Illegal short-term vacation rentals have long gotten a bad rap, accused of ruining the character of residential neighborhoods and taking up properties that could be used for residents in a state where housing is scarce.

But local officials concerned about the spread of COVID-19 have taken the step of putting a lid on even legal short-term rentals. And the operators are preparing to fight back.

Greg Kugle, a Honolulu lawyer who frequently represents vacation rental owners, has sent letters to the mayors of four counties threatening to sue if the officials don’t let owners of legal vacation rentals rent their properties to tourists.

“The result of preventing these rentals statewide equates to damages of approximately $100 million per month, and the collective impact on property values is easily $1 billion,” Kugle wrote.

The shutdown of tourism has hit the legal vacation rental business as well as hotels and restaurants.

Cory Lum/Civil Beat

So far, two mayors have backed off and said they’ll open up vacation rentals to people not under quarantine. But things are still up in the air for the state’s most populous county.

On Thursday, when asked about the issue, Honolulu Mayor Kirk Caldwell’s spokesman, Alexander Zannes, said the administration is still assessing the situation.

“We are evaluating whether we can open legal vacation rental operations in a manner that will protect public health and safety,” Zannes said in a statement.

The flap comes as all of Hawaii remains under an order requiring all people flying into Hawaii to stay in quarantine for 14 days upon arriving. One issue has been how to make sure people follow the orders. While supporters of short-term rentals say their properties are safer because they’re generally less densely occupied that hotels, hotel industry executives argue that they have established policies and procedures to keep guests safe while they’re bound to their rooms.

“We’ve known that the best way to keep our visitors safe is through the legitimate visitor industry,” said Kekoa McClellan, Hawaii spokesman for the American Hotel and Lodging Association.

“Our hotels have adopted the Safe-Stay program, with recommendations from the CDC, support of the Hawaii Tourism Authority, blessed by the Department of Health,” he said. “Simply put, there’s not a safer place for a guest than checking into a hotel, and there’s no better way to guarantee the safety of our community.”

Ted Vivatson, a California beer maker, bought an oceanfront home near Hilo but can’t rent it as a short-term vacation property.

Reid Nakamura

But for property owners like Ted Vivatson, the orders shutting down tourism and vacation rentals have been devastating. A brewery owner from California, Vivatson acquired a beachfront property near Hilo in the hopes of retiring there some day.

In the meantime, he was renting the place to cover his mortgage, taxes, maintenance and other costs. But that’s not happening any more. Instead, he’s paying for two homes.

“It’s devastating,” he said, citing the long list of costs and fees, especially the maintenance costs for a house near the ocean.

“It’s like living on a boat,” he said. “Things just rot away.”

Kugle did not return calls for comment, but his letters to the mayors argue that short-term rentals are potentially safer than accommodations like hotels.

Still, much of the argument involves one of fairness, and questions of why the legal vacation rentals are being treated differently from other properties.

“The emergency orders have singled-out vacation rentals as non-essential businesses while allowing hotels, motels, timeshares, and condo-hotels to continue to operate as essential businesses,” he wrote. “This has resulted in the State and Counties affirmatively discriminating against lawfully operating business owners.”

This, Kugle argues, raises heady constitutional questions, including the rights to due process and equal protection for owners of short-term rental properties. Kugle also argues that prohibiting property owners from using their properties amounts to what’s known as a regulatory taking, in legal parlance, of private property without compensation, which is also prohibited by the Constitution.

Kugle’s letters, which were dated Monday, seemed to get the attention of the mayors.

By Wednesday, some had responded. The Hawaii Tribune-Herald reported that Kauai Mayor Derek Kawakami issued a new rule opening legal rentals for tourists and quoted Big Island Mayor Harry Kim saying he’s drafting a similar rule. Maui Mayor Michael Victorino could not be reached for comment.

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