HomeMy WebLinkAboutLee, PennyAloha County Council, please vote NO on Bill 147. The bill is very destructive to our local economy and
endangers our rural resident's housing security and livelihoods. Please find some comments, clarifications
and additional data below.
Bill 147 applies to rentals less than 180 days
Currently vacation rentals are defined as less than 30 days, so this is a big change, casting a wide net. This is
being presented as a "standardization" and to align with existing Transient Accommodation TAT tax code,
which charges TAT taxes on stays up to 180 days. For comparison, nationwide the standard is 30 days. Only
one other state, Alabama, uses 180 days. On Oahu, the Hotel industry is still fighting to change vacation
rentals from 30 days to 90 days. Tax code is not zoning. HRS 205 clearly states the counties can control
time of uses, so this is a policy choice that will create confusion and hardship for people who never even
considered renting short-term.
U.S. short-term rental lodging taxability by length of stay
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Hosted Vacation Rentals were never able to register with the County and they were not B&Bs
There seems to be the misunderstanding that there are a bunch of scofflaws operating out there, not
"registered" and not paying taxes. Bill 108 regulation in 2018 was explicitly to regulate unhosted STVRs
only. Many tried to register at that time and were denied because they were "hosted". They were not told to
register as a "Bed & Breakfast" and this was not an "enforcement oversight", as we are retroactively being
made to believe. The County communicated that hosted vacation rentals could continue to operate and were
"unregulated" and additional regulation for "hosted" might be added at a later time. Hosted vacation rentals
that are currently not registered with the county have done nothing wrong. There has never been a way for
them to register. I venture to say that hosted vacation rentals would wish nothing more than to finally be
able to be recognized and register their vacation rental. The reason the county only received 50 (of about
4,000 hosted TVRs) registration applications so far on the new registration system that started Sep 1st is
not that people are "waiting for Bill 147 to pass". Hosted vacation rental owners are intimidated by the
confusing and overwhelming regulations and requirements. Not everybody can just afford to get their home
up to code, lose their Homeowners classification and pay 8x increased property taxes or install a septic
system for example.
The Hunden study used this number of "unregistered" vacation rentals to calculate that the county is
missing out on $12 million in TAT taxes (Hunden page 61). This seems to now be used as an argument for Bill
147, but represents a gross over estimate of the amount of unpaid taxes. For clarification:
1. Registration of a hosted vacation rental with the County has never been possible before Sep 1st, 2026.
2. Registration to pay TAT and GE taxes on vacation rental income is with the State and completely
independent of County regulations. TAT and GE licenses are issued by the State, not the County. Vacation
rental owners have been paying TAT and GE taxes to the State for many years, without any involvement of
the County.
The County recently added their own TAT tax collection of an additional 3%. In FY2023 Hawaii County
collected $34 million in TAT revenue (according to the "Annual Comprehensive Financial Report" for Hawaii
County). The Kohala Coast Resort Association stated in testimony that their Hotels and Timeshares paid $17
million that year. That means "somebody" else, likely vacation rentals, must have been paying the other $17
million in TAT taxes. Sorry but the "missing $12 million from unregistered vacation rentals" was calculated
based on a false assumption and is a myth.
Distribution of existing Vacation Rentals on Hawaii Island
The Hunden study found 8,008 vacation rentals advertised on the island. This includes all vacation rentals,
unhosted and hosted. Of those, 6,406 or 80% are geographically concentrated in only 2 areas. The Hunden
study confirms this heavy concentration of vacation rentals:
"Kailua-Kona is the largest submarket, accounting for more than half of the island's supply with 4,324 active
rentals. Waikoloa follows with 2,082 active listings" (see Hunden study page 22).
The same 2 areas also contain most of the permitted zoning: resort zoning and condos/RM. This means the vast
majority, about 80% of all vacation rentals, are already in the permitted zoning areas.
What about the rest of the island?
