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Proposed STR rules fraught with potential economic, legal pitfalls

The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the Hawaii County Council Committee on Planning, Land Use, and Development on July 8, 2024.
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July 8, 2024, 9 a.m.
Hawai‘i County Building

To: Hawai‘i County Council, Committee on Planning, Land Use, and Development
      Ashley Kierkiewicz, Chair
      Holeka Goro Inaba, Vice-Chair

From: Joe Kent, Executive vice president
           Grassroot Institute of Hawaii

RE: Bill 121 — RELATING TO TRANSIENT ACCOMMODATION RENTALS AND HOSTING PLATFORMS

Aloha Chair Kierkiewicz, Vice-Chair Inaba and other members of the Committee,

The Grassroot Institute of Hawaii would like to offer its opposition to Bill 121, which would replace the existing regulations on short-term rentals with a new set of regulations covering owner-hosted, operator-hosted and unhosted STRs.

We are concerned about the effect this measure might have on existing STR operators, small businesses and the broader Hawaii Island economy — and we would request that the county commission an economic analysis of the short-term rental industry in Hawai‘i County before acting on this bill.

For example, a 2020 study commissioned by the Hawaii Tourism Authority discovered that STRs are generally less expensive than hotels ,and 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.”[1]

The study did not look at Hawaii Island specifically, but it did find that STRs added $6 billion to the state’s economy and sustained 46,000 jobs.[2]

The HTA study also surveyed people statewide who own short-term rentals and found that “70% of residents who indicated that they make their living unit available for home and vacation rentals report that they do so to either make incremental income or meet housing gaps (40% and 30%, respectively).”

Further: “Responses in 2019 track with reasons and proportions provided by respondents in 2016, where 60% of respondents indicated that they make their living unit available for home and vacation rentals to subsidize housing costs. The increased proportion can be partly explained by the ongoing rise in housing costs in Hawaii.”[3]

The HTA study indicated that many existing STR hosts — who maybe rent out a room or a second unit on their property — use their STR income to afford Hawaii’s high cost of housing. These existing hosted STRs also offer everyday folks the opportunity to participate in Hawaii’s tourism economy and build wealth for their families.

We are also concerned about the steep fines to be charged to those who would violate this proposed new law, as a $10,000-per-day fine could quickly add up to an unpayable amount — and even result in the loss of property itself. Not only would such a fine be excessively harsh, but it could be unconstitutional.

Both the state and federal constitutions bar excessive fines, and the U.S. Supreme Court’s decision in Timbs v. Indiana establishes that the federal excessive fines clause applies to state and municipal actions as well.[4]

Recent cases, such as Tyler v. Hennepin County,[5] indicate that courts are increasingly prepared to strike down aggressive state action that impairs individual property rights. Thus, we suggest that the penalties associated with noncompliance be reconsidered and restructured.

If this bill moves forward, the Committee should adopt the contents of Communication 675.163, which would remove the language that dictates where STR owner-hosts or operator-hosts can sleep.

The current draft would prohibit people running owner-hosted or operator-hosted STRs from sleeping in a detached bedroom or a guesthouse. This provision would likely be hard to enforce and would not be necessary if the owners or operators were residing on the same lots as the STRs.

Thank you for the opportunity to testify.

Joe Kent
Executive vice president
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] Ibid, p. 4.
[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. 16.
[4] 586 U.S. ___ (2019). 139 S. Ct. 682.
[5] 598 U.S. 631 (2023).

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