Update: County Council forwards proposed changes to short-term rental regulations to planning commissions, director

Update at 9:17 a.m. Jan. 24: The Hawai’i County Council on Tuesday, following a nearly 6.5-hour meeting of its Policy Committee on Planning, Land Use and Development that included almost 4 hours of testimony, most in opposition, forwarded a three-bill package dealing with short-term rentals to the Hawai’i County Leeward and Windward planning commissions and planning director for their consideration and input.

Bill 121, which would add new definitions and rules for owner-hosted, operator-hosted and unhosted transient accommodation rentals, as well as hosting platforms such as Airbnb and VRBO, was forwarded by a vote of 8-0. According to introducers Hawai‘i County Council Chairwoman and Puna Councilwoman Ashley Kierkiewicz, the bill’s objectives are to get all transient accommodation rentals in the County registered while making sure they are operating safely and following the same standards.

Bill 122 would repeal provisions allowing for bed and breakfast establishments, since as short-term rentals, they, too, would be regulated under the proposed new code in Bill 121. The measure was forwarded by a vote of 7-1, with Kohala Councilwoman Cindy Evans voting no.

Finally, Bill 123, which proposes amending the County’s ‘ohana code, including changing the term to “accessory dwelling unit” and removing most restrictions for building these types of units as long as they are used for long-term housing and not transient accommodations, was forwarded by an 8-0 vote.

Puna Councilman Matt Kaneali‘i-Kleinfelder was absent.

Original story posted at 1 a.m. Jan. 23: Hawai‘i County Council Chairwoman Heather Kimball said she and her council colleagues often get asked how many vacation rentals there are in the county.

The answer? They really don’t know.

Kimball and Puna Councilwoman Ashley Kierkiewicz want to change that, along with making sure all short-term rentals, also known as transient accommodation rentals, are operating safely on the Big Island and following the same standards.

They will introduce a three-bill package today during a 1 p.m. meeting of the Council’s Policy Committee on Planning, Land Use and Development that would update provisions for short-term rentals and make several other changes.

Bill 121 does most of the work, adding new definitions and rules for owner-hosted, operator-hosted and unhosted transient accommodation rentals, as well as hosting platforms such as Airbnb and VRBO.

It would require all three types of rentals, which are those that provide accommodations of 180 days or less as per state law and the county’s real property tax code, to be registered with the county. It also aims to lay out and make clearer the standards these rentals must follow. For example, off-street parking requirements, event limits and even guest limits.

“When I was campaigning the first time around and knocking door-to-door, this was one of the top three issues that people in my community had concerns about,” said Kimball. “And it was around issues like … parking being taken up on their street by a vacation rental, noise at all hours of the day and night. I had two folks in my community who decided to move because they couldn’t tolerate the activity that was going on next door.”

The new regulations also would require hosting platforms to include registration numbers on all of their listings and provide regular reports to the Hawai‘i County Planning Department.

Owner-hosted rentals, or any transient accommodation rental hosted by a person who uses the building as their principal home, would pay an initial registration fee of $500. Operator-hosted properties, those rented on behalf of an owner who lives on the same site, would be required to pay a $750 initial fee.

Unhosted short-term rentals, any transient accommodation rental that is not the principal home of the property owner and without an operator located on-site during rental operations, would see an initial registration fee of $1,000.

There also would be annual registration fees for each type of transient accommodation.

Bill 121 – TAR and Hosting by Tiffany De Masters on Scribd

Fines for violating the proposed new regulations would be the same for all rental types and range from $2,500 for the first violation up to $10,000 for the third.

There would be exceptions to the new registration requirements, including:

• The rental is not being provided to a transient or transients as defined in the code.
• There is an emergency declaration enabling temporary shelter for displaced people.
• The dwelling is the principal home of the host and provided as a home exchange and no financial transaction happens.
• The dwelling is being provided to a tenant under a month-to-month lease.

Owner-hosted rentals could be started at any time in any zoning district as long as they meet all safety and code requirements and the owner lives on the property as their primary place of residence.

Operator-hosted rentals would be allowed in resort and commercial areas only, with rentals outside those zones as of the beginning of this year grandfathered in. However, no new operator-hosted rentals would be permitted in those zones if the bill passes.

Unhosted short-term rentals also would be allowed in resort and commercial zones. In other zoning areas, unhosted rentals would only be able to operate with an existing nonconforming use certificate. However, no additional nonconforming use certificates will be issue for unhosted rentals if Bill 121 becomes law.

Transient accommodation rentals also would not be permitted in ‘ohana units if the bill passes, but those already operating in ‘ohana units would be grandfathered in with a nonconforming use certificate.

Those registering transient accommodation rentals would fill out a notarized document to confirm the rental property meets building standards and it’s safe for people to reside in.

“You’re basically signing off on the health and safety of that particular unit,” said Kierkiewicz.

Kimball compared this process of registering rentals to the Department of Motor Vehicles.

“You register your car, you get a safety check which says that it’s operating safely and all of that,” Kimball said. “But as far as how the car is manufactured, the county is not responsible for that. We’re just registering your vehicle. It’s the same thing. We’re just registering your transient accommodation. We want to make sure it’s operating safely.”

The required affidavit would lay out what the rental, which is a commercial operation that comes with the expectation of it being safe for those renting it, should have to protect guests. That would include having smoke alarms, multiple ways to get out of a room in the event of a fire, among other provisions.

