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A Statewide Ban On Vacation Rentals? The Idea Is Gaining Steam After The Maui Fires

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A Statewide Ban On Vacation Rentals? The Idea Is Gaining Steam After The Maui Fires

Feb 02, 2024 | 8:51 am ET
By Stewart Yerton/Civil Beat
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Critics of short-term vacation rentals now include Lahaina Strong, which has organized protests at Maui’s Kaanapali Beach, calling for “more dignified” housing options for Lahaina residents whose homes burned down in the Aug. 8 wildfire. (Brittany Lyte/Civil Beat/2023)
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Critics of short-term vacation rentals now include Lahaina Strong, which has organized protests at Maui’s Kaanapali Beach, calling for “more dignified” housing options for Lahaina residents whose homes burned down in the Aug. 8 wildfire. (Brittany Lyte/Civil Beat/2023)

Hawaii lawmakers have tried and failed to pass legislation reining in short-term vacation rentals in the past, but this session feels different, says Sen. Jarrett Keohokalole, chairman of the Senate Commerce and Consumer Protection Committee. 

Keohokalole has authored an ambitious bill that would reshape the way short-term vacation rentals are regulated in Hawaii – and give counties power to phase them out completely over time. 

Keohokalole’s optimism is hardly political salesmanship. Opposition to short-term vacation rentals is more vocal than ever. And it’s coming from far beyond Keohokalole’s windward Oahu district, where residents for years have complained that a tide of Airbnbs has transformed places like Kailua into mini resorts.

Gov. Josh Green described short-term rentals as a problem in his State of the State speech. Maui residents have held high-profile protests for a moratorium on short-term rentals, which Keohokalole’s bill would essentially enable counties to impose. The Hawaii Island County Council is considering its own ban. On Oahu, the Honolulu City Council is regrouping after a court challenge striking down Oahu’s attempts to close a loophole in its land-use ordinance regulating short-term rentals.

“To hear it in the State of the State Speech is different,” Keohokalole said in an interview. “This year is different because it is a byproduct of the crisis on Maui.”

Currently, 5.5% or 30,000 of Hawaii’s 557,000 total housing units operate as short-term rentals, according to the University of Hawaii Economic Research Organization’s “Hawaii Housing Factbook,” published in June.

On some islands the percentages are much greater. On Oahu, the short-term rentals made up about 2% of the island’s housing supply; by contrast, Maui’s short-term market represented roughly 15% of the supply, UHERO reported. 

UHERO estimated the presence of short-term vacation rentals in Honolulu raises housing costs by roughly 5%. 

Green alluded to this situation in his State of the State speech in January. After discussing the housing crisis the August wildfires created on Maui, Green spoke about the state’s broader shortage of affordable housing.

“Our state is such a desirable destination, and such a profitable investment for many, that people from around the world have purchased property to hold as investments or rent as short-term rentals to visitors — making on average four times what they would if the property was simply rented to a local family,” Green said. “Right now, 52% of all short-term rentals in Hawaii are owned by non-state residents, and 27% of short-term rental owners own 20 or more units.” 

On Friday, Keohokalole will discuss short-term housing issues in a joint committee hearing. His co-chairs are Maui Sen. Lynn Decoite, who chairs the Energy, Economic Development and Tourism Committee, and Sen. Glenn Wakai, chairman of the Public Safety and Intergovernmental and Military Affairs Committee. The only item on the agenda is the short-term rental bill.

The battle lines forming are largely the same as those of past years. On one side are companies like Airbnb, property owners who use the platforms to rent out homes and condos to tourists and an ecosystem of real estate agents and small businesses that support the owners and platforms. 

One the other side are hotel industry executives and lobbyists, housing advocates and individuals and groups that want to limit tourist accommodations to places designated for tourism. Joining the push this year are groups like Lahaina Strong, which has been leading a protest called “Fishing for Housing” at West Maui’s Kaanapali Beach. The Hawaii Association of Counties has submitted testimony supporting Keohokalole’s measure. 

Honolulu City Council Chairman Tommy Waters said it was critical to give the counties tools needed to manage the rentals. 

“Reining in the preponderance of temporary vacation rentals statewide, investing in infrastructure, and continuing to invest in the development and refurbishment of affordable housing at the state and county levels are all critical components in solving our state’s affordable housing crisis,” he wrote in testimony submitted this week. 