Most of the 9 districts on this island do not have any of the "permitted" zoning. Only 2 of the 9 districts will have
a de facto monopoly on the tourism economy: South Kohala/Waikoloa and North Kona.
Below is a spreadsheet showing total numbers of transient accommodations per district, by adding number of
Hotel rooms, timeshares and vacation rentals together. This shows that 77% of all transient accommodations
are concentrated in only 2 districts, South Kohala/Waikoloa and North Kona.
(Table below is based on 2022/2024 data, "STVR" here means any advertised vacation rental, hosted or unhosted):
District All Transiel %Transiel#STVR
North Kohala
112
1%
11:
South Kohala
5757
35%
1981
North Kona
6924
42%
395!
South Kona
287
2%
28.
Kau
204
1%
20,
Puna
1446
9%
131:
South Hilo
1528
9%
59,
North Hilo
52
0%
5:
Hamakua
71
0%
7:
%STVR
1%
23%
46%
3%
2%
15%
1% am-
1
• . South Kona,
287, 2%
TOTAL
16381
8578
Area
#Hotelrooms
#Timesha %HotelTim
Hilo/Honokaa
934
0
12%
Kohala/Waimea/Kawaihae
2724
1045
48%
Kona
2037
928
38%
Naalehu/Kau
0
0
0%
Volcano Area
135
0
2%
TOTAL 5830 1973 7803
82% 1
Hotel Rooms/Timeshares/STVR per District
Puna,
1446,
9%
North Kona, 6924,
42%
■ North Kohala
■ South Kohala
■ North Kona
■ South Kona
■ Kau
■ Puna
■ South Hilo
■ North Hilo
■ Hamakua
Looking at unhosted STVRs with NUCs in the more rural areas of the island (agricultural zoning), more than
50% show local ownership and a local property tax address. These are not owned by large investors or
corporations. This changes dramatically when looking at unhosted 5TVRs in the Kohala/Waikoloa and Kona
areas, which almost all have out-of-state property tax addresses. The vast majority of those properties are
financially and geographically out of reach for local buyers and mostly owned by off -island owners and held
as investments. Notably Bill 147 in fact allows unlimited new 5TVRs and B&B (hosted) in these same areas. It
seems the effect of Bill 147 is the opposite of what is being said was the goal: protecting and incentivizing
out-of-state investments while eliminating locally owned and operated visitor accommodations. Remember
"Hosted" vacation rentals are 100% locally owned or operated, by definition. This is who is being
targeted with Bill 147. What is Bill 147 trying to achieve and who will it regulate out of business? Bill 147
continues and expands Bill 108's Zoning policies for the benefit of large corporations. What we have here on
the Big Island is an unabated, unlimited proliferation of vacation rentals in the permitted zoning districts.
Bill 147 creates a monopoly for corporate resorts and large developers
Big Island - State Land Use Map:
Agriculture (light blue): 45.79%
Conservation (brown): 51.97%
Rural (red): 0.06%
Urban (purple): 2.18%
Yes, those purple spots on the map is where you can have unlimited new vacation rentals, hosted or unhosted,
in condos or single-family homes. Only 2.18% of the island is zoned "urban", which includes commercial,
resort, condo and residential zoning. Most of those properties are not available or affordable to a resident
of the Big Island.
On the other hand, if you are a local homeowner, most of us are in the light blue area (Agriculture 45.79%),
you have no rights to operate a vacation rental and your community will be excluded from the tourism
economy. Grandfathering rights for existing legally operating vacation rentals and B&B aren't even
mentioned. Maybe the Planning Commission might allow you a special permit (or not) for a hosted B&B, only if
you are a real farmer in a farm dwelling and all your buildings, wastewater systems etc are perfectly
permitted. Most people know that many, so called "agricultural" lots are actually small rural residential lots
and can never be bona fide farms. So why is Bill 147 setting farmers up for failure and excluding everybody
else from the tourism economy?
