Proposed bill could push vacation rentals out of residential neighborhoods

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The City and County of Honolulu is trying to get a handle on illegal vacation rentals.

Mayor Kirk Caldwell says there are as many as 10,000 illegal vacation rental units on Oahu, only 800 are legal.

His proposal today would eliminate short term rentals from residential neighborhoods (single-family homes), allowing approximately 4,000 STRs island-wide in resort, business or apartment areas. 

The mayor said the majority of complaints regarding single-family residences were in residential neighborhoods with no owner on-site. “Issues from noise to excess parking issues and everything in-between come in so this legislation is going to crack down extensively on those types of units. It’s going to eliminate them from any residential neighborhood. you will not be able to have a single-family vacation rental in a residential neighborhood,” Mayor Caldwell said. 

According to the bill:

a Transient Vacation Unit (TVU), is a dwelling unit that is rented for less than 30 days at a time. Typically, the owner does not live there, or is not present during the guests’ stay. It can be an apartment, condominium, or single family home. Units in a hotel or “condo hotel” are not considered TVUs.

Bed & Breakfasts would still be allowed in residential areas. According to the proposal, an on-site manager helps minimize negative impacts on neighbors, while allowing property owners to earn income. 

According to the bill:

A bed and breakfast home is a single-family home in which a room or rooms are renter for less than 30 days at a time. The home’s owner, lessee or operator lives in the home and is present during the rental period.

“Some people who operate these units in these residential neighborhoods are going to be upset,” Mayor Caldwell said. “Because you’re not going to be allowed to do it anymore, you cant even get a registration number it’s illegal, not permitted— if you do it you’ll feel heavy fines.”

The proposal requires interested persons, who meet the requirements, to register with the City. Once approved, they will receive a registration number for their property. 

Under the proposal, illegal units could be fined $25,000  a day for a first offense, $50,000 a day for a second offense, and $100,000 a day for a third offense. If there is a fourth violation, outstanding fines would be filed as a lien against the property.

For B&B’s that don’t have a registration number face fines of $10,000 for the first offense, up to $50,000 for the third offense. 

As for enforcement?

Officials say they will me monitoring social media sites, and if you don’t have a registration number on the ad, you’re in violation. 

“We’re going to have people checking social media sites and probably retain a third party to help us do that and we’ll come after you,” Mayor Caldwell added. 

Even current legal rentals would have to re-register to meet new requirements in the near future. 

Requirements would include: 

  • One off-street parking space per bedroom,
  • Insurance coverage,
  • Smoke and carbon monoxide detectors, 
  • House rules, including quiet hours, 
  • A flood plan showing the location of guest rooms for B&Bs, and
  • The total number of bedrooms for TVUs

STR operators must be a natural person (i.e: not a corporation or similar entity) and may not operate more than one STR. The unit must also  have a Homeowner Exemption, certifying its status as owner-occupied. A B&B may have no more than two guest rooms, and four guests at any given time. 

Registered STRs would also pay higher property taxes. Homeowners who operate an STR for 30 or more days a year would be charged a rate comparable to the  hotel/resort rate, while the B&B rate would be half the transient vacation rental rate. 

Under the proposed rate schedule, the TVU property tax rate would be $12.90 per $1,000 of assessed value, and the B&B rate would be $6.45.

In comparison, the current residential rate is $3.50 for homes with an assessed value under $1 million. 

“Every hotel in Waikiki, Koolina and North Shore is paying, so fair is fair—you need to pay what a hotel resort pays because you’re operating as a hotel resort,” Mayor Caldwell added. 

There would be an inital registration fee of $1,200 for a TVU, and $800 for a B&B. Registrations would have to be renewed annually, with renewal fees of $500 for a TVU and $200 for a B&B.

“Its highly controversial, some people will like it—some people will be concerned, but its something that does need to be addressed,” Mayor Caldwell said. “It’s having a major impact on our neighborhoods and our visitor industry.”

If passed, the bill would go into effect May 1, 2019. 

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