By some counts there are 30,000 illegal short-term rentals in Hawaii, mostly on Oahu, even though the city stopped issuing permits for transient vacation rentals nearly 30 years ago. Fueled, in part, by the easy online advertising, this growing inventory of shady operators is gaming a weak system.
Popping up in already crowded residential neighborhoods, these rentals are not in compliance with state and county laws and regulations governing land use and zoning. Except for grandfathered properties, short-term rentals are permitted only in areas zoned for resort use. And, of course, scofflaws are dodging tax bills — general excise and transient accommodation — that legit operators pay.
So, it’s encouraging, after years of griping and grappling, to see a bill advancing at the state Capitol that has potential to significantly strengthen oversight of vacation rental operations. Senate Bill 2963 would allow so-called transient accommodations brokers, such as Airbnb, to collect state taxes generated by rentals using the online home-sharing platform. And it would also make it illegal for brokers to do business with any hosts breaking zoning laws.
In recent years, Airbnb has eagerly offered to handle the tax collection and remittance, but has balked at the prospect of being held liable for law enforcement matters. That take is not surprising, given that its customer listings would plummet — initially, at least — if limited to legitimate operators.
That’s what has happened in San Francisco. Airbnb listings there — its home-base city — plunged to about 5,500 last month, from 10,000-plus in August — as the company and a rival online business were forced to meet a deadline to ditch hosts who had failed to register with the city. While there’s not a ceiling on the count of hosts, registration eligibility is limited to permanent city residents, who must provide verifying documents, such as utility bills.
That current situation came about because the vacation rental sites sued San Francisco when it passed laws in 2015 to hold them for steep fees and criminal penalties if they arranged stays in unregistered homes. A U.S. District judge rejected the companies’ claims that their rights were being violated and instead, ordered them to work with the city on registering hosts.
That upshot appears to support the enforcement aim of Hawaii’s bill. It would make it illegal for brokers to “engage in business” with any rental operator that is not in compliance with all state and county laws, including regulations for land use, taxes and professional licensing. Violations would carry a hefty minimum $25,000 fine.
Two years ago, Gov. David Ige vetoed a bill to allow Airbnb to collect taxes on behalf of the state, in part, because it lacked the crucial enforcement element needed to stop the spread of illegal units. Likewise, San Francisco’s city Board of Supervisors resolved to put in place laws ensuring that homes are not turned into year-round tourist lodging.
Hawaii’s 2018 tourism forecast calls for a record-breaking 9.5 million visitors, following a six-year surge in arrivals. Yet we are not seeing a surge in new, law-abiding accommodations.
Opponents of SB 2963 estimate that a sudden break in the largely unchecked flow of rental options could leave hundreds of thousands of visitors with no place to stay. What’s more, Airbnb has pointed out that had the state allowed it to collect taxes — without a sorting of legal and illegal hosts — it could have brought us $30 million in 2017. Passing up such revenue stings, but it was the right move.
Illegal rentals are creating problems ranging from unwelcome changes in neighborhood character to loss of potential affordable housing for residents. State lawmakers should continue to weigh SB 2963 as it strives to strike a viable balance between collecting taxes owed and deterring the proliferation of illegal rentals.