County to study economics of short-term rental industry on Big Island, but likely won’t delay proposed new regulations
A main point of pushback on proposed new regulations for short-term rentals on the Big Island is the economic impact those rules would have on the industry; more specifically, the wallets of the residents who operate them.
Many in the community think the Hawai‘i County Council should understand and have solid data in hand about how those rentals impact the island’s economy before making any decisions.
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The council does want to know more about the ins and outs of short-term rentals, also called transient accommodation rentals, and on Wednesday adopted Resolution 556, tasking the Hawai‘i County Department of Research and Development to assess and analyze — with the help of a contracted economist — the industry’s fiscal effects.
However, it likely won’t delay the forward momentum of three short-term rental measures already moving through the legislative process.
Resolution 556 was approved by an 8-1 vote, with Puna Councilman Matt Kāneali‘i-Kleinfelder the only member in opposition. It was introduced by Puna Councilwoman Ashley Kierkiewicz, who also co-introduced the package of new regulations.
A June report for The Travel Technology Association states nearly 44% of all Big Island visitors stayed in short-term rentals in 2023, contributing about $1.3 billion to the local economy and resulting in more than $17.7 million in transient accommodations tax revenue and $7.1 million-plus in general excise tax revenue.
The Hawai‘i Housing Factbook published in June 2023 by the University of Hawai‘i Economic Research Organization showed that 7.8% of the county’s 88,259 total housing units, or 6,847, were being used as short-term rentals.
While a large share of these types of rentals are in tourism-dense resort areas, some predominantly residential areas have significant shares. For example, short-term rentals make up 17% and 9% of housing units in Kailua-Kona and Kapa‘a, respectively.
“There is a need to understand the broader economic and fiscal impacts of transient accommodation rentals in Hawai‘i County, including potential impacts on tax revenue, employment, economic activity, housing affordability, neighborhood character, infrastructure, public services and local businesses,” the resolution says.
The measure adds that short-term rentals do provide the opportunity for Big Island residents to generate additional income they can use to support their families, invest in their homes and put back into the local economy.
There’s also the thought that existing short-term rentals, if phased out or restricted, would be converted into long-term housing which would increase housing availability and perhaps alleviate housing affordability concerns.
“An economic and fiscal impacts study would provide valuable insights and data to inform additional policy decisions and regulatory measures for transient accommodation rentals in Hawai‘i County that work for residents, taxpayers, transient accommodation rental hosts and visitors alike,” says Resolution 556.
It would also help assess the validity of the assumption and likelihood of existing short-term rentals being converted into long-term housing.
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The study will look at:
- Daily data on AirDNA, a third-party firm, relating to transient accommodation rental listings in Hawai‘i County including types, occupancy rates, pricing, geographic distribution, market value of the land/building, proximity of the owner, number of structures and other key metrics.
- Direct and indirect economic contributions of the short-term rental industry to the county’s economy.
- Impact of these rentals on housing availability and affordability for Big Island residents.
- Potential and feasibility for transient accommodation rental units to be converted into long-term rentals.
It will also engage industry stakeholders such as short-term rental hosts, local businesses, housing advocates and other representatives to gather input and analysis.
The Research and Development Department and contracted economist are expected to report the findings of the study and their recommendations to the council no later than Feb. 28, 2025.
Community members who testified are thrilled with the legislation.
“I think this is a wonderful idea,” said Kris Adair of Kailua-Kona on Wednesday. “It is incredibly important to do economic research about one of our largest industries. Right now, tourism represents a significant portion of the GDP of this island and I believe that if we go through with this economic impact study, we can better understand how that will impact everybody in this industry.”
Fellow Kailua-Kona resident Joshua Montgomery said this is the way to do legislation properly: do your homework first, draft the measure after, get public comment and pass it with good information.
“Going out and getting quality information is step one, and I’m really glad to see that’s gonna happen …,” said Montgomery on Wednesday.
Caryl Burns, another Kona resident, applauded the council for passing the resolution, especially in connection with an industry of this scope.
She said even when you purchase a car, you do a lot of research about all the vehicle’s aspects. This is a much bigger issue. So it makes even more sense to look at the economics behind it.
Anna Ruth and Joe Peiffer are owners of The Last Resort, a hosted rental in Kapa‘au.
They wrote in support of Resolution 556, saying they not only pay tens of thousands of dollars each year in property taxes, including transient accommodations tax and general excise tax, but they also support the rural economy in a variety of other ways.
