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Does Bill HB76 Mean the End of Short-Term Rental Properties in Hawaii?

I got an email a couple of days ago from an associate encouraging me to take action against a new state bill here in Hawaii with the rather un-glamorous title of HB76. I’ll be honest; I’d never heard of this bill prior to this point, but there seemed to be such an outcry against it that I decided to spend some researching it.

HB76 and Short-Term Rentals in Hawaii

As it turns out, HB76 is a bill that, if passed — and currently that outcome is anything but assured — could potentially impact short-term rentals in Hawaii across all the counties. This worried me, because not only do I provide services to clients who are interested in investing in properties with the intention of converting them into short-term — or ‘vacation’ — rentals, I own rental properties myself and have friends and family in Hawaii who heavily rely on short term rental income. So I took it upon myself to dig into the matter further, and after spending some time researching the subject, I’ve decided to share my thoughts with all of you.

scales of justice

I don’t usually do this kind of deep-dive into a subject — mostly because I don’t want to cause a rash of QWERTY-faces from people having fallen asleep on their keyboards after reading it — but I felt it was of sufficient importance that I do so this time. HB76 is a bill that can and likely will have a dramatic impact on the short-term rental market in Hawaii if it passes. If you have short-term rental properties, or like me, are considering investing in some in the near future, this is information you should have.

dscussing hawaii short term rental bill

What Is HB76, Exactly?

HB76 is an amendment to current Hawaii state law. Its stated purpose, as summarized in the bill itself, is to “(Make) explicit the counties’ authority to enact ordinances to amortize or phase out permitted, nonconforming, or otherwise allowed short-term rentals in any zoning classification. Includes swapping, bartering, or exchange of a residential dwelling, or portion thereof, in the definition of “short-term rental” for this purpose.” Now that’s a long string of legal-ese, so let me summarize the summary. Basically, HB76 grants specific power to the counties in the state of Hawaii to put in place county and zoning ordinances to de-value or get rid of short term rentals on any property, anywhere. It allows them to put these ordinances in place regardless of whether the short-term rentals are permitted or not.

Redefining Short-Term Rentals in Hawaii

But the bill actually goes further than that. I looked at that summary and thought, ‘okay, so they’re potentially not letting people use their investment properties for short-term rentals anymore. That’s not great, but it’s not as bad as the bill’s opponents are making it out to be.’ Upon looking further into the text of the bill — the proposed changes to the law are only a few sentences long — I discovered that it also gives the counties power over owner-occupied dwellings as well. According to the text of HB76: “short-term rental” means “the payment for use, or swapping, bartering, or exchange, of a residential dwelling, or portion thereof, for a stay of less than one hundred eighty days, or a lesser maximum duration as determined by a county, by someone other than the owner, and includes transient vacation rentals as defined in section 514E‑1.”

Did you catch that? HB76 seeks to define ‘short-term rentals’ as ‘a residential dwelling or portion thereof.’ So HB76 would not only allow counties to pass ordinances regarding that house you own on the other side of the island, but also that spare bedroom you have down the hall. They also seek to define a short-term rental as anywhere you allow someone to stay in exchange for cash, goods, or services. So if Bob from down the street needs a place to stay for a couple of weeks, and he offers to mow your lawn in exchange for crashing in your spare bedroom… Boom. You now fall under the Short-Term Rental definition of HB76.

Now, before we get too alarmist, I need to point something out: HB76 doesn’t actually put ANYTHING on the books that would change current zoning ordinances in the counties. It doesn’t make short-term rentals illegal; it doesn’t make any changes regarding rental properties or your spare bedroom (aside from adjusting the legal definition). What the ordinances say today about your short-term rental is exactly what they will say should HB76 pass. All this law does is give the counties the ABILITY to change zoning ordinances in the aforementioned ways. It would be up to each individual county in Hawaii to decide how they wished to apply the new law to their own individual ordnances.

Still, even though HB76 doesn’t change anything in and of itself with regards to the current treatment of short-term rentals, it would give the counties seemingly unlimited power to regulate or remove said properties.

judge's gavel

Why is HB76 Important?

HB76 could potentially crush the short-term rental market across the state of Hawaii. Potentially.