Keohokalole agrees. In an interview, the senator was outspoken about a recent order by U.S. District Judge Derrick Watson striking down a Honolulu ordinance designed to close off loophole in the county’s land-use ordinance. Although Honolulu’s land-use ordinance bans short-term vacation rentals in most areas outside of certain resort zones, including parts of Waikiki and Koolina, the ordinance allows renting short-term to tourists, as long as owners host no more than 12 rentals per year. 

Keohokalole said Watson was wrong to say such 30-day rentals to visitors were residential and not commercial uses. 

“To say a 30-day use is not a commercial use is just ridiculous,” Keohokalole said.

County Zoning Power Comes From State

Zoning law can be complicated, but it rests on a simple idea: state and local governments have the power to regulate land use to promote public interests – specifically to protect public health, safety, welfare and morals. 

In Hawaii, the state grants counties broad zoning powers by statute. The counties can then pass ordinances regulating zoning and land use. 

The statute generally restricts the counties from passing ordinances that would suddenly prohibit a certain land use that was legal at the time the ordinance was passed. But there’s a big exception: the statute also allows the counties to pass ordinances discontinuing particular land uses – as long as the uses are phased out “over a reasonable period of time.” 

However, there’s also an exception to the exception: residential uses can’t be phased out.

Keohokalole’s bill amends the statute to explicitly allow the counties a to phase out resdential uses, and, by extension, short-term rentals.

“If we’re really going to be serious about this, then the counties should have the authority,” he said.

Airbnb Lawyer, Former Hawaii Attorney General, Opposes Bill

Already the concept is getting opposition. A similar House bill passed out of the House Housing Committee on Wednesday, despite pushback from the powerful Hawaii Association of Realtors and the Lahaina-based Rental By Owners Awareness Association.

“This Bill is not to stop illegally operating short-term rentals — this Bill goes after operators who are in full compliance of the law, operating legally within their particular location, either by their nonconforming use certificate or by being legally entitled to operate by zone,” the association’s president, Alicia Humiston, said in her testimony.

Also testifying against the House measure was Airbnb’s long-time Hawaii attorney David Louie, the state’s former attorney general. Louie declined an interview request, saying he didn’t have Airbnb’s permission. But Louie’s written testimony asserted that the measure could lead to “substantial litigation.”

“Although this may appear to be an innocuous delegation of authority, the proposed changes implanted would conflict with existing constitutional rights that have been explicitly recognized by courts in the State of Hawaii,” Louie wrote. “Such changes would potentially cause numerous unintended consequences, which could ultimately lead to a deprivation of vested rights of existing, residential homeowners.”

Others disagree.

David Callies is a retired law professor and author of “Regulating Paradise,” a treatise on Hawaii land-use law. He is also co-author of a law school textbook on national land-use law and recipient of a lifetime achievement award from an organization that assists property owners in disputes with governments. 

According to Callies, governments generally have the right to phase out land uses through zoning changes – called amortization in legal parlance – and that five years is typically a reasonable time frame for doing so. Callies said the counties would need to be careful to avoid potential legal issues when drafting and passing ordinances. 

But he said, “It’s pretty settled doctrine that you can amortize a non-conforming use.”

Callies also said prohibiting short-term rentals wouldn’t be considered a taking of private property, in violation of constitutional rights, because the properties still could be used for housing by the owners or rented out long term.

“You are not going to be able to argue any total taking by regulation,” he said. 

While Callies acknowledged owners might be able to argue the zoning change amounted to a partial taking, he said, “Winning a partial takings case is very difficult.”

Keohokalole’s bill goes beyond allowing the counties to phase out short term rentals. It also establishes a regulatory scheme under the Business Registration Division of the Department of Commerce and Consumer Affairs. Ty Nohara, who heads the division, testified that even with additional funding, the division wasn’t equipped to handle the task of regulating thousands of rentals.

Instead, Nohara suggested such regulation would better be handled by an agency “that will have as its sole focus the responsibility to regulate and enforce short-term rentals in Hawaii.”

Kekoa McClellan, a spokesman for the American Hotel and Lodging Association, acknowledged a regulatory system would require money. But, he said, “What’s the cost of not doing this?”

“The people who are paying the price are kamaaina families who are leaving the islands in droves,” he said.