The March 24 editorial, “Right Opens in a new tab moves on vacation Opens in a new tabrentals Opens in a new tab” (Our View, Star-Advertiser), was an excellent summation of legislation, now before the Honolulu City Council, to regulate vacation rentals.
An estimated 8,000 to 10,000 of these illegal, tax-avoiding, neighborhood-disrupting vacation rentals have plagued Oahu for years. Statewide, the hospitality industry and community groups have appealed to the state Legislature and county councils for stronger enforcement of the laws and ordinances governing these businesses.
The state administration and Legislature have been unable to reach an agreement on an acceptable solution for several years, and so the hospitality industry, which I represent, decided to focus our efforts on the county governments.
The neighbor island counties have responded by moving in the right direction to regulate these vacation rentals. And it was refreshing to see the strides made by the City Council on Bill 89 (2018), which, in its current form, takes a firm stand against new permitting for rentals and allows for limited expansion of bed-and-breakfast businesses. This bill amends the Caldwell administration’s third omnibus bill, which had failed twice before to earn the approval of the mayor’s appointed Planning Commission.
Testifying on behalf of the Hawaii Lodging & Tourism Association (HLTA) at the Council Planning Committee’s public hearing on this bill, I supported some specific amendments because the original measure did not go far enough. The bill emerged with a 5-0 vote, with the language supporting a registration and expansion plan for bed-and-breakfasts only. The Planning Committee chairman’s draft amendment omitted a stipulation for a separate real property tax classification for vacation rentals and bed-and-breakfasts, which I believe is a necessary addition as the bill progresses. This would create an opportunity for the city to follow in the footsteps of Kauai and Maui and collect more property taxes from property owners using their homes as businesses.
This move to regulate vacation rentals comes at an uncertain time for the tourism industry. This newspaper reported on March 26 about island hotels showing their worst February performance in a decade. This amplified the signs of an economic slowdown, as industry stakeholders and economists have been warning for about a year.
Meanwhile, our HLTA hotel-members already had been experiencing a downturn for a good portion of 2018 because of the Kauai flooding, Kilauea eruption, federal government shutdown, and prolonged hotel strike. I might add that the Hawaii Tourism Authority has pointed out that a sizable proportion of visitors are staying at these illegal rentals rather than at the tax-paying, bricks-and-mortar lodgings, with high visitor arrival numbers creating the misperception that our hotels are overflowing with travelers when, in fact, they are not.
With tourism experts projecting that the latest figures likely reflect a general decrease in hotel performance, we note that the Legislature is poised to impose the transient accommodations tax on hotel resort fees, and are flabbergasted by Mayor Kirk Caldwell’s call to increase the real property tax rate on hotels and resorts — the only business real property tax class being targeted for an increase.
We cannot continue to avoid the tough choices on the issue of illegal vacation rentals. Neighborhoods are being disrupted, needed affordable housing is being driven out by illegal rentals, and the city and state governments are being deprived of a major source of as-yet-uncollected tax revenues.
HLTA encourages the City Council and our neighborhood advocates to keep up the momentum on Bill 89 so we can finally address this long-standing problem.
Mufi Hannemann is president and CEO of the Hawaii Lodging & Tourism Association.