The Peiffers provide on-site affordable housing for their property managers each month and pay them about $6,000 a month in wages. They rely on Big Island contractors and small businesses to maintain the property, including gutter cleaning and lawn mowing, with an annual budget of $35,000.
They pay a local woman-owned company more than $30,000 a year for guest cleanings. They also put nearly $1 million into the pockets of Kohala carpenters and tradesmen and another $1 million into small businesses that helped restore the land and homes at the rental property during a massive renovation.
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Plus, the Peiffers direct guests to Kohala and other Big Island small businesses, restaurants, farmers markets, boutiques and excursion vendors to keep those dollars on the island, especially in downtown Hawi.
They urged the council to pass Resolution 556 to conduct a comprehensive economic study that looks at the “positive economic impacts” of short-term rentals around the entire island.
Nicki Conti of Pāhoa said conducting a “real study” is important before proposed new regulations are put in place that could adversely affect many island residents.
“The Big Island is not O‘ahu and the problems and complaints that come from densely populated areas are not the same as rural areas,” wrote Conti in his submitted testimony. “We need to look at each location where tourism takes place and see if and how much it actually affects housing for residents. There is no one-size-fits-all.”
Paul Crawford of Pāhoa said in his written testimony that there are no hotels or other places to stay in rural Puna other than short-term rentals; “the Puna economy is wholly dependent” on them.
Any action to ban them would destroy an economy already devastated — and still recovering from — the 2018 eruption, lava flow and summit collapse of Kīlauea volcano.
“Our restaurants, stores and all the other people dependent on [short-term rentals] will suffer greatly,” wrote Crawford. “Please fund a study to confirm all the people this will devastate financially before taking action.”
Pāhoa resident Guthrie de Bruyn wrote simply in a portion of his submitted testimony: “This is the much-needed study we have been asking for.”
Joy Dillon of Hilo agreed, saying in written testimony that the public has long asked for such a study.
With new regulations being proposed, the public and many Big Island residents who own short-term rentals deserve to know what the real, actual impacts of the industry are on the island’s economy.
“With this legislation, we have put the horse back where it belongs, before the cart, before any discussions about changes to the presently legal [short-term vacation rental] operations can even begin,” said Ken Honma of Kurtistown in written testimony.
Kierkiewicz introduced the resolution at the request of several community members islandwide who want hard-line, specific data about the impacts of short-term rentals on the Big Island as a way to ensure work being advanced through Bill 121, which is part of the proposed transient accommodation rentals bill package, is appropriate for the county.
Bill 121 would require all short-term rentals, those rented for 180 days or fewer, to be registered with the county, which is in alignment with state law and the county real property tax code.
It lays out three rental types — owner-hosted, operator-hosted and unhosted — and where they would be permitted.
In addition, standards would be expanded and made clearer, including guest limits, off-street parking requirements, noise restrictions and limits on events. The bill also identifies stiffer fines for violating standards and the possibility of repeat offenders having their registration revoked.
Finally, the bill would require hosting platforms such as Air B&B and VRBO to include registration numbers on all listings and provide regular reports to the Hawai‘i County Planning Department.
You can find more information about Bill 121 and the other bills in the package online.
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Kimball and Kierkiewicz have reiterated several times since introducing the bill package that they are attempting to balance tourism, the county’s economy, lifestyle and housing.
The tourism industry has evolved on the Big Island. Short-term rentals provide an opportunity for residents to become entrepreneurs.
Kierkiewicz thinks that’s something empowering, especially with the cost of living soaring in the islands.
“There’s a lot of information that’s out there on the state and the national level,” she said Wednesday. “A lot of data, a lot of reports — a lot of reports that actually conflict one another — and what we have going on here on Hawai‘i Island is so very unique.”
The study is meant to provide a clear and full picture of the island’s short-term rental industry.
Kierkiewicz assured her council colleagues that everything they asked during a committee meeting two weeks ago to be included in the report — carrying capacity, making sure money stays on the island, impacts to rental rates and cost of homes, among other nuances — is covered by the study.
“We want to make sure that we’re addressing the specifics and the unique nature of the issues here on this island, and we’ll be working internally within the county and the departments that we have, for example, Planning and Office of Housing and Community Development, and then also with our state agencies, whether it’s [Research and Economic Analysis] and [the Department of Business, Economic Development and Tourism] or the University of Hawai‘i Economic Research Organization, to help us put together a scope that fits the budget but also allows us to acquire the information that we need,” said Department of Research and Development Director Doug Adams on Wednesday.
