Tovin Lapan
Tovin Lapan

New regulations regarding short-term rentals on Oahu went into effect Aug. 1, and property owners, tour providers and visitors are all scrambling to adjust as vacation and event plans have been thrown into disarray.

While those with vacation plans farther out have time to adjust, people planning to visit the Aloha State in August and September have had to scramble as numerous accommodations have been taken out of the rental pool.

Ken Middleton, who has run a charter yacht business on Oahu for decades, said he has seen at least a dozen cancellations for his business, including a destination wedding planned for one of his yachts, due to people losing their vacation rental at the last minute.

"It's definitely been a significant loss, and I'm upset," he said. "I put the blame on the city council and mayor. They are implementing these draconian rules with little notice and no respect for the businesses and people who are being impacted."

Middleton spoke out against the new rules when the Honolulu City Council, which governs all of Honolulu County (the entire island of Oahu), passed Bill 89 at the end of June. The law imposes fines on illegal operators and increases demands on hosting platforms, such as Airbnb and Vrbo, for transaction records. It also 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 law opened up new registration for up to 1,715 bed and breakfast homes, a process not set to begin until October 2020.

"We get 3 million more tourists per year than we did 10 years ago, and the hotels have not grown to accommodate that increase. It's the vacation rentals that accommodated the growth in tourism. And those people are still spending in Waikiki, they still go to restaurants, so it's a win, win, win," Middleton said. "Those people are going to find somewhere else to go. We're not the only pretty beach in the world."

Don Eovino, an Oahu resident who operates vacation rentals, said he still has some legal units but has had to scale back his business and plans to reduce staff for maintenance, cleaning and other duties. He said the existing rental operators who paid taxes and did not have code violations should have been grandfathered into the ordinance to avoid such a cut in the stock of accommodations.

"My feeling is that for the most part, things have been operating fine for 30 years and it's only recently that the hotels have made a lot of noise about it," Eovino said. "I understand some people don't want it in their neighborhood, but I think that is mostly because of some bad actors. It could be better regulated and controlled properly."

Honolulu has not added to the existing 800 permits since 1989. Prior to the new regulations, there were an estimated 8,000 to 10,000 short-term rentals advertised on Oahu at any given time. In July the county sent notices to roughly 5,000 rental operators warning them they may be in violation of the new law. After the law took effect, officials said short-term rental listing fell 37% from the amount found two weeks prior. 

"There are some people that want vacation rentals and will not come here if it's not available," Eovino said. "Big families and wealthy travelers, they want to bring everyone, kids, maybe the nanny too, and they want a full kitchen, washer and dryer, and for everyone to be together. They don't want five or six different rooms at a resort. That market will not have a place to stay now, and down the road this could affect airline lift. They spent years building it up, and if it goes away it takes years to recover."  

Bill 89 was supported by the Hawaii Lodging and Tourism Association and the state's largest hospitality workers union, which both expressed concerns about tax avoidance and the impact of the rentals on residential neighborhoods and housing costs.

"We at HLTA do not take the stance of outlawing the short-term rental market. What we are seeking is a level playing field that includes operating their businesses under the same guidelines, restrictions, zoning laws and standards as our traditional brick-and-mortar hotels, resorts and timeshares," association president Mufi Hannemann said during the city council discussion of the bill.

Hawaiian Airlines, rental property owners associations and booking platforms all lobbied against the bill, citing worries that it would prove too great of a hit to the accommodations supply, damage the economy, and hurt the state's vital tourism industry.

With the law only going into effect on Aug. 1, it is too soon for hard data on its impacts on rental stock, neighborhood dynamics and the visitor experience. 

Mike Dixon, a retired political scientist who has lived on the North Shore for more than three decades and has studied that area's vacation rental market, said the real impacts, if any, will be felt during the annual end-of-year influx of surfers for the busy winter season including the Triple Crown of Surfing. 

"The bill was poorly drawn up and poorly executed," Dixon said. "But September and October are typically slower months, so it's hard to tease out the impacts of the law just by looking at advertising."

Dixon said he does worry that as the short-term rental availability on the North Shore declines, there will be a corresponding slowdown for restaurants and shops in the area, such as in the North Shore town of Haleiwa, that rely on visitors for a significant portion of their revenue.

"From the research I did, it appeared most of the rental operators did pay taxes, so we may see a dip in tax revenue in the first quarter of 2020 that will tell a bigger story," he said. "There's been a lot of upheaval, so stay tuned."

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