The Honolulu City Council passed legislation June 17 aimed at curbing the proliferation of unregulated and unlicensed short-term rental units, a move that was met with fierce debate over the course of several council hearings.
Honolulu, the most populous county and home to the Waikiki resort area, has not issued new permits since 1989. There are roughly 8,000 to 10,000 short-term rentals advertised on Oahu at any given time, while there are approximately 800 permits. The council, which oversees the entire island of Oahu, took up the issue as complaints have spread. Residents are frustrated with rising housing costs and the changing character of some neighborhoods, while the hotel industry has called for a level playing field with adequate enforcement to ensure short-term rentals are paying taxes and fees.
On the other side, proponents of vacation rentals point out that as visitation has grown in the Aloha State, hotel stock has remained stable and vacation rentals have absorbed the bulk of the increase. Many residents who operate rental units argued the new rules are too harsh and the council was stripping away a valuable source of income. Airlines also worry the new regulations could suppress demand for the islands, and Hawaiian Airlines representatives lobbied the council for an approach that allowed for more licensed short-term units coupled with greater enforcement and revenue collection.
The city council passed two bills, 85 and 89, regarding short-term rentals, but Mayor Kirk Caldwell immediately expressed a preference for Bill 89 and is expected to sign it into law.
"It takes great political courage to pass a bill that will help balance the impact tourism is having on our residential neighborhoods," Caldwell said in a statement. "It is time we take meaningful action on an issue that previous mayors and city councils have been unable or unwilling to address. The proliferation of short-term vacation rentals is an issue that has divided our community for far too long, and it's time to bring closure and healing to our island home through fair and effective regulation. Bill 89 may not be perfect, as no legislation ever is, but it's a first step that can be improved upon in the future."
Bill 89 imposes new fines on illegal operators and steps up demands on hosting platforms, such as Airbnb and VRBO, for information on transactions. The bill distinguishes between "transient vacation units" operated by off-site hosts and "bed and breakfast homes" where an owner rents a space on the property they occupy. No new permits have been designated for transient vacation units, but the legislation allows for new registration of up to 1,715 bed and breakfast homes.
In previous testimony to the council, Matt Middlebrook, Airbnb's head of policy for Hawaii, said Bill 89 would lead to the removal of thousands of those transient units from Oahu's inventory and "inflict significant damage on small businesses and the local economy."
Property owners who rent out rooms in their homes without a permit or rent out entire houses outside of designated resort zones will face up to a $1,000 fine for an initial violation plus $5,000 per day for continued noncompliance. Repeat violators could be hit with penalties up to $10,000 a day and confiscation of rental revenue. Hosts will be required to include a registration number with the rental listing, and the platforms are expected to report host details to the county each month, including the length of booked stays and price. The bill also mandates rental operators provide a 24-hour contact to neighbors within 250 feet of the property for complaints and other issues.
"The council had a clear choice between fair and enforceable compromise and a dangerous and onerous ban. Unfortunately, with yesterday's vote, council puts in jeopardy nearly 7,000 local jobs, $336 million in local household income and $77 million in state taxes," Philip Minardi, director of policy communications for Expedia Group, said in a statement after the council vote.
In April the Hawaii Legislature passed a new bill that would obligate Airbnb and other host platforms to report customer information and collect state taxes. Gov. David Ige has vetoed similar legislation in the past, however, and has yet to indicate where he stands on the latest version of the bill.