rules for short-term rentals.

The proposed rules, which were introduced at the request of Mayor Rick Blangiardi, notably would increase the required minimum stay at short-term rentals to three months from the current 30 days.

Bill 41 also mostly limits short-term rentals to resort-zoned areas in Ko Olina, Kuilima, Makaha and parts of Waikiki. An exception would permit transient vacation rentals in some apartment-zoned areas that are in close proximity to resort areas. These are rentals where short-term guests would be able to rent the entire property and also include bed-and-breakfast operations offering short stays, with a live-in owner or manager on the property.

The most recent version of the bill was amended in March to prohibit on-street parking for guests in vacation rentals in communities zoned as rural, residential or apartment use.

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

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

Blangiardi’s administration never put the agreement into full effect, instead opting to introduce Bill 41 to revise the rules governing short-term rentals.

Airbnb Hawaii policy representative Toral Patel urged the Department of Planning and Permitting to honor the current agreement, which she said has been successful on Kauai and Maui.

“Airbnb removed over 1,300 listings in Maui that did not comply with the agreement’s terms, and now works in close collaboration with Planning staff to support compliance,” Patel wrote in her testimony on behalf of the company.

Meanwhile, the supply and demand for vacation rentals outpaced hotels for a large part of the COVID-19 pandemic, but that trend wasn’t evident in February — a time when travelers weren’t prioritizing social distancing as much and crackdowns on illegal vacation rentals have been heating up.

As they struggled to run their businesses during the height of pandemic restrictions, some vacation rental owners removed noncompliant listings and converted the units to longer-term rentals or sold them. That reduced the vacation rental inventory across the state in February from pre-pandemic times, while the hotel room supply was actually a little better than it was in February 2019.

Statewide vacation rental supply fell in February to 462,723 unit nights, a 25.2% decline from February 2019, according to a Hawaii Tourism Authority report. At the same time, demand for vacation rentals dropped to 338,088 unit nights, a 33.6% decline from February 2019.

On Oahu, where the city is considering new enforcement measures, vacation rental supply fell 40% to 146,588 unit nights from 225,185 in February 2019. During the same period, there was a nearly 27% drop in supply on Hawaii island, nearly 20% on Kauai and almost 14% on Maui.

Statewide vacation rental occupancy in February was 73.1%, 8.2 percentage points below February 2019, according to the HTA report, prepared by Transparent Intelligence, which analyzes short-term rental markets.

February occupancy was comparable to the performance at Hawaii hotels, which filled more than 72% of their rooms.

Meanwhile, the average daily vacation rental rate in February increased to more than $296, a nearly 37% gain from February 2019.

There are strong opinions on Bill 41, with over 340 people submitting testimony in anticipation of today’s full City Council meeting. The testimony is nearly evenly split, with opponents of the proposed rules holding a slight edge over supporters.

“Short-term rentals are disruptive to the character and fabric of our residential neighborhoods; they are inconsistent with the land uses that are intended for our residential zoned areas and increase the price of housing for Oahu’s resident population by removing housing stock from the for-sale and long-term rental markets,” wrote Thomas Cestare of the Lanikai Association.

“The City Council finds that any economic benefits of opening up our residential areas to tourism are far outweighed by the negative impacts to our neighborhoods and local residents.”

About 20 people from Friends of Kuilima, a North Shore community group, gathered outside Honolulu Hale on Tuesday to protest Bill 41.

April Perreira Pluss, who owns a 600-square-foot home in Kailua with a 400-square-foot vacation rental, said she would not have bought the property if she knew Bill 41 was a possibility. Pluss said she feels as though the city is punishing those who are trying to follow the current rules.

“I feel that the laws that are existing now are strong enough. And if we follow those laws, I think that everybody would be much happier about it. But I think that that isn’t being enforced,” she said.

“I just think that the vacationer that comes here that rents for 30 days is contributing to our community.”

DPP plans to enforce Bill 41 by creating an enforcement branch within the department of seven full-time positions. Funding would come from 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 a “nonconforming use certificate,” 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. Additionally, B&Bs would be charged at their own special rate, which has not been enforced despite the structure being set up.

If the majority of the Council votes to pass Bill 41 today, it will be transmitted to Blangiardi for his signature before becoming law.

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Star-Advertiser reporter Allison Schaefer contributed to this story.