The new regulations would include an amnesty program for people operating a transient accommodation rental now who did not know they were under a different tax law because of it. Kimball and Kierkiewicz said the county will not use the registration process to go back and penalize people for back taxes.

“We want to have everybody registered,” Kimball said. “We didn’t want to be overly punitive.”

The proposed legislation would make it easier for people to see the rules and implications in one single code so they can see exactly what they need to consider if they want to pursue offering these short-term rentals.

The new regulations also are aimed at preserving the character of residential and agricultural areas of the island, “keep country country, as they say,” Kimball said, and reducing the impact these short-term rentals have on the long-term rental market, including inventory and overall rental rates.

It’s hoped the proposed legislation will decrease speculative investment of properties in residential and ag markets around the island as well.

The second measure in the package, Bill 122, would repeal provisions allowing for bed and breakfast establishments, since as short-term rentals, they, too, would be regulated under the proposed new code.

Finally, Bill 123 would amend the county’s ‘ohana code, including changing the term to “accessory dwelling unit” and removing most restrictions for building these types of units.

“Basically, we’ve made it so that if you can fit it on your lot and you can fit the wastewater, if that’s a septic system, for example, you can build it as long as it conforms to the building code and all of that,” Kimball said.

The county’s first attempt to regulate these short-term rentals was in November 2018 with the passage of Bill 108, which included some recommendations from a March 2018 Hawai‘i Appleseed report that provided an overview of impacts from the rentals on the state’s housing market.

That bill, however, only dealt with unhosted rentals, limiting where they could operate and creating a set of operational standards. Kimball said there was always a plan to revisit the issue. So after about 2 years, some modifications were needed to address the other types of short-term rentals and clarify operation standards to make them easier to follow and more enforceable.

The Hawaii Housing Fact Book by Tiffany De Masters on Scribd

A first draft of the proposed new regulations was released about a year ago and they have been debated with community members, including three webinars. County government has since fine-tuned the language.

The bill package Kimball and Kierkiewicz are putting forward today has already received some pushback before being considered for the first time by the council.

“This legislation is like a doctor ordering major surgery without doing an X-ray first,” said Joshua Montgomery, president of the ‘Ohana ‘Āina Association, which advocates for homestays, farmstays and transient rentals on the Big Island. “Vacation rentals are one of the largest sources of employment and tax revenue in Hawai‘i County.”

The association also started a petition in opposition to the new rules that had nearly 1,700 signatures by 4 p.m. Monday.

Montgomery said more than 7,000 families on the island depend on income from maintaining, cleaning, operating or owning vacation rentals and the industry pays more than $740 million in taxes each year, employing thousands of workers and facilitating visitor spending in places such as Volcano, where there are no resorts.

“Members of our industry have been telling Heather and Ashley for over a year that it will cost people their homes, cost well-paid workers their jobs and force an outmigration of families who depend on vacation rental income to make ends meet,” he said.

Montgomery also expressed concern about short-term whole-house rentals, which the University of Hawai‘i Economic Research Organization estimated in June 2023 to be 7.8% of all whole-house rentals on the Big Island, being pushed out of the industry because of the proposed new regulations that would not grandfather in unhosted transient accommodation rentals outside resort or commercial zones.

He also thinks there should be outside studies done to look at how the proposed new regulations will affect the county’s broader economy.

Kimball and Kierkiewicz recognize that many island families and individuals host vacationers at their homes and understand it’s something they enjoy and is critical to their livelihoods.

“None of the transient accommodation rentals that exist now will be shut down unless they choose to,” Kimball said.

Montgomery said housing is not a zero-sum game and stopping families from renting a portion of their home will not create more. The council members pushed back, saying if a Big Island resident wants to convert a portion of their home into a short-term rental at any point in time in any zoning district, they can.

Kierkiewicz simply wants to make sure transient accommodations are not interfering with people who have lived their entire lives on the island having the same chance to become homeowners as people from outside the state.

“That is the one way that families are able to build up that generational wealth,” she said.

Kierkiewicz added that short-term rentals do contribute to the island’s economy through tourism and while there is still a place for them, the county is at an inflection point to do something to address the myriad challenges the community has raised about them.

“What we’re just trying to do is safeguard our community interests and safeguard our future,” she said.

“I think that we are wanting to ensure that, you know, tourism will always be a part of our overall economy on this island, but it’s about finding balance and it’s about making sure that the impacts are minimized,” Kimball added.

There will be plenty of time for additional community input as the bill package moves ahead.

If the bills receive a favorable nod today from the Policy Committee on Planning, Land Use and Development, they then will go to the Leeward and Windward Planning Commissions for their consideration before coming back to the committee.

If they win approval there again, they each will have two separate readings during council regular sessions.

The entire process will likely take several months.

“Now it’s time for other people to weigh in and get it to the final point where it really should be,” Kierkiewicz said.

Updates on the bill package’s progress, including where and when the public can testify, will be posted on a special website set up specifically for the issue.

Community members also can find additional information, such as the three webinars that were hosted after work began on the legislation, for those who want to know more about the proposed new regulations and code changes.

Kimball and Kierkiewicz added that their doors also are always open to answer any questions.

Information about how to testify at committee and Council meetings can be found on the County’s website.