Decades in the making, Oahu’s knotty vacation rental predicament will not quickly untangle. Even so, the city should swiftly enforce a new law that aims to prevent neighborhoods zoned as residential from turning into de facto commercial resort areas.
Since Ordinance 19-018 took effect this month, its enforcer, the city’s Department of Planning and Permitting (DPP), has been combing through online listings for dwellings to be rented or leased for less than 30 days. Those lacking city-issued certification can be flagged for possible daily fines of up to $10,000.
Previously, DPP struggled with a near-impossible burden that tied violation to catching an illegal operator red-handed.
It’s encouraging that the city is gearing up to get tough on illegal operations. After it stopped issuing new permits for vacation rentals in 1989, increasing demand outmatched weak regulation and enforcement strategy, leaving Oahu with a current estimate of 770 permitted units and about 10 times as many illegal units.
Another new law provision, which takes effect in October 2020, allows about 1,700 more bed-and-breakfast operations in which a property owner stays on-site during the rental period; it does not allow any new permits for rentals known as transient vacation units (TVUs), which are typically unhosted.
The debate over whether to expand inventory at all had long divided residents. Supporters maintain that vacation rentals benefit the local economy and serve as a means for operators to make financial ends meet in high-cost-of-living Hawaii. Opponents rightly counter that rentals contribute to a long-standing affordable housing shortage and mar neighborhood character.
In years past, amid emotionally charged testimony from both sides, City Council resolve to take action withered. This time around, amid proliferation of outlaws — due in large part to the popularity of online home-sharing platforms, such as Airbnb — and the state’s streak of record-setting visitor arrivals, the Council approved a wide-ranging law that holds potential to establish viable balance.
Still, not everyone is pleased, of course. Among the challenges in the works is a pending lawsuit filed by the Kokua Coalition, also known as the Hawaii Vacation Rental Owners Association, arguing that its members have a 2018 settlement agreement with the city that allows them to operate a “30-day rental” contract through which it’s understood the tenant might not stay the entire 30-day period.
Now seeking a restraining order to stop city enforcement action, the coalition is set to go before a U.S. District Court judge this week. While it’s unclear whether this sort of contract skirts city rules and regulations, what’s clear is that in the absence of a courtroom directive, DPP should steadfastly proceed with the crackdown.
An additional provision — also kicking in in October 2020 — requires platforms to file periodic reports with the city that list information about their home-sharing clients. Airbnb’s general listings withhold most of a client’s contact information, including the accommodation’s physical address.
In other cities and states, similar stipulation has touched off legal battles, yielding mixed results. In testimony submitted before Oahu’s law was enacted, Airbnb argued that the provision violates the Fourth Amendment, prohibiting unreasonable search and seizure. Also, platforms have asserted that the federal Communications Decency Act (1996) shields web providers from liability for third-party content on their websites.
However, a recent court battle offers optimism for effectively disputing claimed bulletproof status. The 9th Circuit Court of Appeals recently 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 sensible reasoning that web-based transactions should heed local laws.
In Hawaii, permits needed to operate vacation rentals are issued by the counties, and the taxes that property owners must pay are levied by the state. The two levels of government must work together to wrestle control over the industry’s reach.
Last month, Gov. David Ige took a step in that needed direction of government unity by vetoing a bill that would authorize platforms to collect taxes but also spare them from accountability for doing business with illegal operators by allowing information collected — includ-
ing names and addresses of proprietors — to be kept confidential.
Another promising step: On the heels of an investigation that found many Airbnb hosts do not have a general excise tax license or transient vacation tax account, the state Department of Taxation is slated to go before a Circuit Court judge next week to ask for permission to force Airbnb Inc. to turn over booking records of operators in Hawaii.
Airbnb and other platforms are thriving, and Hawaii’s overall vacation rental demand appears voracious. It’s critical for Honolulu, along with the other counties and the state, to stand resolute in the effort to rein in the industry’s presence.