He and his department are committed to completing the study as quickly as possible with the utmost integrity and transparency in a balanced way to get the most solid, accurate information possible so the council can deliberate and make any changes needed to current and future short-term rental legislation.
Hilo Councilwoman Sue Lee Loy said the National Association of Counties is willing to provide funding and other help to conduct the study, which they also did for Maui County. She said with that assistance, the county could possibly turn the study around even more quickly.
She was going to speak with Kierkiewicz and Adams about that possibility after Wednesday’s council meeting.
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The majority of the council was satisfied with Resolution 556 and the direction the study would take; however, Kāneali’i-Kleinfelder’s opposition stemmed from what he called a logical fallacy.
“I go back to Bill 121, which really was the precursor for Resolution 556; 121 created chaos in the community, 556 looks to inform the community as to the impact of Bill 121,” said the Puna council member.
He said if Lee Loy could get outside funding for the study, that’s great, but providing taxpayer money to fund a study based on legislation that created the need for the study is a problematic circle the council put itself in and he can’t support that.
Many, if not a majority, of those in the community who support Resolution 556 think the study should be completed so the data and information it finds are available before any further decisions are made on the proposed new short-term rental legislation.
“We need an economic impact study of the effects of Bill 121 on changes to our [short-term vacation rental] regulations,” wrote Burns in her additional submitted testimony.
Justin Cleveland said in written testimony he can’t wait to see the study’s findings and supports getting it done to determine the “negative impacts” of Bill 121.
Several others agreed that the study would likely shed light on how the measure would harm the industry.
Sandy David with Lezarde Travel said in written testimony that Resolution 556 will give the county the information it needs in real numbers to decide how to proceed with changes that affect vacation rental owners and hosted rentals or whether to make any changes at all.
Robert Golden, executive director of Puna Rising, appreciates the groundwork council members have done, but said in his written testimony that the most judicious way to move forward on any legislation related to short-term rentals is to wait until the research is concluded.
Joe Kent, executive vice president of the Grassroot Institute of Hawai‘i, agreed in his written testimony: “Because the county is considering a new regulatory framework for short-term rentals, it would be wise to gather relevant information — such as job, wage, income and housing-related statistics — before acting on the proposed new rules.”
“Please conduct this comprehensive study before making a final vote on Bill 121,” de Bruyn wrote.
Some who supported Resolution 556, however, think Bill 121 and the other transient accommodation rental measures should continue to move forward.
“Many have been in opposition to Bill 121 proceeding without this study, or even at all,” wrote Stephen Donoho, administrative director of the Kohala Coast Resort Association. “We believe that the suite of [transient accommodation rental] bills [Bills 121, 122 and 123] should continue to proceed without delay. Every day that implementation of the [transient accommodation rental] legislation is delayed is another day that Hawai‘i County does not accurately know who it should be collecting transient accommodations taxes [TAT] from nor how much they should be collecting in TAT and [general excise tax] based on the average daily rate and occupancy. That puts a significant and unnecessary strain on the county’s resources.”
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Kimball said she is still committed to continuing to move Bill 121 ahead.
“I think as we move forward, we may make tweaks here and there, but the fact is that 121 does not shut anybody down that is operating legally,” the council chairwoman said Wednesday. “It’s a registration process.”
Hilo Councilwoman Jenn Kagiwada said the study does not stop the council’s registration and regulation efforts for the island’s booming short-term rental industry, which she thinks are necessary.
She also thinks moving forward, some of that information could be used to inform appropriate taxation of these rentals.
Bills 121 and 122 were postponed to the council’s Aug. 20 Policy Committee on Planning, Land Use and Development meeting. Bill 123 was postponed to the committee’s Aug. 6 meeting.
Kimball has maintained since the short-term rentals bill package was introduced and throughout deliberations that one of the objectives is to ensure all of these rentals on the island are operating safely, legally and adhering to the same set of operational standards.
“This objective alone justifies that the council continues to work on 121,” she said Thursday in an email, adding as much as the study will provide a clearer picture of the economics of short-term rentals, having existing rentals registered will give a better look at the number, location and status of those already in operation. “All of this data is important for our decision-making as we move forward on this issue. I expect further amendments will be forthcoming for 121 and that we are still a couple of months from a final draft.”