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The bitter fight in the state Senate in the past week over Senate Bill 1292, the so-called Airbnb bill allowing the state to tax vacation rentals, reflected geographic divisions in the chamber as much as political differences.
Short-term rentals are generally illegal in the state but have nevertheless proliferated because owners can earn more money renting properties to visiting vacationers than to Hawaii residents. The bill, which squeaked by on a vote of 13 to 12 after one senator changed his vote, will allow hosting platforms to act as tax collectors for the state if Gov. David Ige signs off on it.
The vote came after three dramatic showdowns in the Senate.
The three most passionate opponents of the bill were Democratic Sens. Laura Thielen and Gil Riviere and the chamber’s sole Republican, Sen. Kurt Fevella. They all argued vehemently against the bill, saying it would allow the state to profit off a business that is hurting their communities by causing rents to soar.
What the three have in common is that they represent beachfront districts on Oahu that are hugely popular with tourists and have become magnets for short-term rental operators providing overnight accommodations in homes that formerly housed Hawaii residents.
Thielen’s district spreads from Kailua through Waimanalo to Portlock and Riviere’s encompasses northern Oahu from Kaneohe to Waialua. Fevella’s district, the area including Ewa Beach, is proving increasingly attractive to budget vacationers.
On the other side of the debate, arguing that the state should not be leaving potential tax revenue untapped, were lawmakers from areas that are less attractive to tourists and Airbnb operations, legislators from neighbor islands and the Senate’s leadership, which supported the bill’s passage and the $46 million a year in estimated revenue it would bring.
Airbnb has long sought the ability to serve as a tax collection agent for the state government. Gov. David Ige’s administration was secretly negotiating such a deal with the booking platform before the 2018 legislative session.
The deal ultimately stalled in the face of opposition from a diverse group that included affordable housing advocates, neighborhood groups, hotel companies and hotel worker unions.
This year, the debate at first played out quietly, as two separate bills moved through the Senate and the House that provided for taxation of short-term transient vacation rentals, or TVRs, but also contained provisions to help regulate them. House leadership eventually dropped its version of the bill and did not appoint conferees to negotiate the final measure.
Meanwhile, Airbnb protested the Senate version of the bill, saying it raised privacy issues for the providers of short-term rentals and the hosting platforms.
In the end, what was left was a stripped-down Senate version that allowed for taxation but also contained provisions that would keep information about the rental operations confidential.
Thielen and Sen. Glenn Wakai, chairman of the Energy, Economic Development and Tourism Committee, reached out to the House to try to reach agreement on a revised bill. According to Wakai, House leaders refused to do so.
“The House was not interested in anything other than taxing TVRs,” he said in an email.
The public debate played out last week and at first it looked like opponents of the bill had won.
Late Friday, the Senate voted the measure down 12 to 12, which effectively killed it.
But on Monday morning, it was alive again. Senate Ways and Means Chairman Donovan Dela Cruz told senators they would lose funding for popular measures if they did not change their minds, and a re-vote was held. Sen. Clarence Nishihara, who had previously opposed the bill, switched his vote to support it.
In an interview, Nishihara said he changed his vote after the senators were told that 15 other pieces of legislation, including his bill making criminal justice reforms, Senate Bill 1552, would die if he did not vote yes.
“We were all made aware” of the implications of losing the $46 million in revenue, Nishihara said. “Airbnb had to pass to get revenues for these bills.”
In addition, he said, members of the administration of Gov. David Ige told him that the bill did not prevent the city of Honolulu from enforcing its own laws, and he was given assurances that the city and county of Honolulu would pass enforcement measures soon.
He said his own constituents in his district, which includes Waipahu and Pearl City, do not see Airbnb rentals as a major problem in their community.
In an interview after the vote, Thielen blamed the leadership of the Senate and the House for forcing a bill she considers highly problematic when they could have crafted a bill with enforcement mechanisms.
Indeed, Senate leadership supported and overwhelmingly voted for the measure. Those voting yes were Senate President Ron Kouchi, Vice President Michelle Kidani, Majority Leader J. Kalani English and Majority Caucus Leader Dru Kanuha.
Lawmakers from the neighbor islands voted for the Airbnb bill by a 3-to-1 margin, with six voting yes and two voting no.
Kauai, Maui and the Big Island have all enacted ordinances regulating short-term rentals in some way, leaving Oahu with the weakest enforcement. Some neighbor island legislators made that point on the floor.
Sen. Roz Baker, who represents Maui and who voted for the measure, blamed the state’s problem on the City and County of Honolulu and its failure to act. She said that city administrators told state lawmakers last year that they knew where all the illegal rentals are and how much they are earning. She said that Honolulu did not need more information from the state.
The bill’s opponents described how their neighborhoods are changing in the face of increasing tourism and visitors who prefer boutique housing in residential areas than the hotel districts.
“Over the years, I’ve seen the vacation rental industry destroy our island home by replacing local families,” Thielen said on the floor. “I come from a community that would not understand me doing anything but a no vote on this.”
Thielen said that the Kailua neighborhood she grew up in and that she still represents was “whfft! gone long ago,” to vacation rentals, and that now she is fighting for Waimanalo, Kaneohe and Hawaii Kai.
“This is going to get worse and worse,” she said.
Fevella said Ewa Beach is “getting slapped, cracked and everything you can think of” because vacation rentals are displacing long-time families.
“Beautiful, plenty local families, plenty ohana are getting ripped apart by these vacation rentals,” he said. “Simple country homes, built in the 1940s, early ’50s, three bedroom, very small, very country, and now 15 vacation rental adults decide to rent them.”
He begged his fellow lawmakers to vote no on the bill.
“In Ewa Beach, my community speaks loud to me; they do not want this,” he said.
“No neighborhood, not yours, not mine, should be subject to something that’s not legal,” he said.
But for Wakai, whose district includes Kalihi, Hickam and Pearl Harbor, and for the rest of the dozen on the other side, the issue was much simpler.
“There are only a handful of TVRs that I know of in Kalihi and Salt Lake,” he wrote in an email. “My constituents are not beating down my door on this issue.”
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