Big Island Lawmakers Attempt To Rein In Short-Term Vacation Rentals – Honolulu Civil Beat

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Supporters say new limits are needed to increase the island’s affordable housing stock, while opponents fear negative economic consequences.

A package of bills expected to be introduced before a Hawaii County Council committee on Tuesday aims to crack down on the number of short-term vacation rentals on the island.

Crafted to address complaints about noise, parking and the loss of character in residential and agricultural areas of the Big Island, the measures also seek to increase the volume of long-term rentals while tamping down rising housing costs.

It’s a debate that has become increasingly urgent statewide amid high cost of living increases, fears that locals are being driven to the mainland by a lack of affordable housing and with thousands of fire survivors from the Aug. 8 Lahaina inferno still stuck in hotel rooms.

“The tragedy of Maui should be a wake-up call for decision makers,” said former Big Island Mayor Harry Kim in a phone interview.

Kim was referring to Maui’s extremely tight housing market, the fact that 14% of the island’s housing stock consists of short-term vacation rentals, and that agencies are struggling to persuade owners of second homes and short-term rentals to house fire victims.

Bills 121, 122 and 123 are sponsored by County Council Chair Heather Kimball and Council Member Ashley Lehualani Kierkiewicz.

In her newsletter to constituents, Kimball said Hawaii island was ill-prepared for the rapid expansion of transient accommodation rentals and online hosting platforms such as Airbnb and Vrbo, which emerged in the mid-1990s.

Wainani Estates is a housing development in North Kona. Homes sold there between 2018 and 2020 were priced mostly in the $550,000 to $665,000 range. (Cameron Miculka/Civil Beat/2020)

Because owners know they can get three to four times more revenue by renting to tourists rather than locals, the trend has headed in that direction, according to Kimball and Kierkiewicz. A 2018 report by Hawaii Appleseed Center for Law & Economic Justice backs that up, finding that in the two preceding years, the number of vacation rentals in Hawaii grew by 35%, driving up housing costs.

Although the proliferation of short-term vacation rentals increases tourism spending and tax collection, “the benefits are far outweighed by the costs,” the report found.

Ashley Lehualani Kierkiewicz represents Puna District in the County Council. (Courtesy: Hawaii County)

“These units are changing the character of the island. They’re changing the island lifestyle,” said Kierkiewicz.

Hawaii County took its first stab at regulating short-term vacation rentals in 2018 with passage of Bill 108. It limited the areas where “unhosted” rentals could operate to resort and commercial districts and implemented some operational standards.

Now the county is going after “hosted” short-term rentals, meaning the owner lives onsite or has someone else managing it from the premises.

“These bills attempt to strike a balance between allowing people to continue or start and operate transient vacation rentals on their properties while limiting the expansion of investor-owned TARs,” Kimball said in a recent interview.

Kimball represents District 1, which includes the Hamakua Coast north of Hilo, while Kierkiewicz represents District 4, which cover parts of the sprawling Puna District on the southeast coast.

The bills are complex and contain many provisions and grandfather clauses. Among the many features, all TARs that are rented for less than 180 days would have to register with the county. The legislation creates three rental types: owner-hosted, operator-hosted and unhosted.

“These units are changing the character of the island. They’re changing the island lifestyle.”

County Council Member Ashley Lehualani Kierkiewicz

Owner-hosted rentals can be started in any zoning district as long all safety and code requirements are met by affidavit and as long as the owner lives on the property and uses it as their primary residence.

Newly opened operator-hosted TARs could only be located in resort and commercial areas. Existing ones, however, could be grandfathered in with the right paperwork filled out and fees paid.

Property owners who operate TARs in auxiliary units could be grandfathered in but new ones could not be started. That said, one of the bills relaxes some of the current restrictions on building so-called ohana units, as long as they are used for long-term housing and not as vacation rentals.

Big Island County Council Chair Heather Kimball is co-sponsoring the new legislation. (Courtesy: Tracey Lyn Gapol)

Operational standards also would be expanded if the legislation passes as written.

