Hawaii has struggled for decades to deal rationally with its vacation rental problem — the problem being that this is a growing industry operating largely outside the law. The opponents worry that the tourist influx into residential areas, mostly illegal, is changing the character of their local neighborhoods altogether.
There is also an argument that vacation rentals have a sizeable, unfair financial advantage. The operators of the rentals do not pay the same transient accommodations tax as conventional hotels do, and state leaders have been itching to level that playing field and gain a great deal of revenue besides.
The pressure to change this status quo has built for years, but it’s a policy shift that requires public knowledge and input. That is why Gov. David Ige’s plan to negotiate privately for a revenue deal with Airbnb and other rental brokerage websites — and decline to release information about it — is worrisome.
The Honolulu Star-Advertiser is filing a formal open-records request with the governor and the state Department of Taxation. So far the agreement has been negotiated only with Airbnb, but similar accords could be struck with other companies as well.
Disclosure of the arrangements is crucial to give the public information it deserves: what revenue the online sites would collect while taking bookings for the rentals and what benefit the brokerage site might get in return for the service.
So far efforts to pass legislation have been elusive. There’s disagreement at the state Capitol over the terms of a collection — whether or not the broker should become an agent for state tax collections.
Conflict also erupted over whether the broker should help government land-use agencies enforce their regulations. The City and County of Honolulu has lagged in developing a workable enforcement plan; in recent weeks the City Council has set in motion another proposal for regulating vacation rentals.
Until the county issue gets resolved, Ige has been inclined to wait on enlisting brokers in the task of collecting revenue for the state. Two years ago, he vetoed a bill passed by the Legislature to authorize the brokers as tax-collection agents.
Ige rightly argued at the time that starting tax collections in advance of county regulations would be like the state giving tacit approval of illegal vacation rentals. If that happens, it would become much more difficult for the city to play its proper gatekeeping role, and the illicit trade would accelerate out of control.
Many would argue that it’s already out of control. On Oahu, where city officials have not issued new vacation-rental permits for nearly 30 years, there are only about 800 accommodations operating legally.
And the city is nowhere near necessary enforcement levels. According to data from the city Department of Planning and Permitting, in 2015 and 2016, fines paid amounted to $13,700 and $13,550, respectively. So far this year, the fine assessments are up to $52,000, but considering how many unpermitted rentals are in business, it’s a paltry sum.
The enforcement failure remains a critical point, one that distinguishes this issue from other justifiable agreements that states can strike with private parties. For example, many states have negotiated privately with the retail giant Amazon on an online sales tax the website would collect and then remit to the states.
This is different, because collection has a way of legitimizing what may be illegitimate rental operations that can be disruptive to a neighborhood. Left unregulated, vacation rentals collectively could undermine residential land-use controls.
And that is not something that should happen without witness or comment from the community that would end up paying the price.
