Honolulu City Council passes new short-term rental rules

After a marathon session Wednesday that featured testimony from more than 130 people, the Honolulu City Council voted 8-1 to pass new rules for short-term rentals that change the minimum stay to three months from 30 days.

Under the new rules, which were introduced at the request of Mayor Rick Blangiardi and await his signature to become law, short-term rentals would mostly be allowed only in resort-zoned areas in Ko Olina, Kuilima, Makaha and parts of Waikiki.

And an exception is provided for some apartment-­zoned areas near resort areas and also allows for transient vacation rentals where short-term guests would be able to rent the entire property and for bed-and-breakfast operations that offer short stays and have an owner or manager living on the property.

Bill 41 also imposes registration fees for legal short-term rentals and prohibits on-street parking for vacation rentals in communities zoned as rural, residential or for apartment use.

In a statement after the Council vote, the American Hotel and Lodging Association in Hawaii, which represents more than 150 properties in Hawaii, said the bill will help purge “illegal whole home rentals from the market while at the same time creating a pathway for legal rentals to be let and taxed appropriately.”

AHLA spokesperson Kekoa McClellan said in a statement the vast majority of short-term rentals in Hawaii are owned and operated by out-of-state hosts. “In many cases, these operators are running 20 or more illegal whole home rentals,” he said. “This is not home sharing; these are illegal hotels which destroy the aloha in our communities and drive up the cost of housing for our residents.

“Bill 41 will help Honolulu claw back much needed housing supply, return our communities to the locals for whom they are intended, and give our legal Hotel industry a fighting chance at regaining Kama‘aiana trust,” McClellan said.

In addition to testifiers at Wednesday’s full Council meeting, over 340 people submitted written testimony on Bill 41.

In her testimony before the Council, Kahala resident Linda Piles urged passage of the measure to crack down on short-term rentals in her neighborhood.

“Fancy adventurers, just like house guests, are not stakeholders in our home or the community,” she said. “They don’t join the neighborhood watch … don’t have children in our schools … and the owners don’t give a rip about we, the neighbors. But Bill 41 transients will not be without places to stay, but will be in resort areas where they belong.”

The World Surf League expressed concern the restrictions would make it impossible to host events on the North Shore during the winter season.

“We’ve always prioritized local surfers and local staff, but without traveling surfers or workers like international judges for fairness, surf events will not be possible here,” said Robin Erb, WSL Hawaii regional director. “The North Shore has limited hotels at peak prices during the winter surf season. Some of our events are for local surfers only, but our own local outer island surfers will be hurt by this bill as well.”

The league wanted to see exemptions of the 90-day rule for surfers and event workers.

Council member Andria Tupola expressed similar concerns about other occupations such as traveling nurses and ship workers who need a place to stay month to month and are unable to commit to a full 90 days.

Bill 41 is a departure from the rules that were established under former Mayor Kirk Caldwell in 2019 allowing a limited number of short-term rentals 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.

Tupola said she didn’t understand why the Blangiardi administration did not want to follow through with the agreement.

“I don’t know why, with the deficiencies of staffing that we have in (the Department of Planning and Permitting) that we wouldn’t want to have an MOU so that the platforms could self-enforce and work with us,” she said.

“When I asked why we are not pursuing the MOU, the deputy director told me, ‘We thought it would be easier.’ I disagree with that, because I do think that we don’t have any control over people’s websites. And so it would behoove us to work with them so that we can have the illegal ones taken down.”

Another point of contention was the $1,000 initial registration fee for legal short-term rentals and the $500 annual renewal fee, plus an additional $50 advertising registration fee.

Council member Heidi Tsuneyoshi was concerned the fees were unfair to legal short-term rental owners who already pay resort-rate property taxes.

“That idea of charging property owners who have been operating legally all this time additional registration fees is, for me, not something that sits well. And I know it doesn’t sit well with the property owners,” she said.

Tsuneyoshi said she would like to see some relief provided through another measure the Council is considering, Bill 4, which would adjust property tax rates for legal short-term rentals.

Currently, if people are legally operating short-term rentals in residential areas through a “nonconforming use certificate,” they are still taxed at the residential rate. However, under Bill 4, short-term rentals and transient vacation units would be charged at the much higher resort rate.

DPP plans to use the new revenue from the property taxes and registration fees to create an enforcement branch of seven full-time positions.

Bill 41 passed with Tupola the lone dissenter and Tsuneyoshi and Carol Fukunaga voting in favor with reservations.