Loading...
HomeMy WebLinkAboutCOM 0739.157 2016-2018(M7 -4A OFFICE OF HAWAIIAN AFFAIRS Administrative Testimony Testimony of Kamana`opono Crabbe, Ph. D Ka Pouhana, Chief Executive Officer Hawaii County Council "' Planning Committee. Bill 108 (Draft 2) AMENDS CHAPTER 25. ARTICLE 1, ARTICLE 2, ARTICLE 4, AND ARTICLE 5, OF TH& HAWAI'I COUNTY CODE 1983 (2016 EDITION, AS AMENDED), RELATING TO ' SHORT-TERM VACATION RENTALS une 5, 2018 9:30 a.m. Hawaii County Building The Administration of the Office of Hawaiian Affairs (OHA) offers the following COMMENTS on the proposed second draft of Bill 108, which seeks to establish a regulatory framework for short-term vacation rentals (STRs) in Hawaii County. OHA reiterates its appreciation of the attention paid to this matter, and further appreciates the amendments to the draft bill that responds to OHA's comments; OHA offers the following specific comments and recommendations for the Committee's further consideration. 1. Additional provisions may be necessary to deter illegal short-term vacation rental uses of limited housing stock, and avoid enforcement challenges being encountered in other jurisdictions. OHA expresses its appreciation for the specific provision now included in the second draft of Bill 108, which clarifies that enforcement of illegal short-term rental operations shall follow the administrative enforcement procedures found in Hawaii County Code (HCC) § 25-2-35. In order to more effectively deter illegal short-term vacation rental operations, and to ensure that Bill 108's provisions and requirements can be meaningfully enforced, OHA offers the following recommendations: A. Penalties for unpermitted short-term vacation rentals should be commensurate with revenues generated from such unlawful activity. cc CD:-< First, OHA notes that the administrative enforcement provisions under HCC § 25-2- 35 allows for a maximum administrative fine of $500, along with potential daily fines of $500 per day in which a violation persists. While such a fine may be an effective deterrent for noncompliance with various requirements and restrictions not directly associated with revenue generation, such as the newly inserted "Good Neighbor Policy," it may not necessarily deter highly lucrative illegal and unpermitted short-term rental operations themselves. For example, with whole -home and -apartment rentals advertised .VIN . ,. 00nlrm Nov 1A Ref. To: G Ref. Dote ►o N j ,A for prices ranging from $120 to $1,000 or more per night, operators could generate gross revenues that exceed a maximum administrative fine of $500 in less than a week, or even in a single day. Such a relatively low administrative fine may do little to discourage prospective operators of illegal short-term rental units, whose potential income could quickly dwarf any possible financial penalty in the less -than -likely event that the county is able to identify and prevail in an enforcement action against them. Given the impacts short-term vacation rentals may have on Hawaii County's current and future residential housing inventory, and to more effectively deter unlawful short-term vacation rental operations, OHA urges the Committee to consider increasing the potential financial liability for, operators of illegal, unpermitted or unregistered short- term. rental operations, to a level commensurate with the revenues generated from illegal short-term vacation rental activity. OHA respectfully offers the following amended language for proposed HCC § 25-4-_.3, to read as follows: Section 25-4- .3. Enforcement. If any short-term vacation rental is found to be in violation of the provisions of sections 25-4- . or 25-4- .1, enforcement shall be pursuant to section 24-2-45; provided that if a person is found to be operating a short-term vacation rental without a permit, certificate, or registration as required by these sections, an order issued to the person pursuant to section 24-2-45 may further require the person to pay administrative costs in addition to a civil fine of: (i) For a person who has not had a notice of violation issued for the operation of a short-term vacation rental without a permit, certificate, or registration within the last five years, no more than $1,000 per day or the offered rental rate, whichever is greater, for each day that the rental property was advertised, offered, or operated as a short-term vacation rental without a required permit, certificate, or registration; (ii) For a person who has had a single notice of violation issued for the operation of a short-term vacation rental without a permit, certificate, or registration within the last five years, no more than $2,000 per day or the offered rental rate, whichever is greater, for each day that the rental property was advertised, offered, or operated as a short-term vacation rental without a required permit, certificate, or registration; (iii) For a person who has had two or more notices of violation issued,for the operation of a short-term vacation rental without a permit, certificate, or registration within the last five years, no more than $5,000 per day or twice the offered rental rate, whichever is greater, for each day that the rental property was advertised, offered, or operated as a short-term vacation rental without a required permit, certificate, or registration. B. Additional mechanisms may be necessary to ensure the county's ability to meaningfully enforce and ensure compliance with this measure. Unfortunately, as OHA noted in its previous testimony on this measure, efforts by other counties to regulate short-term and transient vacation rental operations have been significantly stymied by enforcement challenges. Given the substantial enforcement challenges experienced by other counties, OHA previously urged the Committee to consider including "proven, effective enforcement" mechanisms as a major component of any regulatory proposal for short-term vacation rentals, such as: o Clear and practically enforceable definitions, with elements that are easy to document or otherwise prove; o Clear and transparent processes for filing of complaints, investigation, service, prosecution/administrative enforcement (including timely appeal procedures), and the collection of fines; o Clear processes and training for citizen evidence -gathering; o Meaningful fines and penalties, including daily fines, escalating fines