Hawaii Island County Council Considers Vacation Rental Bill

With more tourists looking for an alternative to pricey hotel stays, or simply what they feel is a more authentic experience of island life, sites like homeaway.com and airbnb.com have become popular with visitors to Hawaii.

A recent report by the Hawaii Appleseed Center for Law and Economic Justice says that 1 in 24 homes in Hawaii is a vacation rental, with the total up by a third in two years.  According to the report, this contributes to the lack of affordable housing in the state. And at the margin, it likely does.

However, if one looks carefully at the data, the majority of these vacation rentals are in neighborhoods zoned “resort,” which means they were constructed with zoning and CC&Rs specifically allowing for, and even encouraging, short term rental. The issue is over vacation rentals in districts zoned residential or agricultural.

Resort zoning is designed for short term vacation rentals like this beachfront Kolea home listed for $5,995,000 (MLS 607466).

Growing Concern over Short Term Vacation Rentals Across Hawaii

Many owners of a second home or condominium throughout Hawaii have found it attractive to cover a portion of their ownership costs, including the fairly steep resort homeowner or condo association dues, with rental income when they are not in residence.

Cheaper than a hotel stay for visiting families and helping owners cover their costs, short term vacation rental seems like a win-win for vacationers and the owners of these homes.

Oceanfront Puako has traditionally been a second home community even for island residents. This home is a vacation rental, offered for $5,200,000 (MLS 616101). 

On the flip side of the coin, local residents in many Big Island neighborhoods outside of resorts are clear that vacation rentals are detrimental to their quality of life.  This is especially true in smaller, tight-knit communities and rural areas.

There is also an argument that many of these rentals are flying under the radar, and the owners are not paying the taxes designed to help the state and county cover the burden to infrastructure transient populations create.

Thus we have seen a tightening of control of vacation rental properties across the State. Hawaii County (the Big Island) is the last to address the issue.

Regulatory Changes Considered by Hawaii County Council

The Big Island, also the County of Hawaiʻi, via its County Council is finally considering additional restrictions on short term vacation rentals. The County Council heard 5 hours of testimony on the proposed bill yesterday (April 24, 2018) before recessing until May 8th.

First — the Bill does not apply to properties that are owner-occupied.

• If more than one room is rented out by resident owners, this is considered a Bed-and-Breakfast or “B&B” and already regulated by the County Code. Note that the “AirBNB” type of rental which may not include breakfast is still covered under the definition if more than one room is available.
• A single room rented by an owner in their primary residence is considered a “hosted rental” as opposed to a B&B.  This is important as some owners on a limited income can afford to stay in their homes by taking in guests.

Second — the Bill clearly defines which zonings (County Plan Districts) will allow for short term rentals with registration only, and which will require a use permit from the County.

Third — the Bill addresses existing vacation rentals in allowable areas by requiring them to register with the County Planning Department within 180 days if the Bill passes.

The Bill allows for grandfathering of existing vacation rental properties outside of those designated zoning districts via a non-conforming use certificate. However, the Bill requires that owners of these pre-existing rentals in State Agricultural or Rural districts also obtain a special permit from the State.

And that might not be easy.

As I wrote back in 2014, the Hawaii state land use commission has challenged the counties about the validity of overnight accommodations on what it has determined to be agricultural land.

The Bottom Line on Short Term Vacation Rentals

Donʻt forget that communities with CC&Rs may prohibit short term vacation rentals. Kohala by the Sea is a good example if you are looking for a property with no transient neighbors (MLS 616881).

If you are considering a Big Island home that you would like to use as a short term vacation rental, be advised that whether this exact bill passes or not, tightening of the regulations is inevitable. As part of your search and purchase due diligence, pay attention to the zoning, check CC&Rs if those apply, and if it is an existing rental property, be aware of registration requirements that you might need to fulfill in the next few months.