Most of the 9 districts on this island do not have any of the "permitted" zoning. Only 2 of the 9 districts will
have a de facto monopoly on the tourism economy. Tourism is our main economy. This island is big enough that
this will cut off most tourism spending from the more rural and remote parts of the island. This will starve
our local towns, shops, restaurants and farmers markets, which are already struggling. There are no other
jobs or economies in these areas. This is economic discrimination by exclusionary zoning for the benefit of
large corporations.
The County Council members who introduced Bill 147, Heather Kimball and Ashley Kierkiewicz, say they want to
support local residents having income from vacation rentals. The Hunden study confirmed there is wide support in
the public for locally owned and operated vacation rentals.
Yet Bill 147 does the exact opposite: The highest barriers to operating a vacation rental are placed on state
land use "Agriculture" which is 46% of the island and 97% of useable land on the island (excluding
conservation).
Heather Kimball says the county's "hands are tied" yet with HRS 205 the State is granting zoning powers to the
counties, it does NOT prescribe the harassment of vacation rentals. The State has repeatedly confirmed "home
rule" for individual counties to regulate vacation rentals as they see fit. This regulation is not appropriate for the
Big Island.
Furthermore, the Rosehill decision only applies to lots created after 1976 and "farm dwellings".
Hosted vacation rentals in single-family dwellings on pre-1976 lots in State land use "Agriculture" were
always legal, and continue to be legal to this date. The County needs to add provisions to the bill to properly
grandfather these existing vacation rentals and ensure continued operation.
Unhosted STVR vacation rentals on pre-1976 lots in State land use "Agriculture", which were registered
previously under Bill 108 and granted a NUC, were always legal, and continue to be to this date. The County
needs to add provisions to the bill to properly grandfather these existing vacation rentals and ensure
continued operation. A violation of newly added registration requirements should not lead to the permanent
and unrecoverable removal of the underlying NUC. The transferability of the NUC at sale of the property
needs to be added back.
Heather Kimball and Jeff Darrow have stated several times (and created an illustrative poster), that hosted
vacation rentals on agricultural lots created prior to 1976 would NOT need a special or use permit, they just
need to register. Problem is, this is not written in the bill. The word 1976 is not even mentioned.
Defective "Agricultural" zoning becomes an economic suppression tool
Many so called "Agricultural" lots in Hawaii county are actually small rural residential lots and can never be
bona fide farms. The County has made clear that these should really be zoned "Rural" instead of
"Agricultural" and even changed the property tax class to "Residential" for all agricultural lots under 1 acre
in size. This defective zoning should be corrected before applying restrictive new regulations.
Existing STVRs with NUCs are disappearing
The number of registered 5TVRs with non -conforming use certificates NUCs (outside of permitted zoning,
mostly agricultural) has been going down to 745 since the initial registration of 988 in 2019 during Bill 108,
due to attrition. As mentioned before, more than 50% of these are owned by Hawaii residents. Bill 147 now
seems to eliminate the transferability of the NUC on sale of the property, which will greatly accelerate the
decline. Bill 147 also threatens NUC holders with the automatic and permanent removal of the NUC if
there is any issue with the overlay of a County registration scheme. That means the property will never be
able to regain STVR status, since NUCs are no longer issued for 5TVRs in agricultural zoning. Grandfathering
rights are important protections of property rights and should not be "taken" easily. It seems the modest
and diminishing number of NUCs is not "good enough" and the county wants to heavily accelerate a total
elimination of these rentals, which are fully legal and have vested property rights.
To clarify: No new unhosted 5TVRs have been permitted since 2019 and the small number of existing ones
are dying out. At the same time new unhosted 5TVRs in permitted zones (resort, condos) are added at a pace
of about 300/year and mostly owned by out-of-state investors.
