The Senate voted 13 to 12 Tuesday to pass a bill that will allow the state to begin collecting transient accommodation and general excise taxes from short-term rentals.
Under the bill, hosting platforms like Airbnb and HomeAway will act as tax collectors on behalf of the state.
Short-term rentals of less than 30 days are generally illegal in the state and many owners are operating them outside the law without paying taxes.
Many lawmakers have been eager to tap into that money stream, frustrated that county governments, who control land-use regulation and zoning, have been slow to enact measures to identify them and limit their growth. The state estimates the taxes will generate $46 million per year.
The bill now goes to Gov. David Ige for his consideration.
The measure, Senate Bill 1292, was voted down, 12 to 12 on Friday night but Senate Ways and Means Chairman Donovan Dela Cruz, a supporter of the bill, made it known that about 15 other unrelated bills would be placed at risk if the state failed to pass the measure, which has come to be known as the Airbnb bill.
Opponents said the bill would accelerate the process of pricing middle-class residents out of the housing market.
“Our community is hurting, we’re losing this battle,” said Sen. Kurt Fevella, a Republican from Ewa Beach. He said high-income vacationers are driving local people out of their hometowns.
Sen. Laura Thielen said the Airbnb bill put the state in the position of allowing “internet platforms to act as a shield for illegal operations,” because the bill does not permit information that is collected from vacationers to be given to local governments to aid them in enforcement efforts.
Dela Cruz said the state needed the money and that the debate over the Airbnb bill had been delayed so late in the session that the senate had no choice but to pass it for financial reasons.
On Tuesday, Sen. Stanley Chang, who had voted against the measure, made a motion for it to be reconsidered, which permitted a new vote to occur. Chang then voted against the measure again.
The senator who switched his position Tuesday was Sen. Clarence Nishihara, who chairs the Senate Public Safety, Intergovernmental and Military Affairs Committee.
One of the bills that Dela Cruz had identified as vulnerable was House Bill 1552, a package of measures establishing oversight of the troubled Department of Public Safety. Nishihara had helped shepherd that measure through the Legislature and co-authored the Senate companion bill on the oversight commission.
Dela Cruz pointedly said on the Senate floor that “these needed programs will get funded” as a result of the vote to pass the Airbnb bill.
After the meeting adjourned, in comments made to reporters, Senate President Ronald D. Kouchi scoffed at criticism that the state would be party to any illegality or responsibility for injuring neighborhoods by encouraging short-term rentals.
“The counties are devastated already,” he said, noting that in the 20 years since vacation rentals began proliferating in Hawaii, county governments did little to solve the problem because they got more income when property values rose as homes were sold off as vacation rentals. Since then, he said, many state residents have found employment as landscapers and housekeepers at vacation rentals, and that those people would be hurt if anything was done to clamp down on them now.
He said he hoped the counties would do something soon about the proliferation of rentals.
“We are at the point we are because of the unwillingness of counties to enforce their own ordinances,” he said.
Thielen told reporters that lawmakers in the House declined to negotiate on the bill in good faith despite many efforts to reach out to them and that leadership of the House and Senate decided they wanted the bill to pass in the way it did. She said they would not consider alternatives, saying that “leadership on both sides rejected it.”
She said that Dela Cruz was left at the end of the session with a limited menu of options.
“He was doing his job to do a balanced budget,” she said. “None of us were happy to be in this position at the end of the day.”
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A Kailua girl, Kirstin Downey is a special correspondent for Civil Beat. A longtime reporter for The Washington Post, she is the author of "The Woman Behind the New Deal," "Isabella the Warrior Queen" and an upcoming biography of King Kaumualii of Kauai. She can be reached at email@example.com.