Two bills being considered by the Honolulu City Council are generally bad news for many operators of the short-term vacation rentals that have proliferated on Oahu and the online platforms that advertise the properties.

While the measures differ in key details, the message for companies like Airbnb and HomeAway seems to be: “pick your poison.”

The bills are scheduled for a public hearing before the City Council on Wednesday.

Both bills make major changes to Honolulu’s land use ordinance, which generally limits renting properties for less than 30 days outside of designated resort zones, including parts of Waikiki and Ko Olina.

This ad appeared on the Airbnb website advertising properties for rent in Waikiki. Screenshot

Although there are some 800 units outside the resort zones that were grandfathered in when Oahu’s stringent prohibition went into effect, many of those are on the edge of the Waikiki resort zone. Meanwhile, there are approximately 9,000 short-term rental units on Oahu.

Although many of the short-term rentals are illegal, city officials face practical and political challenges enforcing the land use laws.

On one hand, the vacation rentals have taken away housing stock and altered residential neighborhoods; on the other hand, the rentals have become an integral part of the tourism economy, allowing for a growth of visitor numbers far exceeding the growth of hotel room inventory.

One measure, Bill 85, focuses on creating tougher enforcement mechanisms. Among other provisions, it gives citizens the right to go to court and prompt the city to take action against a neighbor operating an illegal short-term rental.

The other measure, Bill 89, is based on a proposal by Mayor Kirk Caldwell. It makes it easier for homeowners to operate “bed and breakfasts” in homes where they live, but cracks down on so-called transient vacation units, or TVUs, which are whole homes rented out by people who don’t live in the property. A Civil Beat analysis of data from Airdna, which provides data for rental operators, found that there were 8,522 active rentals on Oahu in August; 6,842 of those, or 80 percent, were entire homes.

While Bill 89 proposes a middle road – allowing more bed and breakfasts, but imposing tougher penalties for illegal TVUs  — platforms like Airbnb have opposed even the less stringent of the two laws.

Matt Middlebrook, Airbnb’s head of policy for Hawaii, said Bill 89 would severely damage Hawaii’s economy by suddenly removing thousands of TVUs from the inventory of accommodations on Oahu.

“Instead of bringing short-term rental rules on Oahu into the 21st Century and addressing market realities,” Middlebrook said in written testimony, “Bill 89 would largely destroy the alternative accommodations market outside of the resort zones and inflict significant damage on small businesses and the local economy.”

Companies like Airbnb have generally supported policies that would let the platforms collect taxes from hosts and remit the money to the government. However, the platforms have resisted regulations to crackdown on unauthorized rentals, including measures that would impose reporting requirements to help ensure listed properties are in compliance with the law.

Tougher Crackdowns Elsewhere

The City Council is wrestling with the issue as local governments elsewhere are much farther along imposing tougher laws.

San Francisco, for example, only allows people to rent out their primary residence and have strengthened efforts to make hosts register. In a key ruling for Hawaii, the U.S. 9th Circuit Court of Appeals in March upheld a Santa Monica ordinance imposing the sort of reporting requirements that are included in the Honolulu bills.

Meanwhile, the Big Island and Maui have adopted measures to better regulate the vacation rentals.

Hawaii recently attempted to subpoena from Airbnb a decade worth of receipts to see whether the company’s vacation rental hosts were paying taxes. A judge denied the request.

Hotels And Airlines Divided

In Honolulu, each bill has its own supporters. With its focus on enforcing existing prohibitions, Bill 85 has won the support of neighborhood groups, affordable housing advocates and hotel workers.

“The enforcement piece has been the key,” said Cade Watanabe, an organizer with Unite Here Local 5, which represents hotel workers.

Watanabe also acknowledged that legalizing more short-term rentals, eventually, might be necessary.

“Of course that has to happen, but we have to be able to tackle enforcement first,” he said.

The hotel industry, meanwhile, is backing Bill 89. Kekoa McClellan, Hawaii spokesman for the American Hotel and Lodging Association, said the industry wants to support residents trying to make extra money by renting a room or two.

“The visitor industry is supportive of local people having the opportunity to run a true home sharing business,” he said.

Hawaiian Airlines jet at Daniel Inouye International Airport. Honolulu, Hawaii.
After years of flying above the fray, Hawaiian Airlines has finally joined the debate on short-term vacation rentals. Cory Lum/Civil Beat

Others say more discussion about the details of regulation is needed.

With the visitor industry now clearly dependent on short-term rentals, the industry’s biggest local player, Hawaiian Airlines, has finally come off the sidelines and joined the debate. Ann Botticelli, a Hawaiian spokeswoman, said the industry needs to be better regulated.

“Short-term rentals — within and outside of resort districts — have become an expected part of the accommodations inventory in a tourism market, and a well-diversified portfolio of accommodations is an important part of a long-term, sustainable tourism strategy,” she said in testimony.

“Limiting the number and location of short-term rental units should be part of a broader and wider conversation about well-managed tourism.”

Asked in an interview whether Hawaiian believes the city should allow thousands of illegal rentals on Oahu while the broader conversation takes place, Botticelli said the airline could not support illegal activity.

“The law’s the law,” she said.

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