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Hawaii County Vacation Rental Bill Update

Two topics I wrote about recently, the vacation rental bill being considered by Hawaii County Council and the 2018 Kilauea eruption activity on the islandʻs East side, continue to make news on the Big Island. The question is whether the ongoing eruption in Puna will change the progress of the bill limiting vacation rentals in residential and agricultural neighborhoods. Vacation rental is allowed in resorts, like this oceanfront condo Halii Kai 15C (MLS 615690)

Hawaii Island to Prohibit New Vacation Rental Homes

The essence of the proposal before Hawaii Island ("Big Island") County Council is to limit the growth of short term vacation rentals in neighborhoods zoned residential or agricultural. The bill does not apply to "bed and breakfast" establishments where the owner lives on property; the County code specifies that a B&B be a residential-zoned property. Existing unhosted vacation rentals in residential or agricultural neighborhoods will be "grandfathered in" with a registration and annual payment to renew. Although the bill as currently drafted would allow the registration to pass to a new owner, proposed amendments would dissolve the exemption upon sale of the property. Even the oceanfront community of Puako is zoned residential and no new vacation rentals would be allowed. Look for established vacation rentals like the property outlined above (MLS 608206). Vote on the bill has been postponed repeatedly. Most recently it was postponed after the councilwoman from Puna District made a plea. According to our own calculations at Hawaii Life, about two-thirds of the homes lost to lava flows were not owner-occupied. The councilwomanʻs estimate of 400 vacation rentals destroyed is consistent with our numbers. Her point is that the county should encourage new vacation rentals in her district to help offset the economic losses they will face if tourists stay elsewhere. It is currently unclear whether an exception would be made for Puna district, if the entire bill will be postponed, or whether it will soon pass despite the lava emergency in lower Puna. My districtʻs councilman believes it will pass soon with few amendments.

What the Vacation Rental Bill Means to Real Estate Buyers and Sellers

The Water Falling Estate at Ninole is a celebrity vacation rental, asking $8,888,888 (MLS 613831) Take a gated community like Kohala Ranch on the west side of Hawaii Island, where well-appointed homes on 3-10 acres have ocean and sunset views, and climate similar to the nearby Kohala Coast resorts. Zoning is agricultural, and therefore the vacation rental bill would not allow rentals, although CC&Rs currently do. As many as 50 homes in Kohala Ranch and Kohala Estates are set up to be rented when their owners are not in residence. Again: as long as those owners have paid their general excise and transient accommodations taxes on past rentals, and make the necessary non-conforming use filings, they could continue to rent after the bill takes effect. This Kohala Ranch home was rented once this year, so would qualify for continued rentals (MLS 617259) However, buyers of a property that has not been rented or whose owners fail to apply for the registration will no longer be able to offset part of their holding costs with rentals. If renting your second or future retirement home in Hawaii is what you had in mind, you might think about acquiring that property now, while you can still establish a rental track record. Let me know if I can advise you on a property that will qualify under the new vacation rental bill.

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