Go to Top

Oahu Short-Term Rental Rule Amendment – “Policy Pivot”?

Hilton Beach
  • Update 9.9.2021: During the 9.8.2021 follow-up meeting, the DPP released a further revised DRAFT Bill 9.7.2021. This latest revision is still miles away from being sensical and practical. The next meeting is 9.29.2021. To request accurate timely updates and how you could help shape the final bill, contact: OahuSTRAlliance@gmail.com
  • Update 8.23.2021: The DPP released a slightly revised DRAFT Bill which corrects some typos, including this reversal: “The use of a condominium-hotel unit as a primary residence or usual place of abode is allowed.” – Good.

Unacceptable provisions remain inexplicably baked into the Bill:

  1. Only hotels can a) manage, and b) set rental rates for condotels!  — Seems unreasonably lopsided and restrictive. Hotels have been divesting themselves from ownership for years. The Ala Moana Hotel, Aloha Surf, Bamboo, and Palms At Waikiki all converted to condotels. Hotels want management control but not the risk and responsibility of upkeep. A dozen condotels operate flawlessly without a 24h service desk. So do trains, train stations, some buses, and many airline check-in counters. Perhaps the revised Hotel definition still requiring a 24h front desk is based on an outdated business model. Individual owners buy condotels with the right to self-manage, and or the right to use third-party property managers. It promotes competition and innovation, which leads to progress. That’s how evolution, the economy, and business work.
    • The DPP trying to remove management rights from condotel owners does nothing to reduce impact on residential neighborhoods.
    • It also does nothing to crack down on illegal short-term renting. What is the hidden agenda? Is the DPP bowing to Hotel industry pressure under false pretense?
  2. Rental terms of <180 days (instead of <30 days) are illegal unless the property is a B&B or TVU. — Say what? Whoever needs a temporary rental for less than 6 months will need to check into a hotel/B&B/TVU?    – This story is still developing. Below is the original article…

________________________________

On August 20, 2021, the DPP advertised this Memorandum and DRAFT Bill to amend existing short-term rental rules. A public hearing is on 9.1.2021.

The Bill is described as a “policy pivot” and states two primary goals:

  1. Reduce impacts on residential neighborhoods.
  2. Regulate STRs that are permitted only in or adjacent to existing resort areas.

So far so good. No big pivot. Secondary goals include:

  • Providing better enforcement tools to address illegal STRs.
  • An independent source of revenue to support the necessary enforcement actions to reign in illegal STRs on Oahu.

That’s where some of the details get gnarly and run off the track.

In 2019, CO 19-18 (Bill 89) merely codified 30-year old existing laws and started enforcing them for the first time.  

However, the proposed DRAFT is an entirely different ball of wax raising additional questions. Is it trying to rewrite and remove property rights?

________________________________

After glancing through the document here are some bullet points and random notes:

  • No additional B&Bs and TVUs will be allowed in residential neighborhoods, but current non-conforming B&Bs and TVUs can continue.   
  • New B&Bs and TVUs will be allowed at KoOlina Resort (map) and Kuilima Estates (map) in the A-1 and A-2 apartment zone, and on the Gold Coast (!) (map) in the A-2 apartment zone, just south of Waikiki.

Ok. That is consistent with the two primary goals.

Adding the Gold Coast is huge! Now the Diamond Head Beach Hotel can finally become legal and live up to its name. Gold Coast condo buildings can now modify their house rules to their discretion if they desire to allow ST renting. It remains to be seen how many will join the club.

  • Hotels, condominium hotels, and hotel units will be newly defined and added as a permitted use, subject to development conditions in the Apartment Precinct and Apartment Mixed Use Precinct of Waikiki.

How does that affect the alleged ongoing negotiations to rezone the Waikiki Banyan and the Waikiki Sunset?

  • Existing non-conforming TVUs and new TVUs will be assessed at the hotel and resort tax rate, currently at $13.90 per $1K assessed value.
  • Existing non-conforming and new B&Bs will be assessed at the B&B prop tax rate, currently $6.50 per $1K assessed value. B&B owners must live at the B&B and must obtain the home exemption for property tax.

No surprise here. Everyone saw that coming. The city had been missing out for decades on property taxes from NUC units that are assessed at the lower residential tax rate. No more free riding with a low $3.50 tax rate while ST renting. More cash for a revenue-hungry city.

  • All TVUs and B&Bs must always carry $1Mill in commercial general liability insurance.
  • The DPP gets up to $3.125Mill in real property taxes to fund the enforcement of STRs.

$3.125Mill/y seems like an astronomical amount. For policing? – I can think of a hundred ways to invest that money more productively.

  • The B&B and TVU definitions are amended to increase the rental period from less than 30 days to less than 180 days (!?)

Say what? It must be a typo, or something is missing. Here is the excerpt:

Short-term

Unbelievable. Any rental advertisement with less than 180-day rental terms is illegal unless the property is a B&B or TVU?  – Unacceptable.

Am I not allowed to rent out my residential property to a 5-month tenant? Does that increase the minimum rental term from 30 to 180 days for the ‘Dedication for Residential Use’?

Here is the DPP’s revised definition for “Hotel” and “TVU”:

Revised Definition - Hotel & TVU

And here is how the DPP suggests condotel units should be managed:

Centralized booking system - price fixing?

Unbelievable. Could this in earnest be meant to apply to all condotel units?

If yes, then it rescinds private contracts with property managers in favor of monopolizing hotel management contracts. That’s like outlawing ridesharing companies like Uber and Lift to benefit cab companies. It prevents owners from self-managing or using third-party property managers.

Rental rates must be set by the hotel operator? Isn’t that a form of price-fixing? Does that benefit the general public, or the hotel industry? – Unacceptable.

There are at least 11 Waikiki condotel buildings that currently have no hotel front-desk operation. They will be forced to designate a central booking agency. Other condotel buildings are operating with multiple competing onsite rental agencies. Who decides on which central booking agent shall be imposed on the property owners.

No primary residence

Hold on to your hats. If you bought a condotel with the intent to enjoy it as your principal residence. Guess what? The Bill suggests you can’t. You must make it available for tenants. The DPP wants to restrict your personal use rights. – Unacceptable

Gecko
Gecko

________________________________

I’d like to give the DPP the benefit of the doubt. They are trying to accomplish the two primary goals outlined above. But the real “policy pivot” is that individual owner’s property rights are thrown under the bus while the hotel industry is getting a juicy bone.

Perhaps we are missing something. This is only a DRAFT that is subject to discussion and tweaking.

Most solutions of complex real-world problems are messy compromises. I get it. The right utilitarian action should benefit the majority, but not if it compromises the entire system.

Strange things can happen when nobody pays attention. We can’t rule out the risk that this Bill could turn into law.

Let us know what you think. The public hearing is on 9.1.2021. Stay tuned for updates.

________________________________

— We don’t just write about this stuff. We are expert realtors specializing in representing buyers and sellers of real estate in any market condition. We are committed to providing the most excellent service available on the planet. We love what we do and look forward to assisting you too!

Contact us when you are serious and ready. We are here to help.  

________________________________

Also…, we want to make this The Best real estate website you visit. We love to get your feedback on how we might improve. We are humbled by your support and remain committed to constant learning and growing with you.  ~ Mahalo & Aloha

Oahu Short-Term Rental Rule Amendment – “Policy Pivot”? was last modified: September 10th, 2021 by George Krischke
George Krischke
Principal Broker (R) Hawaii Living See my other articles

Subscribe to Our Newsletter

Get 1 email / month with latest posts

Loading Facebook Comments ...