In Hawaii’s effort to rein in the so-called sharing economy’s vacation rental sector, which is thriving yet largely unpermitted in the islands, state and county governments are struggling partners.
The transient accommodations and general excise taxes that short-term rental operators must pay are levied by the state — but the permits needed to operate a rental are issued by counties. Due to often weak and poorly enforced county laws, as well as federal law clouding transparency in online bookings, the partners are grappling with a vast illegal inventory.
It’s encouraging then — in the wake of several years of debate at the state level, and decades of deadlock in Honolulu County — proposed legislation is advancing that holds promise to gain more control over the scope of the home-sharing industry in Hawaii.
Among the measures advancing at the state Capitol is Senate Bill 1292. Its provisions include a requirement for websites like Airbnb, which charge fees for vacation-rental booking services, to register as third-party tax collection agents and collect GET and TAT payments.
Also, moving forward is House Bill 419. In counties that set limits on the number and location of vacation rentals, it requires all operators and respective properties to be listed on a registry. Further, it requires tax collection agents to disclose to the state information on listings; and prohibits collecting fees or completing bookings for properties not listed.
Here and in many other visitor-magnet areas, online platforms have balked at similar calls for transparency and policing. Even so, Hawaii lawmakers should support this legislation as a potential means to making sure government gets its due tax revenue.
In the past decade, as online platforms emerged as global businesses, they have asserted that the First Amendment and the federal Communications Decency Act (1996) shield web providers from liability for third-party content on their sites. However, recent court challenges are making strides in disputing that protection.
Last month, the 9th Circuit Court of Appeals reaffirmed a Santa Monica, Calif., ordinance that holds hosting platforms liable for booking short-term rentals that aren’t permitted by the municipality. The ruling supports the assertion that the Communications Decency Act does not give the go-ahead to a lawless no-man’s land on the internet.
Further, the court panel’s written ruling stated: “Like their brick-and-mortar counterparts, internet companies must also comply with any number of local regulations concerning, for example, employment, tax, or zoning.”
The case was touched off when Santa Monica — intent on preserving its supply of affordable housing amid a competing demand for vacation rentals — went after illegal home-sharing vacation rentals posted online. Honolulu and the rest of Hawaii should insist upon securing the same level of responsibility here.
Honolulu, which has not issued new vacation rental permits since 1989, has about 800 legal rentals and at least 8,000 outlaws. In an effort to bring bite to regulation, the City Council is now weighing an omnibus measure, Bill 89, that would allow up to 4,000 new permits for hosted bed-and-breakfasts; there would be no new unhosted transient vacation units in residential areas.
That move appears to be a sensible step forward, as TVUs get much of the blame in complaints about noise, parking snags and other rental-related problems in residential neighborhoods. Left unchecked, the strong demand for vacation rentals undermines established land use law, essentially growing resort zoning in residential zones.
Hawaii’s local and state leaders must continue to tag-team fight against de facto hotel use in residential zones; and for laws that establish more transparency and fair taxation.