Honolulu officials will start conducting “digital stings” in August after Mayor Kirk Caldwell signed a law on Tuesday cracking down on illegal short-term vacation rentals.
“This is a good bill,” Caldwell said at a press conference. “It reflects a lot of hard work, and it reflects the sense of our community, the passion, the emotion, the fairness, and how to take back our neighborhoods that have become overrun by visitors.”
The law, Bill 89, grants the city enforcement power over illegal home rentals that officials and residents say have overwhelmed residential neighborhoods with tourists. Unlike the alternative Bill 85, which Caldwell vetoed, the new law allows for about 1,700 hosted bed and breakfast units that are restricted by density, limited to two bedrooms per unit and governed by other rules.
It goes into effect in two waves. The first, starting Aug. 1, requires 770 legal rentals grandfathered in from the 1980s — those with a nonconforming use certificate, or NUC — to include a registration number in all advertisements.
“If not, the city is going to assume it’s illegal, and we’re going to rigorously investigate,” the mayor said. Violations can result in a $1,000 fine followed by addition daily fines of $5,000.
The second wave takes effect Oct. 1, 2020. That’s when 1,700 bed and breakfasts will be allowed to register legally and will receive a registration number that will be required to be part of any advertisement for the rentals.
Those who advertise without that number could face fines of $1,000 for an initial violation, $5,000 a day after that, and for subsequent violations, $10,000 a day, the bill states.
Unhosted vacation rentals, in which a property owner rents out their entire home in their absence, have only been allowed in Waikiki, Ko Olina and Turtle Bay. That limitation has been in place for years but was apparently ignored by property owners throughout the island seeking to supplement their income and investors who have driven up property values.
Caldwell said the city was ill-equipped to enforce the rules before because it required catching property owners in the act during an in-person visit. That left neighbors frustrated by disruptive vacationers outside of resort zones and a lost sense of community, they testified in meetings.
The new law, which was approved unanimously by the Honolulu City Council, allows the city to issues notices of violation based on advertisements alone.
Officials expect the law to eliminate thousands of illegal vacation rentals throughout Oahu that advertise with companies like Airbnb and Expedia, which owns VRBO and HomeAway.
In a statement, Expedia spokesman Philip Minardi said the company is “disappointed by the decision to close the door on Honolulu’s long-standing vacation rental community.”
“The reality is, there was a better way,” he said. “We worked hard to find a reasonable compromise that would have protected local communities and homeowners while preserving Oahu’s tourism economy.”
According to Minardi, the new law threatens thousands of local jobs, millions of dollars in household income and over a billion dollars in economic activity. The company would like to limit vacation rentals “in a responsible way.”
“We welcome the opportunity to continue working with Mayor Caldwell and the Honolulu City Council on a new compromise before the negative impacts of Bill 89 are felt by community businesses, homeowners and travelers, alike,” he said.
According to Caldwell, some realtors and property owners have complained that they’ve already booked vacationers in their short-term units for August. Caldwell indicated he has little sympathy.
“Well, you’re doing an illegal activity,” he said. “It’s really pretty tough and we’re hoping it will bring people into compliance.”
The mayor said he expects the law to open up units to long-term renters which will help with housing affordability and reduce homelessness.
“I believe this is one of the most positive things that has happened in my time as mayor,” Caldwell said.
Kekoa McClellan, Hawaii spokesman for American Hotel and Lodging Association, thanked the mayor and city council for passing the law.
“The team here has gone to great lengths to ensure that what we put forward places our state’s most important economic resource first, our legitimate visitor industry and the people who work in it,” he said.