Broadening zoning powers could stifle homebuilding

The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the House Committee on Finance on April 2, 2024.

April 2, 2024, 4 p.m.
Hawaii State Capitol
Conference Room 308 and Videoconference

To: House Committee on Finance
      Rep. Kyle T. Yamashita, Chair
      Rep. Lisa Kitagawa, Vice-Chair

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


Aloha Chair Yamashita, Vice-Chair Kitagawa and other members of the Committee,

The Grassroot Institute of Hawaii would like to offer its comments on SB2919 SD2 HD1, which would expand the zoning power of the counties in an effort to overcome the effect of a court decision that frustrated Honolulu’s effort to limit short-term rentals.

In addition to specifically stating that the counties would be allowed to phase out transient vacation rental units, SB2919 SD2 would allow county zoning ordinances to dictate “the time, place, manner, and duration in which uses of land and structures may take place.”

We at Grassroot fear that the overly broad zoning powers that would be created under this bill would negatively affect both the housing market and the economy.

The intention of the bill is to make it possible for counties to heavily dictate timing and use of residential property, but broadening the zoning powers of the counties could result in additional regulations that stifle housing growth.

In addition to being overly broad, SB2919 SD2 HD1 could be ineffective in achieving its primary goal. The court’s decision in Hawaii Legal Short-Term Rental Alliance v. City and County of Honolulu[1] was decided based on Hawaii Revised Statutes Section 46-4, but it does not follow that a change to that Section would be sufficient to eliminate short-term rentals.

The jurisprudence in this space continues to develop, but courts have been clear that the issue touches upon constitutionally protected property rights. Hawaii’s courts have specifically noted that preexisting uses are vested rights protected by the due process provisions in both the Hawaii and U.S. constitutions and thus cannot be abrogated by later zoning ordinances.[2]

In other words, this bill would give the counties more zoning powers, but would not end litigation over short-term rentals.

Moreover, the assumption that greater regulation or a phase-out of short-term rentals is a desirable goal is not supported by an impartial analysis of the visitor industry and the actual participants in the STR economy.

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.[3] 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 government regulations. In Tyler v. Hennepin County[4] and Timbs v. Indiana,[5] the Court sided with property owners on Fifth Amendment and Eighth Amendment grounds, respectively.

Given the uncertain legal and economic considerations in this approach to the issue of short-term rentals, we suggest the Committee defer SB2919.

Thank you for the opportunity to testify.

Ted Kefalas
Director of Strategic Campaigns
Grassroot Institute of Hawaii

[1] No. 22-cv-247-DKW-RT (D. Haw. Oct. 13, 2022).
[2] Waikiki Marketplace v. Zon. Bd. of Appeals, 86 Haw. 343, 949 P.2d 183 (Haw. Ct. App. 1997)
[3]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.
[4]Tyler v. Hennepin County, Minnesota, et al.” Supreme Court of the United States, May 25, 2023.
[5]Timbs v. Indiana,” Supreme Court of the United States, Feb. 20, 2019.

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