Honolulu’s city government has been barred from making residential rentals of more than 30 days but less than 90 days illegal — but only for landlords who were already renting out residences under these terms before Oct. 22, 2022. It’s a somewhat confusing carve-out, but can be reckoned with as the city moves to enforce emergent vacation-rental rules.
Honolulu can and should vigorously bar any new would-be property owners from jumping into this 30- to 89-day rental business, and it also must continue to assiduously lay down the law prohibiting unpermitted short-term rentals (STRs), with meaningful penalties to deter illegal operations.
On Dec. 21, U.S. District Judge Derrick Watson issued a permanent injunction against enforcing parts of a city law that apply to 30- to 89-day rentals. His reasoning is sound. Ordinance 22-7, which took effect Oct. 23, 2022, redefined the length of “short-term” rentals from a minimum of 30 days to a minimum of 90 days; however, before that date, Honolulu did not define a rental period of 30 days or more as “short-term,” nor did it fine or prohibit such rentals. Because state law forbids turning a legal use of property into an illegal use of property, Watson ruled, legally operating 30- to 89-day rentals must remain legal.
Despite this setback, Watson’s order doesn’t create a huge change in the city’s stance on STRs; it only prevents the city from prohibiting 30- to 89-day home rentals “lawfully in existence at its effective date.” That means that when the city investigates possibly illegal STRs, it must be sure that the suspect operation doesn’t fall under this narrow exception. Landlords can provide receipts and show that they advertised before the effective date to be grandfathered in as legal.
Up until now, the city hasn’t enforced any restrictions against 30- to 89-day rentals, because the court had issued a broader preliminary injunction. Now, the city can prohibit new operations from sprouting up, and begin enforcement. It’s important to do so, because some landlords are already using the exception to advertise “decoy” listings of 30 days or more when they have no intention of renting for that span. During this big-wave season, it’s possible to find ads like that for North Shore properties without much sleuthing.
It’s good to hear that the city has been actively enforcing its prohibition on STRs operating without a permit, requiring that landlords register their legal STRs and include permit information within its advertising. This prevents rental- listing services such as Airbnb or VRBO from posting available units without a permit, and allows for a quick check of the rental’s legality. Because no permit was previously required for 30-day-or-more rental, that remains a gray area; nevertheless, enforcement is possible and should be pursued.
The city has issued more than 1,000 notices of violation since Ordinance 22-7 took effect, and 246 of these have advanced to further enforcement. It has also beefed up its Short-Term Rental Enforcement Branch, from two to five workers, and has begun sending overdue penalties to a collections agency. There’s room for improvement here. The city must act aggressively to recover these penalties: While 29 STRs, owing penalties of $4.64 million, have been referred for collections in amounts ranging from $2,000 to $2.2 million, so far, only $14,514 on four accounts has been recovered.
On Oahu, the ordinance restricting STRs came about because of residents’ complaints, as they began to take notice that neighborhoods were becoming more transient; all the while, rents and prices were rising. Further, the University of Hawaii Economic Research Organization (UHERO) has calculated that for each 2% of Oahu’s housing stock that converts to STRs, Oahu’s housing costs rise by 5%. As concern continues to rise over the cost of housing here, short-term rentals are coming into the crosshairs as an avoidable problem — and Honolulu’s efforts to hold the line are well worthwhile.
On Maui, where an eye-opening 40% of residential units in West Maui, including Lahaina, have been taken up by STRs, the burden this places on the residential housing market has been put on full display by the Lahaina fires.
On Friday, Gov. Josh Green, Mayor Richard Bissen and representatives of community organizations seeking to house Maui’s fire-displaced appeared at a news conference to discuss efforts to create new housing — but it remains clear that without help from STR owners on Maui, all fire refugees could not be sheltered in a timely manner. Green again called on STR operators to open their homes to the displaced, out of good will, but left open the possibility that West Maui STRs could be pressed into use under his emergency powers.
Outside of this emergency situation, it’s clear that Maui must get a handle on its overrepresentation of STRs, including unpermitted units, within residential properties. And while Judge Watson’s ruling doesn’t settle the matter, it does leave Honolulu County’s enforcement of STR restrictions in place. Maui County should take note.