Those include guest limits, off-street parking requirements, noise restrictions and limits on events. The proposed legislation also envisions heavier fines for violations of standards and the possibility of having a registration revoked for repeat offenders.

The council members held a year of public discussion and outreach since introducing draft versions of the legislation, receiving extensive feedback. Amendments were made based on public feedback, the lawmakers said, and a website was developed that explains the ins and outs.

Emotions appear to be running high on all sides of the issue.

“We’re going to defeat this bill or any others like it. Period. Dot. End of story,” said coffee farmer Joshua Montgomery.  “We’ll beat it at the county council. If not, we’ll beat it at the election box in November. If not, we beat it in court.”

Montgomery is a spokesman for Ohana Aina Association, which represents operators of homestays, farmstays and vacation rentals on the Big Island.

Montgomery doesn’t believe the legislation would lead to more long-term rentals. And, he says, making it harder for island residents to rent out bedrooms or garages will only increase financial hardships many locals face by living in such an expensive state.

“We don’t really have a housing supply problem. We have a money problem. You can go to Zillow right now and see dozens or hundreds of homes that are available for sale. The issue is local families don’t have enough money to buy them,” he said. “Taking away their economic opportunity like this is not going to help their situation.”

Joshua Montgomery
Joshua Montgomery is a coffee farmer who opposes the proposed legisiation. (Courtesy: Joshua Montgomery)

Others, like Kailua-Kona resident Alexis Ching, see the legislation as a necessary means to curtail Hawaii island’s spiraling housing costs and the erosion of cohesive neighborhoods.

“More and more I’m seeing Kona as a place that’s becoming more transient,” said Ching, who grew up in the area and works in the nonprofit sector.

As more homes become short-term rentals marketed to tourists willing to pay top dollar, fewer homes are available to rent longterm. As inventory shrinks and demand grows, prices rise, putting affordable rental and homeownership to people like her even further out of reach.

“It drives up the cost of housing,” Ching said. “It makes life more expensive.”

A June 2023 report from the University of Hawaii Economic Research Organization found that 17% of housing units in Kailua-Kona are short-term vacation rentals. By contrast, cities like Las Vegas and Los Angeles, where tourism is also a significant industry, TARs make up 3% and 1% respectively.

“We don’t really have a housing supply problem. We have a money problem.”

Legislation opponent Joshua Montgomery

Hawaii Island REALTORS, a trade group, is among those who see the proposed regulations as burdensome, expensive and onerous because of the registration fees and fines for noncompliance.

Jessica Gauthier, who sits on the group’s government affairs committee, said instead of creating what she called a “mountain of paperwork” for property owners and county employees, the county should enforce existing rules and crack down on TAR owners who operate illegally.

Jessica Gauthier is an East Hawaii real estate professional and manager of several short-term vacation rentals. (Paula Dobbyn/Civil Beat/2022)

In addition to being a real estate agent, Gauthier manages a number of short-term vacation rentals. Gauthier said her company indirectly employs nearly 30 people to maintain, clean and perform pest control at the units and that the business paid the county nearly $47,000 in taxes last year.

“Our contribution alone is enough for one full-time planning staffer to go through Air Bnb, then identify the illegal use and send certified ‘cease and desist’ letters,” Gauthier said.

Gauthier also doubts the legislation would encourage more property owner to open their doors to long-term renters since they could get much more money from tourists.

UHERO found that short-term vacation rentals in Hawaii “play a truly outsized role in the housing market compared to other locations.” Researchers also found that changes to the regulatory environment governing TARs would have significant positive consequences for the housing market.

On Tuesday, members of the County Council’s policy committee on planning, land use and development will vote on whether to move the bills to the Big Island’s windward and leeward planning commissions for consideration. Information on how to participate or watch the 1 p.m. meeting is here.

Kimball and Kierkiewicz expect the process of reviewing and amending the legislative package could take six months to a year before a final vote.

Former Big Island Mayor Kim, who was in office when the first TARs regulations were passed, said he hopes the new package of legislation will be approved.

“This might be a turning point,” Kim said. “You shouldn’t have to be a millionaire just to afford a simple house.”

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