The beachside town of Kailua has long been ground zero in the debate over unpermitted short-term vacation rentals.

Depending on which side you asked, the measure — eventually passed by the Honolulu City Council cracking down on the rentals — was either a long overdue step to protect a once sleepy community that avaricious absentee investors had turned into a crowded resort area, or a dumb idea that would wreck the local economy for the sake of greedy hotel owners.

But five months after the measure went into effect, the vacation rental business on the windward side is still going strong, numbers from the Hawaii Tourism Authority show. The City Council bill was expected to have an especially big impact on Kailua because the community has boomed as a tourist destination in recent years with the advent of online platforms like Airbnb.

Although it’s generally illegal to rent residential properties short-term outside of designated parts of Waikiki and Koolina, Honolulu government officials allowed the practice to go on until the outcry from residents and the hotel industry grew too loud to ignore. The law is designed to make it easier to enforce the prohibition.

Kailua Oneawa Street sidewalk traffic.

Kailua is still bustling five months after a new ordinance went into effect to crack down on short-term vacation rentals.

Cory Lum/Civil Beat

But HTA data indicates the market is alive and well in Kailua.

More than 600 vacation units were on the market in Kailua as of November, the authority reported, using data gathered by a private firm, Transparent Intelligence, Inc. It was a 26% drop from the year before, to 636 from 854, a drop of 218 units.

In brief, the numbers show the sky hasn’t fallen. It’s just lowered.

The HTA’s consultant, Transparent Intelligence Inc., obtained the vacation rental data from listings on Airbnb, VRBO, TripAdvisor and Booking.com, said Jennifer Chun, the HTA’s director of tourism research. The firm scrubbed the data to remove duplicate listings, as well as listings for units such as time shares, Chun said.

That the vacation rental business remains vibrant in Kailua isn’t the only surprise in the HTA numbers. For instance, they also show that the number of units actually increased in November to 636 from 549 in September.

Chun said she couldn’t explain the uptick. She also doesn’t have data on how many of the rentals are legal versus illegal.

“I don’t have the bandwidth to figure that out,” Chun said.

Curtis Lum, a spokesman for the Honolulu Department of Planning and Permitting, said the agency has issued 260 violations island-wide since Aug. 1 and 15 orders finding persons had engaged in the illegal activity. The agency has also received 128 complaints via a new online system, Lum said.

But HTA does have the bandwidth for plenty of other information on the vacation rental market in Kailua. In addition to units, HTA tracks the supply of room nights, another measure of accommodations inventory that counts the number of units by the number of nights in a month.

Like unit numbers, the supply of room nights in Kailua dropped about 25 percent in November 2019 from the previous November. That still leaves 17,784 room nights; it’s down 5,764 from 23,548.

Perhaps not surprisingly given the decline in supply, average daily rates in Kailua increased to $191 in November from $162 the previous year, an 18 percent rise.

So far, the impact on businesses in Kailua appears to be muted. As of December, Kaipo Chung at Pedego Electric Bikes said his business is still booming, thanks mainly to busloads of tourists coming to Kailua for day trips.

Kaipo Chung cleans up an electric bike ready for the next customer.

Kaipo Chung said business at Pedego Electric Bikes is as strong as ever months after the crackdown took effect.

Cory Lum/Civil Beat

“Last month and the month and the month before that, we were packed,” Chung said.

Other small businesses offered a similar view. Karisa Archambault, assistant manager at Fighting Eel clothing store said the temporary closing of the Pali Highway probably had had a bigger impact than the vacation rental bill. At Splash!Swimsuit shop, Katrina Go said she also hadn’t seen much of an impact on business.

“It’s still been pretty good because it’s the holiday season,” she said during an interview in December.

To be sure there’s been an effect. Avelania Junkert, at the Brazilian Showroom bikini shop, said her business has suffered because of the bill.

And Leon Mosher, a real estate agent who specializes in Windward Oahu, said prices for long-term rentals might decrease over time as more properties come onto the market. But so far, he said, there has been little impact on the market. Suggestions that there’s been a proliferation of houses on the market also are incorrect, he said.

“It’s more a perception than a reality,” he said. “It’s still a seller’s market.”

Hawaii’s Changing Economy”  series is supported by a grant from the Hawaii Community Foundation as part of its CHANGE Framework project.

 

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