When Hawaii tourism came to a halt in 2020, Honolulu residents were able to feel what the island was like before the advent of short-term vacation rentals – and the millions of tourists they draw. 

Mayor Rick Blangiardi wants to hold on to that feeling and is proposing what he calls an aggressive crackdown on the industry. 

“Our plan here, and what we’re going to do, is to shut that business down,” the mayor said at a press conference last week. “We feel this is absolutely critical for our communities, so we’re not feeling overrun. This is about the city’s efforts to manage tourism while at the same time address housing needs.” 

The Blangiardi administration is proposing new rules for short-term rentals. They are scheduled to be discussed at Wednesday’s Planning Commission meeting before proceeding to the Honolulu City Council. 

Part of the plan is to further restrict the number of short-term rentals on Oahu.

Vacation rentals have been allowed to operate anywhere on Oahu if they’re booked for 30 days or more – regardless of whether the guest really stayed there the whole time. The new rules would require guests to book for at least 180 days, a less desirable time-frame for tourists and hosts. 

The new proposal would also prohibit all new short-term rentals in residential areas, regardless of whether the owner lives on site or not. 

Legislation passed in 2019 allowed for about 1,700 units to be permitted in residential areas if the owner lived on site. A bed-and-breakfast permitting process was slated to begin in October 2020 but the Blangiardi administration delayed that registration. A lottery system was considered, but the administration decided not to pursue it. 

Fines, which currently go up to $10,000 per day, would be increased to $25,000 per violation per day under Blangiardi’s plan. 

The Blangiardi administration’s proposal addresses taxation too. 

Bed-and-breakfast properties, where the owner lives on-site, would be taxed at the bed-and-breakfast rate. Whole-home rentals, also known as transient vacation units, would be taxed at a higher hotel and resort rate. 

All new B&Bs and transient vacation units would be required to maintain general excise and transient accommodations tax licenses and would have to maintain a minimum of $1 million in commercial general liability insurance at all times, the proposal states.  

The city estimates the new tax revenue will bring in over $3 million per year, which will be directed to a new short-term rental enforcement branch of DPP. 

The legislation has already drawn support from citizen groups like Keep It Kailua, which have railed against the proliferation of illegal rentals for years. 

Matthew Luchinskas, who has lived on the North Shore for about 50 years, said vacation rentals have changed his community over the years.

“We used to have a healthy mixture of school teachers, Kahuku nurses, carpenters, all kinds of people lived here,” he said. “So many people have had to move out, and investors come in and make it a vacation rental. It happens a lot on the North Shore.”

He said the proposed changes could have a significant impact. 

“This is beneficial for improving the quality of life for the people of Oahu, the finite resources we have, and it does generate revenue through the taxes and funds they will have established,” he said.

Max Sword, the Hawaii policy adviser for Expedia Group, which runs the rental site VRBO, said the mayor’s proposal is better than a previous iteration under Blangiardi that would have restricted rentals even in resort areas. 

“We’re supportive, and we’re here to work with them to enforce the legal ones operating and determine the illegal ones,” he said. 

It’s important that the city strike a balance with restrictions, he said, because if the rules are too harsh, operators may find underground alternatives to platforms like Expedia’s VRBO. 

Inspector Positions Were Left Unfunded

Blangiardi’s proposal seeks to crack down on a problem that had been percolating for years. 

Community members said the rentals were bringing disruptive tourists onto their quiet streets and taking up parking spots. 

Housing advocates said short-term vacation property owners – some of whom didn’t even live in Hawaii – were robbing the community of desperately needed long-term housing in exchange for a lucrative and illegal revenue stream. 

And critics said the rentals have contributed to a troubling trend in which a tsunami of tourists are impacting Hawaii’s infrastructure while their overall spending trends downward. 

“That created an incredible amount of tension pre-Covid. Our beaches were overrun,” Blangiardi said on the online “Spotlight” program. “Local people felt totally subordinated.” 

Meanwhile, operators of units advertised on Airbnb and VRBO argued it was their right to do with their property what they wished, that they needed the income to survive in Hawaii, that many of them paid taxes on their earnings and that they had built an ecosystem of subcontractors who relied on them. Some suggested that the 2019 legislation was a ploy to benefit the hotel industry.   

Two years ago, the Honolulu City Council tried to address the issue by unanimously approving  Bill 89. It threatened island property owners who illegally used their units as short-term rentals with fines of up to $10,000 a day. 

Then-Mayor Kirk Caldwell signed the legislation and almost immediately announced “digital sting” operations to catch violators and mailed out thousands of warning letters to suspected owners.

“We’re starting a new era of enforcement, and we’re excited about it,” Kathy Sokugawa, the acting Department of Planning and Permitting director, said in July 2019. 

To some extent, the law was successful in cracking down on illegal rentals, according to DPP Deputy Director Dawn Takeuchi Apuna. 

Ordinance 19-18 gave DPP the power to cite people just for advertising short-term rentals without a current registration number or nonconforming use certificate. It also made that advertisement itself evidence enough of illegality. 

As a result, DPP was better able to identify illegal rentals and has issued 744 notices of violation since the law was passed, Apuna said. That’s compared to only 166 violation notices in the four years prior to the 2019 law. 

“However, illegal (short term rental) owners and operators have proven to be creative at maneuvering around (short term rental) restrictions and evading DPP enforcement,” she said in an email. “The proposed bill will direct more resources and focus on these types of violators.”

Since the 2019 law took effect, there have been far more complaints than violation notices: 2,075 complaints and 607 violation notices, the DPP website says. 

Seven positions created to enforce short-term rental laws were never funded by the Honolulu City Council, according to DPP Director Dean Uchida.

The 17 inspectors who are currently assigned to enforce rental rule violations are also tasked with inspecting land use and building violations, but the process for inspecting the rentals is more time consuming. DPP is in the process of hiring a third-party vendor to help, Apuna said. 

Still, she said proving a violation occurred is challenging.

“Inspectors have a difficult time contacting persons on the property who manage, operate or own the property, and who can receive notices of violations, as well as dealing with conflicting information on (short term rental) advertisements,” Apuna said. “It is also difficult to establish evidence that the occupant is only renting the property for less than 30 days.”

An agreement signed by Honolulu, Expedia and Airbnb in 2020 was helpful, Apuna said. As of February, the platforms were required to create two mandatory fields for new bed and breakfasts and transient vacation rental listings on its platforms: the tax map key for the property and the host’s transient accommodations tax number.

Whether those rentals are legal though isn’t certain because the remaining provisions of the agreement never went into effect, Apuna said. 

The proposed bill would require that all new short term rental listings have a city registration number provided by DPP, so that if a unit does not have a registration number, it will be considered illegal by default, she said.