Hawaii lawmakers have advanced hotly contested bills this month that would allow Airbnb, and similar online vacation rental platforms, to collect taxes on behalf of the state.
While the legislation potentially could bring in millions of dollars in unpaid general excise and transient accommodations taxes, opponents of the measures say that they only will abet the proliferation of hundreds of illegal vacation rentals that are depleting the rental market for local residents, driving up rents and changing the character of residential neighborhoods.
“We can’t continue to lose hundreds of homes out of the rental inventory on a monthly basis without continuing to exacerbate an already terrible housing problem here,” said Eric Gill, secretary and treasurer for Unite Here Local 5, which represents primarily hotel workers.
On Wednesday, the House Consumer Protection and Commerce Committee passed House Bill 1471, a bill backed by Airbnb, that is similar to a measure vetoed by Gov. David Ige last year. A similar measure passed the Senate Commerce, Consumer Protection, and Health Committee last week.
The bills still have a long way to go toward final passage and Ige indicated to reporters last week that he wouldn’t support a measure that didn’t include safeguards to ensure counties can verify that the rentals being advertised are legal. In vetoing last year’s measure, Ige said that the legislation “provided a shield for owners who choose not to comply with county laws.”
More than 22,000 vacation rentals were being advertised online, on platforms such as Airbnb, VRBO and TripAdviser, according to a 2014 report by the Hawaii Tourism Authority — a majority of which were believed to be illegal under county restrictions.
Airbnb alone had some 8,134 entire home listings available for short-term rent on Oahu, Maui, Kauai and Hawaii island during the 12 months leading up to Oct. 1, 2016, according to a report the company commissioned. However, there is debate over how many of these units would be made available to local, long-term renters if operators couldn’t rent them out on a short-term basis.
Meanwhile, the state is struggling with an affordable housing shortage and has one of the worst homeless rates in the country. Hawaii’s shortage of rental housing is expected to grow to more than 20,000 units by 2020, according to statistics from the Department of Business, Economic Development and Tourism. Ige has proposed pouring some $180 million into affordable and public housing this upcoming fiscal year to try to keep pace with the problem.
Airbnb, which like last year has retained a cadre of high powered lobbyists from Honolulu’s Capitol Consultants, argues that its online advertising platform benefits local businesses and residents who generate extra income from the rentals, allowing some people to remain in their homes in the face of foreclosure.
The company also says that if it had been allowed to collect and remit taxes in Hawaii last year, it could have brought in some
$26 million in revenue, up from its estimate in 2015 of $15 million.
But that’s where the essence of the controversy lies. While Airbnb can help ensure that tax scofflaws are paying the state what they owe, a task the Hawaii Department of Taxation has struggled to do, the legislation also could allow illegal vacation rental operators to hide behind the company’s generic tax identification number.
Gill said that Airbnb’s business model encourages the illegal activity, noting that last year the company blanketed communities, such as Manuawili and Nanakuli, with postcards urging residents to engage in short-term rentals. The number of permitted vacation rentals on Oahu has been capped since the 1980s.
“So Airbnb actively encourages people to violate the law,” Gill told legislators at a Tuesday hearing on HB 1471.
Asked to respond, Airbnb told the Star-Advertiser that the postcards were sent “in error and do not reflect our goals for our community in Hawaii.”