Chart below shows number of un-hosted 5TVRs growing in permitted resort/condo zoning and grandfathered
STVR with NUCs located in agricultural zoning going down (source: Hawaii County EPIC system)
Blue = 5TVRs in permitted zones, Orange = 5TVRs with NUC
Registered unhosted STVR
4,500
4,055
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
3,012
2019 2025
0 STVR in permitted zones ■ STVR with NUC
745
Vacation Rentals contribute substantially to real property tax
The Hunden study points out significant economic losses and TAT/GE receipts, if vacation rentals were to be
restricted. The study did not include an estimate of the loss in property taxes that would occur if large
numbers of vacation rentals had to discontinue operations, which is the primary source of revenue for Hawaii
County. Effectively these properties would be changing their property tax classification to the much lower
rate of "Homeowner" with exemptions or "Agricultural". The decrease in property tax revenues for the
county would be enormous. The "Residential" tax class, which includes vacation rentals, currently
contributes 48% of total property tax revenue to the County and "Apartment" contributes 18%. For
comparison, the Hotel/Resort category only contributes 4% of total property tax revenue to the County
(brown wedge).
PROPERTY TAX RAISED BY TAX CLASS
■Affordable Rental ■ Residential ■ Apartment ■ Commercial ■ Industrial
■ Agricultural
■Conservation ■ Hotel/Resort ■ Homeowner
Vacation Rentals implications on Hawaii County, per Hunden study
The Hunden study identified key implications, see slide below, including that the majority of vacation rentals are
small mom and pop operations "more than 75 percent of 5TVR owners operate only one rental unit" and
"...suggesting that most 5TVRs are operated by individuals with a personal financial stake rather than large-scale
investors".
They also found that only 4 percent of owners would convert to long-term rentals and "the likelihood of vacation
rentals converting to long-term housing for residents is minimal".
Implications
Based on comprehensive market researdi, including three separate surveys targeting supply (STVR owners and operators), demand (visitors), and residents
(Hawai'i County residents), Hunden has triangulated the findings to assess the impacts and implications of the STVR industry on the County.
• Survey results show that if STVRs were unavailable, 24 percent of visitors would not have made the trip. 26 percent would have stayed in a full-
rcent would have rented a timeshare or condo.. r : " .. :Id tia '......> ?limited sendce hotel. This
indicates that restricting STVRs would result in a loss of dose to one fourth of the lod®ng, food & beverage, transportation, shopping, and
entertainment spending attributed to STVRs.
• The I-lawai'i County STVR market primarily appeals to budget-oonscious travelers, larger groups, and frequent STVR users. while the hotel market is
dominated by luxury prolx°Ulf _-s catering to more affluent visitors.
All visitors surveyed re,,ardless of lodging type, prioritized nature -based outdoor recreation. STVR visitors were more likely by 79 percent to engage
in these activities as well as local culture. With the growth in wellness tourism and related trends i orally. Hawaii County is poised to continue to
grow in this space. as wellness aixl community well-being remain central to the Hawai'i Island Tourism Strategic Plan.
• If STVRs were restricted on the island, only 4 percent of owners and operators would definitely convert their listed units to long-term rentals while
68 percent indicated they would not. This suggests that the likelihood of STVRs converting to long-term housing for residents is minimal.
• Both hotel and STVR lodging revenues exceed $700 million annually on Hawaii Island.:vith additional daily visitor spending averaging more than
$130 per person. Most STVRs are concentrated within designated Resort Zones.
Resident sentiment toward tourism is largely positive, with respondents recognizing its importance to the local economy, job creation, and cultural
vibrancy. Most do not believe STVR, -:. . , ,_: _ively impacted their neighborhood or quality of life. While 56 percent perceive that housing costs
and availability have increased due to tourism, 61 percent said STVRs have not deterred them from renting or purchasing property.
• More than 75 percent of STVR owners operate only one rental unit, and 54 percent rely on the income to cover housing -related costs. Only 20
percent of owners view their property as a pure investment, suggesting that most STVRs are operated by individuals with a personal financial stake
rather than large-scale investors.
