The Big Winner From Honolulu’s Bill 41? The Hotel Industry - Honolulu Civil Beat

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About the Author

Paul E. Nachtigall

Paul E. Nachtigall is a former chair of the ethics committee for the Society for Marine Mammalogy. He is a former head of the research division of the now-closed Naval Ocean Systems Center’s Hawaii Laboratory. Nachtigall was the founding director of the Marine Mammal Research Program of the University of Hawaii Manoa’s Hawaii Institute of Marine Biology, where he is now an emeritus research professor and active member of the graduate faculties in psychology, biology and marine biology. He is also a member of Friends of Kuilima.

During the height of Covid 19, many benefited from emptier beaches and clearer highways, with fewer tourists in town to swim and surf.

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But the vast majority of locals struggled to make ends meet. As our economy suffered — dependent on a travel industry then decimated by the pandemic — some even moved away because of the high cost of living.

The hotel industry lobby lost no time in capturing frustrations with tourist impacts for their own benefit, successfully pushing through massive, confusing, and likely devastating changes for residents in the form of Bill 41, which recently passed the Honolulu City Council.

As the original bill states, “The City Council finds that any economic benefits of opening up our residential areas to tourism are far outweighed by the negative impacts to our neighborhoods and local residents.”

But the real intent of Bill 41 is to eliminate what are legal short- and medium-term rentals — not only in residential areas, but also in resort areas (areas zoned with the purpose of serving the visitor population) — with the primary goal of pushing most tourists and vacationing residents to stay in hotels.

Bill Was ‘Rammed Through’

To start, Bill 41 will impart a heavy toll on legal short-term rental owners, many of whom share their property to make ends meet and afford to live here. Many are seniors, like me, who bought resort rental properties as part of their retirement plan.

Currently, each resort-zoned unit must pay a 4.7% general excise tax, 10.5% state transient accommodations tax, and new 3% city transient accommodations tax (over 18% on every dollar) in addition to property and income taxes.

Honolulu City Council sit with plexiglass dividers between their desks at Honolulu Hale during the COVID-19 pandemic.
The Honolulu City Council passed Bill 41 earlier this month. It’s impact could be harsh on residents who own short-term rentals. Cory Lum/Civil Beat/2021

If Bill 41’s associated Bill 4 is passed, that tax rate will increase by four times — in addition to a license fee of $1,000 and potential fines of up to $25,000, along with the potential for unnamed criminal penalties.

Under Bill 41, Department of Planning and Permitting restrictions and standards include complex rules and restrictions, such as the owner/operator must maintain the names and telephone numbers of all transient occupants for two years, and owners must carry at least $1 million in commercial liability insurance.

The costs and additional bureaucracy of Bill 41, to be signed by the mayor shortly, will drive up the costs of legal rentals — no question. And as fewer owners rent, won’t rental supply decrease?

So who is benefiting from this new law? How much will it harm local families and businesses?

Will burdening the legal short-term rentals in resort areas help keep short-term rentals out of residential areas? Where is the economic analysis of the effects of this law?

Hotels will benefit, surely, but nobody knows answers to these questions because Bill 41 was rammed through without going through normal protocol for massive changes in law.

The costs and additional bureaucracy of Bill 41 will drive up the costs of legal rentals.

There was no fiscal note, study cited, or data-driven discussion throughout the process, which was further hindered by Covid-related restrictions.

We need reasonable solutions for the people and businesses of Hawaii and a process that makes sense. While Bill 41 was supposed to eliminate short-term rentals in residential neighborhoods, it created instead a terrible tangle of regulations on resort properties that do not need controls and will suffer greatly.

My own family’s dreams for the years ahead, for me and the next generations, are quickly evaporating with Bill 41’s passage.

I can only hope people wake up to what is happening and speak up, before the hotel industry pushes more of us, especially seniors and our families, into difficult living, budgetary and personal choices.

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About the Author

Paul E. Nachtigall

Paul E. Nachtigall is a former chair of the ethics committee for the Society for Marine Mammalogy. He is a former head of the research division of the now-closed Naval Ocean Systems Center’s Hawaii Laboratory. Nachtigall was the founding director of the Marine Mammal Research Program of the University of Hawaii Manoa’s Hawaii Institute of Marine Biology, where he is now an emeritus research professor and active member of the graduate faculties in psychology, biology and marine biology. He is also a member of Friends of Kuilima.


Latest Comments (0)

The whole vacation rental debacle is a red herring. It truly benefits the hotel industry and the unions that thrive on it. First fallacy, the alleged homes that these atrocities are taking place at are not in Aiea, or Mililani, they are for the most part close to the beach, or near Waikiki. Many are higher end homes in districts like Kahala, or Diamond Head, where the average home price is several million, so their not being available to the rental market will not make any difference to any regular working class Joe. Second, this impression of tearing at the fabric of locals, taking up parking and partying, sounds like our average neighborhood as is. There are no bigger parties than a local party, we all have that neighbor who cleans out the garage and invites everyone over. From Kalihi to Kaimuki monster homes flourish with out street parking regulations or a commercial building permit. These are structures designed to house dozens in a residential setting and should be the real definition of social decay, but they continue on unabated. Lastly, if you are well to do and want friends to stay at your mansion for free, nothing in this bill stops you from doing it.

wailani1961 · 7 months ago

This article is sad, but true. Locals don't get it. The vast majority of local businesses rely on tourist dollars in one form or another, which means the wealth of locals rely on tourist dollars. Fewer tourists means less wealth for locals. Tourists spending more in hotels owned by foreign/mainland companies, luxury retail stores, or chain restaurants in Waikiki means less wealth for locals. Locals rely low wage jobs provided by mainland companies, and amplify arguments made by the hotel lobby that enrich mainland/foreign businesses while funneling wealth outside of the islands, and then wonder why they can't afford a home.Look at the numbers - about 5k illegal vacation rentals in Honolulu, compared to 350k housing units. That's not a problem that changes the character of neighborhoods, that's a strawman argument targeted at the ignorant. Just like the idea that the elimination of STRs will reduce housing costs, when historically housing costs have shown zero correlation to STR supply.I don't have a dog in this fight either way. But it's disappointing that locals continue to be taken advantage of by foreign/mainland corporations, and they still haven't learned any better.

FutureNihon · 7 months ago

My neighborhood is not your business zone. I want the tourists to stay in Waikiki. If your plan for owning a home in Hawaii includes renting it out, rent it to people who live here.

Lthammerhead · 7 months ago

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