A grand bargain on vacation rentals

Large segments of our housing stock are being bought for investment purposes by non-resident individuals or corporations and immediately withdrawn from the local rental market. The incentive driving this practice is clear: investors make up to 3.5 times more in profits by using properties as short-term rentals (STRs) than they do by renting to residents long-term.

The figures are startling. According to recent studies, approximately 80 percent of STRs in Hawaiʻi are entire homes or apartments, and the vast majority are owned by non-residents. Several mainland booking agencies each manage hundreds of properties bought by investors as second homes or speculative investments.

To succeed in striking the right balance, any expansion of legal STRs must be joined with an effective, efficient and proven enforcement mechanism that can be easily and successfully implemented by the City & County of Honolulu. Fortunately, the enforcement provisions in Bill 85 carefully follow the process that was recently used by San Francisco to reduce the number of illegal STRs in that city by 70 percent. It is also one of the few effective enforcement procedures that has withstood legal attack by Airbnb.

The bill would require that prior to providing booking services, hosting platforms such as HomeAway and Airbnb verify that the unit being rented is operating under a valid certificate of registration. The platform would also have to commit to making available the names of operators, the addresses of properties and dates of use for each unit. Hosting platforms that violated the requirements would be subject to a fine of between $25,000 and $50,000 for each violation. These regulations would hold the platforms accountable for profiting from illegal transactions.