for repeat violations, and the disgorgement of profits derived from illegal short- term vacation rental activities, with some portion of collected fines allocated towards enforcement activities; o Allocation of some portion of collected fines to reward those providing information leading to successful enforcement against illegal short-term vacation rental operations; o Non -monetary penalties including denial of all building- or business-related county permits until all outstanding fines and taxes have been satisfied; o Publication of complaints and fines for deterrence purposes; . o Sufficient positions, training, and resources for investigation and prosecution, including for any necessary evidence gathering; o Conditions in all registration, permitting, and non -conforming use certificate processes allowing for site inspections and exarnination of tax records; and o Publication of all legal short-term vacation rental units on a county - maintained website. OHA appreciates the amendments made to this measure to reflect some of these considerations, including the refinement of definitions, and the aforementioned clarification of enforcement procedures. OHA does respectfully offer the following recommended language for the committee's consideration to .more fully implement the considerations listed above: First, in order to better ensure sufficient resources for enforcement actions, including the documentation of evidence necessary to enforce the provision of this measure, OHA recommends amending the proposed "short term rental enforcement account" to allow for additional sources of revenue, including fines and administrative costs collected from county enforcement actions, by amending subsection (c) of Section 25-4- .4 to read as follows: (c) This account shall be funded by appropriations, grants, awards, donations, gifts, or other moneys derived from public or private sources; fees collected in connection with nonconforming use certificate renewal applications; administrative costs and fines collected pursuant to section 25-4- .3; and interest, dividends, or other income from the aforementioned sources. Second, in order to provide the county with the clear authority to leverage community resources, and ensure it has the flexibility to encourage compliance through various means, OHA respectfully offers the following recommended language for an amended subsection (d) of proposed Section 25-4-_.4 to read as follows: (d) The funds in this account shall be utilized to pay for expenses that facilitate enforcement of and compliance with the County's short-term vacation rental laws, including but not limited to dedicated enforcement personnel, investigations and evidence gathering activities, community education and trainings on documentation and reporting of unlawful short-term vacation rental activities, the maintenance of complaint intake programs for the reportingof f alleged unlawful short-term vacation rental operations, the publication of notices of violations and levied fines for deterrence purposes, the maintenance of updated listings of all permitted or otherwise legal short-term rental operations, collection and analysis of statistical information, and any other relevant activities and initiatives. Third, to address an enforcement loophole that has been exploited in other county regulations pertaining to short-term rental operations, OHA recommends clarifying that lease agreements for periods of time 30 days or longer' should nonetheless be considered short-term rental agreements if they contain any addendum or provision that contemplates an actual stay of less than 30 days, such as a clause that provides for additional payments to be made if a renter stays in a rental beyond a set period of less than 30 days.2 OHA also notes that the Committee may wish to clarify that only those building sites that serve as an owner's or operator's residence as a principle use should be considered excluded from regulation as a short-term vacation rental, to be more consistent with the definition and requirements of "bed and breakfast establishments," and to avoid regulatory ambiguity for building sites used as temporary residences by their respective owners or operators. Accordingly, OHA respectfully recommends amending the proposed definition of "short-term vacation rental" to read as follows: 1 To be more consistent with the definition and regulation of "bed and breakfast establishments," and to reflect month-to-month residential tenancy agreements, OHA also recommends changing the definition of short-term vacation rentals from dwelling units that are rented for "30 consecutive days or less," to units that are rented for periods of less than 30 days. z For example, OHA is aware of certain real property firms offering 30 -day leases that include attached addenda contemplating an actual stay of a much more limited period (i.e. one week), with substantial additional fees to be paid in the event of a stay exceeding that limited period. "Short-term vacation rental" means a dwelling unit of which the owner or operator does not reside on the building site as its principle use, that has no more than five bedrooms for rent on the building site, and is rented for periods of less than thirty consecutive days, provided that any rental agreement for a period of thirty consecutive days or longer but that contains any provision contemplating an actual stay of less than thirty consecutive days shall be considered a rental agreement for less than thirty consecutive days. This definition shall not apply to the short-term use of an owner's Drimary residence as defined under the Internal Revenue Code. 2. Additional provisions and mechanisms may further mitigate the potential impacts of short-term vacation rentals on Hawaii county's residential housing supply and unique communities. As OHA previously testified, the proliferation of transient vacation rental uses of Hawai`i's housing inventory may significantly reduce much-needed residential housing opportunities, as well as fuel land speculation and increase housing costs both locally and throughout the Hawai'i market. Accordingly, OHA urges the Committee to carefully consider additional regulatory and other mechanisms, to mitigate any impacts that short- term rentals may have on housing opportunities for county residents. First, the Committee may wish to consider