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Short-term rental property owners contest new bill regulating rentals on Hawaii

Property owners maintain that pre-existing rental properties shouldn't be subject to a new ordinance changing minimum lease length.

(CN) — Most travelling restrictions have lifted across the United States, and after years of not being able to travel, many have begun to plan vacations again, with Hawaii maintaining its position as a top destination for many. A marked shift toward a preference for a more residential vacation, as opposed to booking a hotel, and sites like Airbnb and VRBO have made it easier for short-term vacation rentals to proliferate.

The surge of vacation rental properties in Hawaii has prompted the creation of Bill 41, which was signed into law at the end of April and will take effect Oct. 23, 2022. The bill establishes an ordinance that primarily redefines the short-term rental period minimum from 30 days to 90 days for properties outside of specified resort zoning areas. Under the bill, if property owners and managers rent for less than 90 days, they can be subject to heavy fines and taxes.

The Hawaii Legal Short-Term Rental Alliance (HILSTRA) has filed a lawsuit against the City and County of Honolulu and the Department of Planning and Permitting in response. HILSTRA is comprised of property owners and managers that have been operating legally within the 30-day minimum for years, and in some cases, decades.  The goal, says Gregory Kugle, attorney for the plaintiffs, is to “protect the grandfathered rights of property owners.”

Kugle and the lawsuit cite prior changes to Hawaii state zoning restrictions. The first regulation to short-term rentals came in 1986 with the introduction of the initial ordinance that established the 30-day minimum. After this point, if a property could prove that they had been operating prior to the 1986 ordinance, they could be issued a "non-conforming use certificate" that allowed them to operate as they had always done, without having to adhere to the 30-day rental. There is no such exception detailed in Bill 41.

The lawsuit aims to protect this class of pre-existing rental property owners and managers from punishment for this change and ultimately to create an exception to the ordinance that would allow a similar "non-conforming use certificate" for properties already registered as lawful short-term rentals prior to the ordinance’s October start date. "We want a ruling that these are lawful prior uses...do the same thing for these property owners," Kugle says.

The bill currently states that any 30-day rental leases must either be stopped when the ordinance takes effect or be converted into 90-day leases. As a result, property owners and managers have taken issue with the potential lost income and disruption this new ordinance can usher in, as well as registering concern for local auxiliary businesses they employ for maintenance and booking.

The ordinance could furthermore have adverse affects aside from financial losses for property owners and managers. The lawsuit attests to the importance of short-term rentals as, "30 day rentals fill a much needed accommodation market that is not served by traditional hotels or for employment that is distant from resort zoned areas." Many of those currently utilizing the 30-to-89-day rentals are often military members, travelling healthcare workers and other professionals who may find themselves potentially out of luck for specific accommodations come October.

This new bill is characteristic of the ongoing struggle between residents and tourists. Although tourism has long been a cornerstone to the Hawaii economy, many locals still find the presence of the tourist industry problematic and disruptive to the local way of life. “Keep Hawaii, Hawaii” is a common refrain on the islands.

The influx of out-of-state visitors and new residents, supported by this industry of short-term rentals, has not always been well-received by locals. Bill 41 points to short-term rental properties as an influence on the ever-rising cost of housing on Hawaii that has increasingly pushed out local residents from their neighborhoods. Bill 41 clarifies that, "The purpose of this ordinance is to better protect the City’s residential neighborhoods and housing stock from the negative impacts of short-term rentals by providing a more comprehensive approach to the regulation of transient accommodations within the City."

The Department of Planning and Permitting could not be reached for comment. The non-conforming use exception proposed by the lawsuit would not apply to vacation rental property owners that register their properties after the ordinance fully comes into effect. Registration for short-term rentals is currently temporarily suspended.

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