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Vacation Rentals "remove" Housing inventory and raise Housing costs
The Hunden study reviewed case studies in other locations like Oahu and New York. Even if Oahu got rid of
all vacation rentals, rents and Housing prices would only go down by 5%, per governor Josh Green and UHero.
New York also observed very little effects on housing affordability. Oahu has restricted vacation rentals to
resort zones and some apartment zoned areas in Waikiki a few years ago, yet Housing prices seem to keep
going up.
Between rising cost of living, inflation, insurance, mortgage, maintenance costs and HOA, it is questionable if
the miniscule effect on Housing prices is worth removing income streams that so many local families on this
island rely on? The downside seems bigger than the upside. In rural areas like Puna and Kau, the lack of
economic opportunities seems primary and overshadows housing affordability. How good is a Home or a
rental, if you lack the income to keep it? Also farming tends to be not financially sustainable by itself and
vacation rentals are a great way to make a small farm economically viable. And really, the Big Island's
economy is not comparable to urban places like Barcelona, New York and even Oahu, which offer a lot more
diversified job opportunities in many more fields.
O'ahu
Implications
Housing Implications: Research from the University of Hawaii Economic Research
Organization (UHERO) indicates that for every 2 percent of housing supply
converted to STRs. housing costs on Oahu increase by approximately S percent.
Economic Implications:
Property Owners: Many local homeowners who previously relied on income
from STRs have faced financial challenges.
Tourism: While hotels may benefit from reduced competition, the overall
tourism industry can experience shifts. STRs often cater to budget -conscious
travelers or those seeking longer stays. and their reduction might influence
visitor demographics and spending patterns.
Tax Revenue: The island anticipated increased tax revenue from registered STRs.
However, the decline in legal STIR operations may offset these gains, and the full
fiscal impact remains to be seen.
Affordable Housing.
In a February 2024 article published by Hawaii News Now, Governor Josh
Green stated "Our best guess for Oahu is if we got rid of vacation rentals
entirety, rents and prices would drop by about S%. So, even if we achieve that,
Oahu would still have among the highest housing prices in the country, which
wouldn't solve the housing crisis."
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Vacation Rental complaints
We never really got to see the actual data, but here is what was mentioned by the Planning Department and
Heather Kimball a couple of times:
Hawaii County TAR— Bills 121, 122 and 123, "Frequently Asked Questions", March 27, 2024: (Note: TARS =
Vacation rentals)
"How many complaints did the county receive this year about TARS?
The planning department received the following formal complaints:
Hilo had 27 TAR complaints for 2022
Kona had 38 TAR complaints for 2022"
Based on these 2 data points, we can say that in 2022 the Planning Department received 65 complaints regarding
vacation rentals. Considering the total number of about 8,000 vacation rentals operating across the island, this is a
really small number of complaints.
Vacation Rental enforcement: large fines, liens and non -judicial foreclosure
The proposed fines are very large $5,500-$10,000 plus 2x highest daily rate PER DAY. For example, after one
month and with a daily rate of $300, the accrued fine would be $23,500-$28,000.
A question was asked during the Planning Commission Hearing how the Planning Department collects unpaid fines
and the director described how the department currently handles those. But once Bill 47 hits, the registration
launched Sept 1st and enforcement will start Jan 1st, fines for vacation rentals will be substantially larger,
accumulate faster and automatic liens will be placed on homes annually every September after a one year of non
payment.
Bill 47, now ordinance 25-50, says under Section 6-41. Administrative enforcement:
(f) Each September the County automatically files liens on all properties with unpaid fines ... "...the fines
shall constitute a lien on the subject property that, for the purposes of authority, shall be considered
equivalent to liens arising pursuant to chapter 19 of this Code."
Hawaii County code chapter 19 deals with property taxes and the resulting liens. After 2 years the county
can sell your property through non -judicial foreclosure (see Section 19-38. Tax liens; foreclosure without
suit.).
Here is Section 19-38 it refers to:
Section 19-38. Tax liens; foreclosure without suit.