The counties of Hawaii already have a track record of enacting strict policies regarding short-term rentals in their jurisdictions. In 2019 the Honolulu city council passed an ordinance preventing owners from acquiring new permits for whole-home short-term rentals. The island of Maui levies heavy financial penalties on short-term rentals operating without permits, up to $20,000 initially plus $10,000 for each day the rental operates. The Big Island of Hawaii heavily regulates short-term rentals, not allowing them in single-family residential and agricultural zones at all.

Possibility of Further Regulations on Hawaii Short-Term Rentals

Considering all this, it is not outside the realm of possibility that the counties would use HB76 to enact even stricter regulations against short-term rentals, perhaps to the point of removing them altogether. This, in turn, would dramatically impact those who are looking to purchase or have already purchased investment properties with an eye towards turning them into short-term rentals. And thanks to HB76, the property owners would have almost no avenue for appeal of these decisions, save for getting a new bill enacted and passed to re-limit county authority.

It is worth noting that one of the main reasons given for the introduction of HB76 is the low availability of affordable housing in Hawaii. And on paper, at least it makes sense; if X number of properties in Hawaii are short-term rentals, those same properties are obviously unavailable for use as affordable housing for those who might be seeking it. Proponents of HB76 say that allowing the counties the power to crack down on short-term rentals would have the effect of raising the amount of affordable housing available to Hawaii residents, as well as potentially reducing ‘quality of life’ problems in residential areas. Things like loud parties from vacationers, raucous behavior, even petty crime could potentially see a decrease thanks to the increased power of counties to regulate and remove short-term rentals.

Current Status of HB76

The bill was up for discussion and potential voting before the Hawaii State Legislature on February 4th. After several live testimonies and the review of hundreds of written testimonies by short-term rental owners and interested parties, Chair Nakamura decided to defer any debate or discussion of HB76 until a later date. As of the time of this writing, it is unknown when HB76 may appear again for discussion. It is possible that the matter is closed and that the bill will not be re-introduced for discussion. Personally, I’m not convinced that we’ve seen the last of HB76, though the form and title may change further down the line.

waterfall on hawaii island

My Personal Take on HB76 in Hawaii

I’ll admit, I’m not a fan of HB76, and not just because I own rental property. I can sympathize with the argument that more short-term rentals could mean a further decrease in the availability of affordable housing for Hawaii residents, and I can certainly have compassion for those individuals who find themselves in need of said housing. But I also see the other side of the coin; short-rentals can and do provide vital income for families struggling to make ends meet in the islands. When HB76 was brought up before the State Legislature for discussion, there were over 200 pages of testimonials written in by residents and businesses on the islands. Many of those testimonials came from home-owners who would be unable to survive without the income they get from renting out their spare bedrooms or their ohanas. Personally, I think the potential disadvantages of passing a bill like HB76 outweigh any advantages we might see come from it.

A Long Way to Go

Now with that being said, I feel I need to make one thing clear; the existence of HB76 has not changed my opinion in favor of investing in real estate in Hawaii. HB76 appears to have a long way to go before it gets passed, if it ever does. There has been a very vocal outcry against the bill — of the 200+ pages of testimonials I saw regarding HB76, only a few were actually in support of the bill, with the overwhelming majority in opposition, so even if it does come up again in the legislature, there are plenty of voices willing to fight against it. And even if it does get passed some time in the future, that doesn’t affect the viability of investment opportunities now. I would encourage my own clients to not be scared to invest in short-term rental properties today. The worst thing that could happen would be that HB76 passes somewhere down the line, and they would just sell the property–likely for a profit, given the way Hawaii housing prices are going.

Ultimately, I believe HB76 is something to be aware of but not afraid of. As it stands, there is no guarantee it will ever come up for discussion again, let alone pass. And if it DOES come up for discussion again, I and others across the islands will be keeping an eye on it and speaking out against it as necessary. I understand why the State put forth this bill and can even applaud the legislature for wanting to do something about the affordable housing shortages in the islands, but I do not believe potentially destroying the short-term rental market in order to make more housing available is the proper way to do it. I’ll continue to be in favor of short-term rental properties, and I’ll encourage my clients and readers the same, up to and until HB76 comes back around for another try.

If you’re interested in knowing more about HB76, these links might be of use to you:

Want to Know More?

Whether you are new to real estate or you’ve been doing this for a long time, Hawaii is different than most other states. Getting help from an industry expert is really the best way to go. If you ever have a specific real estate question, just send me a quick email, call, or text. I love talking real estate, and I’m happy to help, no strings attached.

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Aloha,
Tom

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