One year later: The effects of Hawaiʻi’s illegal short-term rental ban

“We have the lowest property taxes in the U.S. and, almost, in the world,” says Victor Geminiani, executive director of the Hawaiʻi Appleseed Center for Law & Economic Justice from 2011 until last year. “There is no better place to park your money than Hawaiʻi.”

The battle to get a new bill passed that would curb illegal short-term rentals was joined in 2016 by citizen groups, activist Facebook pages like Keep it Kailua, council member Pine, nonprofits like Hawaiʻi Appleseed and unions anxious to preserve hotel worker jobs. At the same time, cities around the world tumbled to the STR game: Madrid, Barcelona, Venice, San Diego, San Francisco, New York City, Miami—all established limits or outright bans on STRs. Some were suing Airbnb over undisclosed revenues that hid tax evasion. There were now clear examples of how to control and reverse the situation.

Yet the years 2016, ’17 and ’18 saw Oʻahu and the islands teetering on the brink of surrender to the hosting platforms. Airbnb struck first, offering to collect state taxes from its Hawaiʻi hosts and distribute them. The amount Airbnb dangled before the legislature was $30 million. With the Honolulu City Council divided and uncertain how to tackle the issue, and Maui and Hawaiʻi counties tempted by the money, it felt like a tactic to drive acceptance and forgiveness of STRs.

For STR opponents, a data doorstop was needed to block the public relations and misinformation that gave lawmakers an excuse for inaction. Enter Madison DeLuca, 25, an AmeriCorps policy analyst for VISTA (Volunteers in Service to America). DeLuca says she “tried to use state-published sources as much as possible to minimize potential claims of bias.” Of her 78 citations in the eventual Hawaiʻi Appleseed report, many came from studies commissioned by the HTA. “It took her three months,” says Geminiani, “but she found all these figures that the city said they couldn’t get.”

The March 2018 Hawaiʻi Appleseed Short-Term Rental Report debunked every argument in favor of STRs. Were they too hard to count and track? Well, DeLuca did it, relying “mostly on searching state and county websites to determine the number of STRs,” she says. Were they on the rise? Yes, there was a 35 percent increase over the previous two years. Were they profitable? Yes, bringing in 3.5 times more revenue than a longterm rental. Well, at least the 23,000 statewide STRs were mostly grandmas and grandpas renting out spare bedrooms to pay the bills, right? No. In fact, up to 93 percent of listings were for entire houses.

As for the economic impact, the report looked at a study of San Francisco that concluded that its economy “loses up to $300,000 [in costs and services] per vacation rental per year. The impact in Hawaiʻi is likely to be similar”—especially since Hawaiʻi ranks first in crowding (more than two people per bedroom) for both owner-occupied and rental houses, and in doubling up (where multiple households live in a single home).

Just as damning was the news that, although the visitor count was up 60 percent since 1989, visitor spending had not increased for 30 years. With vacation rentals taking up a third of Oʻahu’s vacation units—expanding from the original legal 800 units to an estimated 10,000, if not more—the blame fell squarely on STR visitors and their hosts.

The Senate voted down the Airbnb bill, SB 1292. But Ways and Means chair Dela Cruz held up 15 bills, including one granting burial rites to Filipino World War II veterans, saying, “If you want to keep bills, you need 1292.” He got his votes.

“We lost Maui,” says Geminiani, whose Appleseed study found 52 percent of Maui homes were sold to nonresidents and 60 percent of condos to nonresidents or second-home owners. Legislators from the Neighbor Islands had consistently supported the bill to take tax money from Airbnb, most of which would be generated by STRs run amok on Oʻahu—not very neighborly of them. Now their STRs were coming home to roost.

In March, Maui announced public hearings on a strengthened short-term rental ban. The existing law from 2012, said Michele McLean, Maui County Planning Department director, left “a lot of illegals out there, so it hasn’t succeeded in what its original objective was.” On May 23, an amended bill regulating and limiting STRs was passed.

How close did Oʻahu come to becoming Maui? By August 2019, our vacation rental supply was increasing 20 percent annually, according to a frequent consultant used by the HTA, Eric Kloninger of Kloninger & Sims Consulting. It might seem that no one could argue that that was sustainable, but as the vote was coming to a head the HTA unlinked its 2014 study of vacation rentals, one that DeLuca, the AmeriCorps policy analyst, had singled out as crucial to the Hawaiʻi Appleseed report. It disappeared. “A lot of those sources”—HTA and state—“are now gone,” says Gavin Thornton, who succeeded Geminiani at Appleseed. “We didn’t have in the project plan that we’d need to keep forever waging these battles.”