Tough Rules and Enforcement: Big Island Vacation Rental Law

My County Councilman warned me that the compromise bill limiting short term vacation rentals on the Big Island that passed in November 2018 by design left the County with latitude in the details of implementation. The first glimpse of the rules and regulations came last week, with several public hearings scheduled before the April effective date of the bill.

So as not to completely bury the lead: many of the agricultural-zoned vacation rentals that were expecting to have a pathway to be “grandfathered” in with a non-conforming use permit will likely not be able to continue to operate.

That is the bottom line. For homes being rented short term in many newer subdivisions with larger lot sizes, whether in Puna district or Kailua Kona; in gated communities like Kohala Ranch or rural areas like South Kona and North Kohala, the County will deny short term rental permits if the underlying state designation is agricultural. With dozens if not hundreds of active listings advertising their vacation rental success, but falling into this bucket, this is truly a concern for buyers and sellers alike.

If the rules stick: the views from Kohala Ranch will still attract home buyers, but not those who plan on renting their home short term when not in residence.

State Land Use Designations Complicate the Short Term Rental Issue

If you are looking for information about the basic provisions of Bill 108 and what the process is for registering an existing short term vacation rental, please start by reading my earlier blog post.

The new law prohibits NEW unhosted short term rentals where the property is zoned residential or agricultural. I predicted that would give a spike in value to homes that had a rental history and filed for the non-conforming use certificate…and where that is possible, that will still be the likely outcome.

The complication is a single paragraph in Bill 108, which aligns the Countyʻs registration and enforcement process with State law that had previously not been enforced on the Big Island. The Hawaii Land Use Commission designates every square inch of the island into one of four categories: Conservation, Urban, Rural, and Agricultural. No matter what an individual countyʻs zoning code might consider the property and deem its allowable uses, the state has a law stating that the offering of overnight accommodations for less than 21 days on ag-designated property subdivided after June 4, 1976 is only allowable within a County that includes at least three islands (meaning Maui).

This is exactly the portion of the Hawaii State Statutes that I discussed in 2014 with respect to the counties issuing special use permits for a “retreat center” on agricultural land.

Bill 108 applies to homes with 5 bedrooms or less, leaving homes with more than 5 bedrooms like this one in a gray area on rentals (MLS 622996), although state law on ag-designated parcels would still apply

State Legislation Introduced to Ease the Agricultural Property Issue

Puna district representatives have already introduced bills into the Hawaii State legislature by that would amend the state law to exempt “any County with a population between 150,000 and 500,000” meaning that the Big Island would also qualify.

As I understand it, here are all the steps that would need to happen for a property somewhere like Kohala Ranch or Ooma Plantation to be allowed to get a nonconforming use certificate and continue to rent without being in violation:

• The State bill needs to pass and get signed by the Governor. Sine Die, the last day of the session is May 2nd. The Governor gets until July 9th to veto, sign, or allow it to become law.
• The County Council would then need to pass a bill amending Ordinance 18-114 (which is what Bill 108 became once it passed) to remove the restriction on issuing nonconforming use certificates for ag-designated lots.
• The State law requires that the overnight accommodations be in the context of “bona fide agricultural activity” specifically defined. The County statute and rules would have to address how that would be verified…and the property applying would need to have qualifying activity in place.
• The properties would still need to meet all other conditions, such as improvements being 100% permitted, having paid all applicable taxes, and providing notice to adjacent homeowners.
• All of the above would need to happen by October 1, 2019, unless that deadline for registration is extended by the County Council.

Whatʻs a Second Home or Future Retirement Buyer to Do?

Master bedroom lanai on Kulalani at Mauna Lani condo – eligible for vacation renting (MLS 624263)

If the income from short term rentals is essential for you to afford a second home or future retirement property in Hawaiʻi, the safest course would be to purchase a home or condo which is zoned to allow that activity, whether or not the property currently has a rental history.

Another option currently allowed at both State and County levels would be to rent your property long term.

As with all such matters, getting the advice of an attorney would be wise if you have your heart set on a vacation rental property where there is any doubt about registration and permits under the new law.