The Future of Big Island Vacation Rentals

The implementation period for Hawaii Countyʻs Bill 108 / Ordinance 18-114 has come to close. That means that outside of resort/commercial districts, only the Big Island short term vacation rentals that applied for and were granted a non-conforming use certificate during the past six months will be legal going forward. Bottom line, at least for now: do not count on buying a home or building a home and using it for un-hosted short term rentals, if the underlying zoning does not already allow that.

I am still getting many questions from prospective buyers about what the future will hold for Big Island short term vacation rental regulations. Will there be future relaxation of the rules? Will they start regulating hosted rentals as well?  While I am still in search of the proverbial crystal ball, I have been analyzing the Countyʻs draft General Plan update for clues as to the Planning Departmentʻs thoughts.

If you want to build a home and be sure of your ability to do short term rentals, buy a lot with resort zoning (MLS 631283)

The Context: The Future of Tourism – Visitors in the Big Island Economy

To provide a bit of context, on average visitors account for 15% of the Big Island population, with the bulk of the accommodations on the West Side from Kailua Kona through the Kohala Coast. Past studies estimated that 73% of visitors are still housed in hotels and timeshares, and only 12% in short term vacation rentals…but that means on the order of at least 10,000 “visitor units” outside of hotels and timeshare, including both hosted (owner lives on-site) and un-hosted.

How many of these are now legal?  The Planning Department has 90 days from the date of submission to approve or reject the applications, so it will be a while before we know exactly how many units registered and how many non-conforming applications were approved. And those will only represent the unhosted segment.

Looking across the Waikoloa Beach Resort golf course from Halii Kai…Hilton converted this part of the hotel to timeshare.

The trends forecast used by the General Plan predicted continued growth in tourism/visitor arrivals. The General Planʻs tourism goal is instead to increase length of stay and visitor expenditures, rather than the number of visitors.

With their primary responsibility to serve Hawaii Island residents, planners view tourism as a mixed bag of positive and negative. Approximately 25% of employment on the island is related to some aspect of tourism: accommodation, food service, recreation, entertainment.  The Planʻs vision would be for the economy to expand in other sectors, while still promoting this important employment sector in ways more consistent with the rest of the Planʻs goals.

The Plan describes a vision for growth in this industry as “place-based tourism that emphasizes the preservation of Hawaii Islandʻs unique cultural, natural, and built environment assets.” My understanding in plain English: the Countyʻs efforts would encourage new tourism-related ventures that provide jobs closer to where residents actually live, and that support keeping the Big Islandʻs values intact.

Short Term Vacation Rental Proposals in the Draft Hawaii Island General Plan

Here are the General Plan proposals specifically related to Short Term Vacation Rentals.

The first item is essentially the current regulation for un-hosted rentals: “Permit timeshares and un-hosted short term vacation rentals only within designated resort areas.”

The next section provides a future direction for hosted rentals, defined as short-term vacation rentals with an owner or operator living on the same building site. It suggests licensing them based on the existing process for approving licensed B&Bs, and proposes an overall limitation on the number of rentals for which special permits will be given to 3% of the population within any census tract, with a waiting list once that cap has been met.

Hale Ohia Cottages near Hawaii Volcanoes National Park got a non-conforming use certificate, in addition to its other licenses, bringing its total licensed count to 15 bedrooms

And while Hawaii state law still prohibits short term rentals on land designated agricultural, the County seems inclined to recognize that a certain amount of ag or rural tourism could be helpful in encouraging more food production as well as local employment opportunities: “Allow appropriate flexibility for the development of small bed and breakfast or hosted vacation rental type visitor accommodations in rural areas, especially those with heritage, agriculture, wellness, or similar themes.” Meaning, there is hope for those of you yearning to run a small scale retreat center on the Big Island.

Of course, your best bet is still to buy something that already has the zoning, non-conforming use certificate, or special use permit. Letʻs talk about options!