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2022 – New Regulations on Short-Term Vacation Rentals on the Horizon for Honolulu

A bill on transient accommodations now going through the Honolulu City Council has the potential to affect thousands of landlords and homeowners. In January, the City Council voted 7-2 on Bill 41, which advances new rules that would restrict short-term rentals to a minimum of 90 days, up from the current 30. The intent of the measure, introduced by Mayor Blangiardi’s administration, is to crack down on illegal vacation rentals in residential areas such as Kailua in response to some residents’ concerns.

About Oahu’s Bill 41

For context, Bill 41 expands upon and is stricter than Ordinance 18-19 (formerly Bill 89) of 2019. According to this law (which only applies to the island of Oahu), short-term Rentals (B&Bs & transient vacation units, or TVUs) outside of the resort/resort mixed use district are prohibited unless the property already has a Non-Conforming Use Certificate (NUC). Advertising an illegal short-term vacation rental (separately from operating one) is also a violation and triggers hefty fines, (which started in August 2019). Lastly, only 1,699 owner-occupied, hosted B&Bs were to be permitted outside of resort zoned areas starting October 1st, 2020, subject to an application approval process and a number of restrictions. While this provision was meant to be paired with agreements with rental platform companies such as Airbnb and VRBO toward the goal of increased enforcement of violations, the Department of Planning and Permitting never permitted the additional units. With the advent of Bill 41, those platforms are no longer in discussions with the City.

woman hands keys over to person signing contract

In addition to the longer minimum rental period mentioned, Bill 41 will limit new permits to within or next to resort-zoned areas like Kuilima, Ko Olina and Waikiki. It increases the renewal fee for Non-conforming Use Certificates (NUCs) for bed and breakfasts and transient vacation units to $2,000 every two years, up from the current $600 every two years.

The bill has been referred back to the zoning and planning committee with recommendations for further amendments before a yet-to-be-determined hearing before the full council. To read the bill and its draft revisions, see this page and this page. When the next council meeting is scheduled, the agenda will be posted on the second link, including instructions on viewing and submitting testimony.

Opposition to Bill 41

Opponents of the bill (including many real estate professionals such as myself) say that it would harm the economy, property owners who are doing short term rentals, and vendors such as cleaners, landscapers, plumbers and electricians. The full ramifications to potential buyers of investment properties remains to be seen but future legislation should be considered when buying such a property.

Want to Know More?

If you are currently doing short-term rentals with your Oahu property or would like to be updated on the status of this bill, contact me, Cathy Possedi. I am contacted almost daily by investors who are interested in buying a vacation rental on Oahu. If you are looking to do the same, you should follow what’s happening with Bill 41.

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Sanjay Arora

February 17, 2022

Awesomely informative piece! Mahalo for sharing it!

Marcel

February 17, 2022

My wife and I own a condo in Waikiki and although we weren’t affected by the change in the rules of Short Term Rentals because we rented to a local fellow for years, I think the people making the decisions on this are short-sighted.
I think they would be better off by limiting the numbers of units and increasing the cost of NCUs. Then let the market decide. If the property owner thinks they can compete with the hotels after paying higher taxes, the costs for getting set-up, etc then let them.
My wife and I won’t stay in a hotel. If we can’t find a suitable VRBO to stay in while travelling we will just go elsewhere. We stayed in several lovely VRBOs before buying our condo and met many lovely hosts. We are now selling the condo and looking to Fiji and other Pacific islands to spend our vacation dollars.
We totally understand the attempt to ‘keep Real Estate prices down’ but I don’t think this will work. It hasn’t anywhere else.

Patricia S Wilk

February 23, 2022

Appreciate this update on Bill 41, viewed from the perspective of an island and north shore visitor on a semi-regular basis. Feel for the real estate and hospitality/adventure/entertainment industries should this Bill pass (and it’s sounding more and more as if it will). In short — it sounds like the next council meeting may provide for the 3rd and final reading of this bill. Should there be a vote, and the bill pass, it’s my understanding there’s a 180 day (6 mos) lead-time before the bill becomes law?

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