explicit restrictions on short-term vacation rental use of newly developed housing units, including in developments targeted at providing housing relief for local residents. OHA understands that significant development projects, which include workforce and affordable housing components, are being planned for Hawaii County, including in West Hawaii in particular. To ensure that these developments actually provide the residential housing relief as intended, explicit limitations may need be placed to explicitly prevent the conversion of such units into short-term or other transient vacation rental use, even when located in zoning districts where such uses may be permitted. In addition, the Committee may wish to consider restricting short-term vacation rental owners and operators to "natural persons," and prohibit the operation of short-term vacation rentals by corporate entities more likely to be engaged in real estate speculation, or run by individuals legally insulated from liability for regulatory violations. Accordingly OHA respectfully offers the following amended language for subsection (a) of the proposed Section 25-4-_., to read as follows: (a) Short-term vacation rentals shall be permitted in the: (1) V, CG, and CDH districts; (2) CV district, provided that a use permit is obtained for each use; and (3) General Plan Resort areas and Resort Node, except that RS districts in the General Plan Resort areas and Resort Node shall require a use permit; provided further that no short-term vacation rental use shall be permitted for dwelling units dedicated to or set aside as workforce'or affordable housing, and that any permit or certificate required by this Chapter for a short-term vacation rental use shall only be issued to a natural person. Second, OHA reiterates its understanding that zoning districts where short-term vacation rentals may be permitted may be found in such rural and Native Hawaiian communities such as Keaukaha, Mahukona, Ninole-Punalu`u, and Na`alehu; concerns have been raised as to whether allowing whole -home vacation rental operations in and adjacent to such communities may negatively impact the character, quality of life, and lifestyles of such unique and otherwise resilient cultural strongholds. OHA accordingly submits that, in addition to the registration requirements found in the current bill draft, a permitting process for any and all new short-term vacation rental operations, with public notice and opportunities for meaningful community input, may be one means to mitigate any inadvertent or undesirable impacts, while allowing for some degree of local community self-determination as to whether any particular short-term vacation rental operation should be allowed. In addition, the Committee may also wish to consider capping the percentage of available housing units in a particular area that may be used as short-term vacation rentals and Bed and Breakfast establishments. OHA offers the following amended language for paragraph (b)(2) of the proposed Section 25-4-_., to read as follows: (2) Any new short-term vacation rental established in a zonin district after the effective date of this section, where such use is permissible pursuant to this section, shall obtain a short-term vacation rental permit and register with the director prior to use of such rental. The director shall hold at least one public hearing in the community in which the short-term vacation rental will be located, to accept public comments on the short-term vacation rental permit. The director may shall compile and publish comments submitted on the short-term vacation rental permit application, and may: (A) Approve the permit application; (B) Approve the permit application with conditions to mitigate concerns expressed during the public hearing; (C) Deny the permit application due to potential impacts to community welfare, safety, and health; inconsistency or conflicts with the community development plan; or a significant potential for substantial community conflict; with the basis for the denial, including relevant concerns expressed during the public hearing, provided to the applicant in writing. An applicant whose permit is denied may submit another permit application three hundred and sixty-five days after the denial. Third, the Committee may also wish to consider more explicit burdens of proof for those seeking nonconforming use certificates, including requiring proof of compliance with all applicable taxes during the periods of time in which a property was used as a short-term vacation rental, and providing for the denial or revocation of any nonconforming use certificate issued based on inaccurate or incomplete information. OHA respectfully recommends amending subsection (b) of proposed Section 25-4-_.1, to read as follows: (b) Prior Use and Tax Compliance. The applicant seeking a short-term vacation rental nonconforming use certificate shall have the burden of proof in establishing that the property was in use prior to July 20, 2018, and that all applicable taxation and other laws were complied with for such periods of use. Evidence of such use and compliance prior to July 20, 2018 shall include tax documents for the relevant time period, including: State of Hawaii general excise tax filings; transient accommodations tax filings; and federal and State of Hawaii income tax returns. Other reliable information may also be provided. Based on the evidence submitted, the director shall determine whether to issue as short-term vacation rental nonconforming use certificate for the short-term vacation rental. 3. Conclusion In conclusion, OHA again expresses its appreciation to the Committee for taking on this important subject, and seeking to mitigate the range of negative impacts that may result from the ongoing unregulated use of Hawaii Island's housing inventory as transient vacation rentals, including short-term vacation rentals in particular. OHA believes that this bill., with further consideration of the above comments and recommendations, can help the county take a strong step towards addressing its residents' housing needs and quality of life, and looks forward to providing information and assistance to the county, administration and the County Council as it further develops its short-term and transient vacation rental policies. Mahalo for the opportunity to testify on this matter.