(;I) All real property on which ;Iny lien. ur lr,Irt I here(&, fur t;Ixes levied 1Aursu;IIII to I his
Code h;Is existed fur ;It Ie;lst 1 wu ve;II•, In;Iv be sold by w;tv of foreclosure without
suit by the clire(-Iur ur ;Is otherwise sl)(wified in IIlls Code.
(b) Such delinquent I—val liropol-ty shall be sold by the director or the director's
design, Ited rellre-se nt;Itive ;It Ill lhlic ,Action In the highest. bidder, forcash, to
Solisfv the lien, logether with ;III interest, llen;Ilties, costs, and expenses due or
inetlrred on ;ucrnlnt of the loxes, lien, ;III(I s;Ile.
(e) The sill -plus, fun(is I'rom the lax foreclosure sale, if;Iny, shall he rendered to the
person(s) Iegolly entit-led to the sIll-pills funds reselling fnmi the sale.
((I) The sale shall be held at ony public fll;tce proper for soles on execution of tho
foreclosure.
(1983 CC, c 19, art 5, sec 19-:18: ;Irn 1997, ord 97-84, sec 1; am 201 1, or(I 1 1- 1 •etc, sec 2.)
A foreclosure without suit —more commonly known as a non -judicial foreclosure fs
a process where a lender seizes and auctions off a property to recover a defaulted
mortgage loan without going through the court
system. C Consumer Financial Protection Bureau -. .a
Bill 147 encourages unlimited development and overtourism in the Kohala and Kona areas
Bill 147 and also previous Bill 108 in 2018, allow unlimited new vacation rentals in resort, commercial and
multifamily/condo zoning. The Hotel/Resort industry has embraced the vacation rental concept very much for their
own growth. These condos, villas and Residences tend to be owned by wealthy off -island owners, with the majority
of the profits going offshore and to large corporations.
General Plan 2045 added 1,000 additional acres to "Resort" zoning. Additionally, the largest "Urban Expansion" area
on the whole island was placed directly mauka of the existing resort zones (see GP map below).
What are the odds of those "urban" areas turning into affordable housing and communities for local residents
versus multi -million dollar investment homes for off -island owners, with resort amenities and automatic right to be
a vacation rental? Who is reining in the ever-expanding resort industry? Now developers can just build so-called
"housing" and expand transient accommodations next to the resort. The expansion of these already very dense
areas seems problematic, considering the very precious marine ecosystems downstream, the scarcity of water and
the already huge problem of sewage and pollution (see cesspool conversion priority map below, Priority 1 is red).
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How many tourists can you possibly concentrate around Hapuna beach for example? Puako? Kawaihae? What is the
carrying capacity? How many golf courses, pools, hot tubs, AC systems, individual inside and outside kitchens and
bathrooms can this fragile ecosystem support? This bill is directly contributing to setting the path for
overdevelopment and overtourism which leads to destruction of the precious natural environment. What will this
area look like in 10 years? I wish there was a much more comprehensive review of the tourism industry and careful
planning for the future. This is not sustainable.
Bill 147 and ordinance 25-50 will be destructive to the local economy and natural environment and take away the
livelihood that many families currently rely on. Thank you for your careful consideration and voting NO on Bill 147.
P5: Here is a real lived experience from Oahu, an example of what this kind of regulation leads to, see: "Honolulu
fines retiree over half a million dollars for advertising a rental".
•Pacific Legal i p •••
@PacificLegaL
BREAKING: Honolulu is charging 83-year-old retiree Sandra May with $600,000
in fines over a website error. The City put alien on her home and cutoff her access
to basic city services. Today, we filed suit to stop these excessive fines.
Link to the Hunden study for County of Hawaii "Economic Impact Study in Short -Term Vacation Rentals" :
https://static1.sg uare space. co m/static/63a60a7b774001557452176c/t/6891249fe615 cf394968fa6b/1754342588489/H awa i i+Cou nt
V+STVR+StudV.pdf