The vacation rental problem on Oahu is not going away, much as the Honolulu City Council has tried to keep it on the back burner. Quite the contrary: The day is coming up fast when, without regulatory action, city leaders will lose all control over how residential communities can be maintained.
The city stopped issuing the permits (“certificates of nonconforming use”) for these rentals in 1989, but ineffective enforcement tools made it difficult to penalize the scofflaws. The rentals multiplied, with the most explosive growth following the establishment of online rental broker sites such as Airbnb. And the Council ran into withering resistance whenever it attempted regulation.
Finally, enough political pressure has been brought to bear on the nine Council members that now there seems to be the will to handle the proliferation of illicit bed and breakfast (B&B) units and transient vacation units (TVUs).
State legislators are looking hungrily at the transient accommodations tax (TAT) revenue these rentals could add to state coffers — revenue that the broker sites have offered to collect on the state’s behalf.
Here’s the reality check: There is a spot for vacation rentals on the spectrum of visitor accommodations. Some already are legal, they are increasingly in demand, and stamping them out categorically is neither realistic nor desirable.
It’s reasonable to reopen a path for legalizing a limited number, if it also provides an opening to lay down some needed markers for what’s required of landlords. The city’s window of opportunity to nail down firm restrictions will slam shut once tax revenue starts pouring in, so there’s really no time to lose.
After a long and emotional public hearing Thursday in Honolulu Hale, the Council rightly advanced for more discussion four resolutions aimed at allowing limited numbers of vacation rentals, under much stricter enforcement rules. But there is more work to be done on them — in particular, hardening the penalties even further, and raising the bar considerably on TVUs.
Unlike B&Bs where the homeowner is the live-in host, the TVU, usually a single-family home, is turned over entirely to the guests who can cause a greater intrusion on the neighborhood. And these units are the most common targets of the investors who buy them, driving up property values and rents for local residents.
Fortunately, even assuming the resolutions are adopted in some form, there will be an opportunity for revision. The legislation hands off the proposed regulations to the city Department of Planning and Permitting for further review, after which they will return to the Council for another look.
Here is what looks promising in the legislation:
>> Resolution 17-52 toughens penalties considerably. It would require sites such as Airbnb to report monthly to the city on the Oahu rentals that advertise, including the address and person responsible for the listing. Rental operators would be barred from advertising through any other method. It would allow neighbors of rentals to go to court to compel the city to enforce violations.
>> Resolution 17-164 would authorize the city to issue a lien against a property for a violation. It also mandates that advertisements of vacation rentals include addresses and certificate numbers, and establishes advertisements as evidence that can be used against an operator. Also, a TVU or B&B certificate would be prohibited from transfer in a property sale.
>> Resolution 17-163 would allow for an unspecified limit on the new B&Bs and TVUs that would be allowed islandwide and within each development plan area. It also doesn’t specify what percentage of the total should fall in either category: Clearly, a far lower percentage of TVUs should be allowed.
>> Resolution 17-301 would set various limits on B&B operations and would cap their permits at 0.5 percent of all Oahu residential properties. None of the Council districts could have more than one-third of the citywide total allowed.
This version would regulate both types of vacation rentals but would not expand TVUs. However, the optimal legislation package would split off the TVU category separately, possibly creating a separate tax category for it.
The rental of these units to short-term vacationers removes full homes from the local residential market, in the pursuit of higher profit margin from the steady turnover.
City policy should counter that profit motive by assessing a hefty tax, which could lessen the incentive and keep more units in the residential rental inventory. Oahu’s affordable housing need and homelessness are already at crisis levels, and draining the inventory further makes no rational sense.
The island’s sky-high visitor count and low hotel vacancy could justify a modest expansion of the vacation-rental sector. But the city must not allow it to destroy the character of Oahu as a place where real people really do live and work. This is home.