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HB1838 HD1’s STR phase-out would harm many businesses

The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the House Committee on Judiciary and Hawaiian Affairs on Feb. 29, 2024.
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Feb. 29, 2024, 2 p.m.
Hawaii State Capitol
Conference Room 325 and Videoconference

To: House Committee on Judiciary & Hawaiian Affairs
      Rep. David A. Tarnas, Chair
      Rep. Gregg Takayama, Vice-Chair

From: Grassroot Institute of Hawaii
           Ted Kefalas, Director of Strategic Campaigns

RE: HB1838 HD1 — RELATING TO ZONING

Aloha Chair Tarnas, Vice-Chair Takayama and members of the Committee,

The Grassroot Institute of Hawaii would like to offer its comments on HB1838 HD1, which would amend Section 46-4 of the Hawaii Revised Statutes to allow the counties to phase out non-conforming single-family transient vacation units in areas of any zoning classification over a period of time.

First of all, the removal of short-term rental units from Hawaii’s tourism sector could harm the economy as a whole and generate legal challenges under the takings clause of the Fifth Amendment, as well as perhaps the Eighth Amendment, which has to do with excessive penalties or fines.

A 2020 study commissioned by the Hawaii Tourism Authority found that STRs added $6 billion to the state’s economy and sustained 46,000 jobs.[1] The survey also found that “30% respondents reported that if there was not a home and vacation rental option during their recent stay in Hawaii, they would not have made the trip.”

Thus, the removal of STRs from the vacation unit inventory could have a cascading effect, causing damage to other tourist-focused businesses, such as car rental agencies, restaurants and tour operators, as well grocery and other retail outlets and workers employed in cleaning, repairing and maintaining the STR units.

As for possible legal challenges, the U.S. Supreme Court has in recent  years indicated its willingness to uphold property rights against state and local government regulations. In Tyler v. Hennepin County[2] and Timbs v. Indiana,[3] the Court sided with property owners on Fifth Amendment and Eighth Amendment grounds, respectively.

If the committee decides to move this bill move forward, we recommend that it add this wording at the end of the proposed change to the section:

except that any county that phases out single-family transient vacation units must provide just compensation to the owners of such units.”

That is, it would now read:

Neither this section nor any ordinance enacted pursuant to this section shall prohibit the continued lawful use of any building or premises for any trade, industrial, residential, agricultural, or other purpose for which the building or premises is used at the time this section or the ordinance takes effect; provided that a zoning ordinance may provide for elimination of nonconforming uses as the uses are discontinued, or for the amortization or phasing out of nonconforming uses or signs over a reasonable period of time in commercial, industrial, resort, and apartment zoned areas only[.]; provided further that a zoning ordinance may provide for the amortization or phasing out of nonconforming single-family transient vacation rental units over a reasonable period of time in an area of any zoning classification, except that any county that phases out single-family transient vacation units must provide just compensation to the owners of such units.

Thank you for the opportunity to testify.

Ted Kefalas
Director of Strategic Campaigns
Grassroot Institute of Hawaii
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[1]Hawaii’s Home and Vacation Rental Market: Impact and Outlook,” prepared for the Hawaii Tourism Authority by JLL’s Hotels & Hospitality Group, April 20, 2020, p. 10.
[2]Tyler v. Hennepin County, Minnesota, et al.” Supreme Court of the United States, May 25, 2023.
[3]Timbs v. Indiana,” Supreme Court of the United States, Feb. 20, 2019.

 

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