A heated controversy over short-term vacation rentals is coming to a head this month in Hawaii, where lawmakers at the state and local levels are considering measures to regulate, tax, and sharply curtail the number of allowable units from Airbnb and other providers.

The controversy is occurring at a time when short-term vacation rentals, many of them without the county-issued permits that are required, are growing far faster than any other type of accommodations in Hawaii. According to figures from the Hawaii Tourism Authority, short-term rental units increased by 5,716 units between 2013 and 2017, while hotels added just 942 rooms during that period.

Squeezed on Oahu

Proponents of greater regulation say the spike in short-term rentals, particularly on Oahu where the bulk of the population lives, are squeezing local residents out of an already tight and expensive housing market as well as creating congestion in residential neighborhoods. They say the situation is similar to that in a plethora of destinations from San Francisco to Barcelona, where regulatory measures on short-term rentals have already been enacted.

“We have the highest cost of living in the U.S. and our residents are leaving in droves—and part of the problem is the proliferation of illegal vacation rentals,” Victor Geminiani, executive director of Hawaii Appleseed Center for Law and Economic Justice, a non-profit group advocating for the regulatory measures, told Skift. “So much of our housing is being sucked up by speculators who are buying houses not to live in them or to rent them for the long term, but for short-term rentals.”

Two measures are currently before the Honolulu City Council, where a vote is expected to take place on May 8. Bill 85 focuses on creating tougher enforcement mechanisms, including giving citizens the right to go to court and prompt the city to take action against a neighbor operating an illegal short-term rental. The bill is supported by neighborhood groups, housing advocacy groups, and Unite Here Local 5, which represents hotel workers.

The other measure, Bill 89, makes it easier for homeowners to offer bed-and-breakfast accommodations in homes where they live but would crack down on so-called “transient vacation rentals” or TVUs, which are entire homes rented out by owners not living on-site.

Catch-22

The number of legally permitted transient vacation rentals on Oahu outside the designated resort zones of Waikiki and Ko Olina are currently limited to 800. However, it’s believed there are currently more than ten times that amount operating illegally, especially on the North Shore where the Hawaii Tourism Authority estimates that about one in four houses are tourist rentals.

Ken Kimi, owner of Honolulu-based A Touch Above Travel Services and president of the American Society of Travel Advisors’ Hawaii chapter, sees Oahu’s vacation rental issue as a catch-22 situation.

“Local government says you need to be licensed for short-term rentals, but they are not giving out licenses other than for the Waikiki district, so homeowners just rent out their home or room anyway,” he said. “Short-term rentals in residential districts create parking problems and short-term renters don’t typically worry as much about disturbing the neighbors.”

Economic Impact

Some vacation rental companies that have aggressive marketing campaigns aimed at encouraging Hawaii residents to list units are strongly opposing the measures. They warn of a catastrophic effect from suddenly removing thousands of TVUs from the inventory of accommodations on Oahu.

“Instead of bringing short-term rental rules on Oahu into the 21st century and addressing market realities, Bill 89 would largely destroy the alternative accommodations market outside of the resort zones and inflict significant damage on small businesses and the local economy,” Matt Middlebrook, Airbnb’s head of policy for Hawaii, said in written testimony.

Kahea Zietz, head broker for Hawaii Life Vacations, a short-term rental provider, posted an article on the company’s website, urging opposition, claiming that Bill 89 would likely depress real estate prices and “have an immediate and devastating impact” on Oahu’s tourism economy.

Those opposed to the regulatory measures also point to the acute need for accommodations in Hawaii, where visitor numbers have been steadily increasing during a time when hotel growth is almost stagnant. According to Hawaii Tourism Authority figures, a total of 9,954,548 visitors came to Hawaii in 2018, an increase of 5.9 percent over 2017.

Such arguments mean little to regulatory advocates like Geminiani who said the tourism industry needs to take a “hard look at the consequences” of unchecked growth.

“We know our economy is built on tourism, but there comes a point when enough is enough,” he said. “People here are really getting fed up, especially when they see their kids fleeing to the mainland because they can’t afford to live here.”

Taxing Situation

The measures before the Honolulu City Council are far from the only way Hawaii is grappling with the short-term rental issue. Regulatory measures have already been enacted by the governing councils on Maui and Hawaii Island.

Meanwhile, the Hawaii State Legislature is considering a bill that would require Airbnb and other platforms to collect and pay taxes on behalf of short-term rental hosts. At press time, the legislation was not expected to pass before the current session ends.

Taxation on short-term rentals is strongly supported by the Hawaii Lodging and Tourism Association, which represents 50,000 hotel rooms in the state. Both Airbnb and Expedia, which owns HomeAway.com and VRBO.com, have issued written statements in opposition.

While similar legislation was passed previously, it was vetoed by Governor David Ige, who voiced concern that it would only encourage the growth of illegal rentals lacking county permits.

“It looks like it will be the second year in a row where a bill has died in the legislature to allow local and transient accommodation tax to be collected and forwarded,” Kimi said. “I think the thinking is that if it is allowed, then the government is sanctioning these illegal rentals. So because of the stalemate, home owners keep renting and the government gets nothing.”

Photo Credit: Beachgoers enjoy the sand and waters of Kaanapali Beach on Maui in Hawaii. Michael Goulding / Orange County Register/MCT