We are concerned with companion bills House Bill 1850, HD1, SD1 and Senate Bill 2693, SD3 being rushed through the Legislature and promoted by the Hawaii Department of Taxation.
The bills would elevate vacation rental brokers that apply, such as Airbnb, to the status of registered tax collection agents of the state of Hawaii.
At a recent hearing, the representative testifying for the Tax Department was asked whether the department was concerned that the source of the transient accommodation tax (TAT) and general excise tax (GET) income may be illegal according to county laws.
His response was that the department taxes TAT and GET transactions regardless of their legality.
Fair enough; the department could not possibly determine that every transaction taxed did not include some form of illegal activity, service or product.
However, given that most of the residential-zoned transient accommodation activity on Oahu is illegal, easily determined by comparing Hawaii Tourism Authority data (about 4,500 in 2014 but much greater now) with the number of valid Honolulu County–issued nonconforming use certificates in effect (about 800), we are concerned that a significant portion, or majority, of the future transactions by these new state agents would be illegal under Honolulu City and County law.
Much the same goes for Kauai and Maui counties.
Granting “registered agent” status to various vacation-rental brokers would cause the public, visitors and waiting-in-the-wings prospective illegal short-term rental providers to use the excuse that any such short-term rental activity must be “legal” because it is being openly and publicly brokered by a registered agent of the state of Hawaii.
Housing is our primary concern here. Illegal vacation rentals already take thousands of houses and apartments out of Oahu’s rental market — driving up prices, rents and homelessness.
Adding a few thousand more new illegal vacation rentals would worsen the situation and undermine the governor’s (and our) quest for solutions to the housing crisis.
Should this scenario play out as we fear that it must, the Legislature and governor will be burdened with the ethical conflict of having given legitimacy to the state-registered tax collection agents involved in widespread illegal activity at the counties’ level — plus having aided these brokers’ ability to turn even more much-needed rental housing into more illegal vacation rentals.
Legislators are enamored with the prospect of tax revenues from illegal vacation rentals. But the opposite is destined to prevail.
The loss of even more rental housing would further push up housing prices, rental prices and homelessness, costing taxpayers much more in rent supports, social services and public assistance.
The human cost of this result is not estimable.
These bills are coming to a final vote in the House and Senate. We are hoping they will fail, or at least be amended to require these new Hawaii state agents to list and broker only county-certified legal vacation rentals, as has been recommended by officials of the Honolulu Department of Planning and Permitting in their testimony.
Larry Bartley is executive director of Save Oahu’s Neighborhoods; Kathleen Pahinui is a co-founder and member of Save North Shore Neighborhoods. This piece was co-signed by the Rev. Bob Nakata of Faith Action for Community Equity; Victor Geminiani, co-executive director of the Hawaii Appleseed Center for Law and Economic Justice; Don Bremner of Keep It Kailua (KIK); and Connie Mitchell, executive director for The Institute for Human Services.
