I read with interest the recent front-page article, “Short-term rental rift creates a house divided” (Star-Advertiser, Aug. 25).
A few months ago, I was misled into buying a Honolulu rental property.
Excellent area, large lot, spectacular views and a so-so building — serviceable for rental. I was able to verify the claimed income 7% net (after expenses) on the cash price. I wired the money and closed on June 14 (subject to a number of already booked short-term rentals). However, no one bothered to advise me that the rentals were totally illegal and that the “Big Hammer” — the city’s Ordinance 89 — was on the table and fixin’ to pass.
On June 22 there was a week’s gap in the booked rentals, and we flew over from Dallas to personally “take possession” of the property and live in it. The rental is a single-family, six-bedroom house in a 100% residential neighborhood in Hawaii Kai. In effect a small hotel, which had been running at about 65% occupancy for years with frequently changing renters — typical occupancy of six days.
After perusing the Star-Advertiser on a daily basis, I gained a substantial amount of understanding of what indeed was happening, and regretfully had to recognize that the basis upon which I had purchased the property was crumbling away beneath my feet.
Your Aug. 25 article focused on the Kuhio area of Waikiki, which — indeed — is a royal mess. Who’s to blame? The responsibility rests squarely on decades of inept, ignorant and unfocused or distracted city and county administrations and councils. It’s about time someone woke up and addressed this issue.
I have seen estimates in the Star-Advertiser, that the number of illegal rental operations range from 6,000 to 10,000. Let’s take the middle number, 8,000, and let’s assume the average number of bedrooms is only three per operation. That equals to 32,000 rooms operating illegally. What’s a big hotel? 800 rooms? If that is the case, the illegal operations equal 40 big hotels operating illegally in Honolulu!
I am from Texas, where our biggest city (Houston) has no zoning laws, so I do not automatically react to unusual real estate activities. I am, however, also not a hick from the back country, so after familiarizing myself with the Honolulu situation (mostly by reading the Star-Advertiser), I regret to conclude that I cannot think of one good reason why my property should be permitted to offer short-term rentals.
With respect to Waikiki, the situation is different. Waikiki is obviously and blatantly the very soul of Hawaiian tourism and anyone claiming that it should be regarded as a residential neighborhood — never mind the zoning mess — is flat not thinking straight. All units in that area should be offered an opportunity to purchase zoning waivers, which would allow them to rent short term — good deal for them and good money for the municipal coffers. The effect on the owners living long-term there would be their crying all the way to the bank.
The hammer has fallen and there is all kinds of collateral damage — much of which will be percolating to the surface over the coming months as illegal operations cease, businesses servicing them close and jobs are lost. Anyone pretending that there will be no consequences, is obviously whistling in the graveyard. You cannot put the equivalent of at least 40 big hotels out of business without damage.
Some will be replaced with union-built and -staffed legal operations — which, however, will come at a cost that does not address the huge cost- conscious demand met by the illegal short-term rentals.
Arrivals will tick down, resulting in some sand in the gears of the otherwise smooth-running Hawaii tourism engine. The union bosses and the hotel industry will be happy.
Carsten Mikkelsen, of Dallas, Texas, has bought, sold, developed, managed and syndicated real estate in California, Texas and Germany for over 50 years.
