May 6, 2024 -- The landscape of short-term rental properties in Honolulu County is a dynamic and contentious issue, with recent legal developments, tax implications, and community impacts all playing a role in shaping the current situation.
Legal Developments
A recent court ruling has allowed short-term rentals (STRs) in Honolulu to continue operating despite an ordinance that bans rentals of between 30 and 89 days in non-resort areas. The law permits STRs in resort districts, such as Waikiki and Ko Olina, for less than 30 days. This ruling is significant as it maintains the status quo for existing STRs, allowing them to operate without interruption.
Taxation and Revenue
Honolulu's short-term rental owners are facing higher property taxes, with an estimated $16 million in revenue expected from these increased taxes. The city relies heavily on property taxes, with almost half of its annual revenue coming from this source. The proposed tax rate for STRs is a middle ground between bed-and-breakfast and hotel rates.
Housing Market Impact
The proliferation of STRs has been criticized for depleting the housing supply for long-term residents. This trend is particularly concerning given that Hawaii has some of the highest housing costs in the nation and a large percentage of renters. The impact is exacerbated by the fact that STRs are often more profitable than long-term rentals, which can lead to a preference for short-term over long-term housing.
Regulation and Community Response
A bill, SB2919, has been passed to allow each Hawaii county to redefine zoning ordinances and potentially convert STRs into long-term residential housing. This bill empowers counties to regulate transient accommodations, including STRs, and aims to address the housing crisis by potentially reducing the number of STRs. Governor Green has signed this bill into law, emphasizing the need for local control over vacation rentals.
The State of Short-Term Rentals in Honolulu
STRs in Honolulu are only permitted in resort-zoned areas and specific apartment-zoned areas. There are two types of STRs: Bed and breakfast homes (B&Bs) and Transient vacation units (TVUs), both of which are subject to strict regulations. Platforms like Airbnb and VRBO are also strictly regulated on Oahu.
Economic Considerations
Short-term rental income is subject to state and county transient accommodations tax (TAT) as well as general excise tax (GET), which contributes to the local economy. However, there is a concern that the commercial use of STRs strains Hawaii's limited housing inventory and exacerbates the housing crisis.
Future Discussions
Council members are expected to continue discussions on the rates of property taxes for STRs, seeking a balance that is fair to homeowners while addressing the housing supply issue. The Governor has also shown a commitment to tackling the state’s affordable housing crisis and ensuring that every family has access to safe and secure housing.
the situation of short-term rental properties in Honolulu County is complex, with legal, economic, and social dimensions. While STRs provide a source of income for property owners and contribute to the local economy, they also pose challenges to the housing market and community well-being. The ongoing discussions and legislative actions aim to find a balance that supports both the tourism industry and the housing needs of local residents.