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HomeMy WebLinkAboutCOM 0739.249 2016-2018 Pip) �i[l 1b' COMM ivoi OFFICE OF HAWAIIAN AFFAIRS Administrative Testimony Cp Testimony of Kamana`opono Crabbe, Ph.D c.: Cvn Ka Pouhana, Chief Executive Officer '-' --I Hawaii County Council - Planning Committee Bill 108 9 AN ORDINANCE AMENDING CHAPTER 25. ARTICLE 1, ARTICLE 2, ARTICLE 4, A ' ARTICLE 5, OF THE HAWAII COUNTY CODE 1983 (2016 EDITION, AS AMENDED), RELATING TO SHORT-TERM VACATION RENTALS May 8, 2018 1:00 p.m. West Hawaii Civic Center The Administration of the Office of Hawaiian Affairs (OHA) offers the following COMMENTS on Bill 108, which seeks to establish a regulatory framework for short-term vacation rentals (STRs) in Hawaii County. In light of the potential impact of short-term vacation rental land uses on housing opportunities for Native Hawaiians and other island residents, OHA greatly appreciates the attention paid to this matter, and offers the following comments and recommendations for the Committee's consideration. As an initial matter, OHA appreciates the initiative taken to address the use of Hawai`i County's limited housing inventory for short-term vacation rentals, particularly for whole-home rentals that are taken off the long-term residential market) As home prices, rental prices, and homelessness continue to increase, and as Hawai`i Island sees continued population growth and an associated demand for more housing over the next decade,2 land-use planning that ensures housing affordability may be more critical now than ever before. While OHA realizes that local Hawai`i County residents may be engaged in short-term rental operations that may meet Hawaii County specific needs, the continued lack of any regulations of short-term vacation rentals may invite increasing speculation from non-residential investors and corporations, thereby exacerbating a rise in housing costs beyond what Hawai`i County residents are able to afford. Notably, in 2014, a survey of popular short-term vacation rental sites found that there were 4,986 individually-advertised short-term vacation rental units for Hawai`i 1 SMS,THE IMPACTS OF VACATION RENTAL UNITS IN HAWAII 9 (2016), available at http://www.hawaiitourismauthority.org/default/assets/File/Housing%20and%2oTourism%20113016.pdf; see also VICTOR GEMINIANI & MADISON DELUCA,HAWAI'I VACATION RENTALS: IMPACT ON HOUSING& HAWAI'I'S ECONOMY 6(2018) (finding a 35% increase in the number of vacation rental units in Hawai'i over the last two years). 2 Nancy Lauer, Big Island population rises: Census estimates show Hawai'i County making biggest gains, HAWAI'I TRIBUNE-HERALD, March 23, 2017. 1 awn. No.1N•2C Ref. To: P[PC Ref. U telUL 2 4 2018 ®,� Island, indicating that one out of 16 housing units in the county may have been used for transient rather than residential use.' Two years later, in 2016, over 17% of housing units in Hawaii County were found to be "unavailable" as housing stock, three times as high as the percentage of unavailable housing units in Honolulu; throughout the state, "seasonal, recreational or occasional use" such as periodic use of units or short-term vacation rentals was also found to be the "largest component of Hawai`i's unavailable housing units."4 Meanwhile, the National Association of Realtors has stated that vacation rentals "increase rents, decrease affordability, and draw developers' attention to the top of the market," and local researchers have reported that vacation rentals "exacerbate the affordable housing problem by reducing our housing stock and driving up rents, which in turn inflates demand for investment properties."5 In addition, residential rental rates have been found to be highest in visitor destination areas statewide — including in Hawaii County— "consistent with the proposition that increasing residential rents are related to increasing visitor rent rates," and strongly suggesting that short-term tourism accommodation uses may lead to increased residential housing costs, wherever they proliferate. Accordingly, as in other counties, the large and growing number of short- term vacation rental units on Hawaii Island may be contributing to increasing rent and housing costs, particularly where an entire home is rented out for unlimited number of days (as opposed to infrequently or periodically), which directly reduce the county's housing supply just as its residential demand is substantially increasing. Without any regulatory and enforcement mechanisms, vacation rental operations may threaten the long-term housing market and affordable housing opportunities for Hawaii Island's residents and families. In addition to the above concerns, it may also be important to note the limitations of the economic benefits that are purportedly provided by the short-term vacation rental industry. Most notably, data has shown that upwards of 70% of properties listed as short-term vacation rentals in the state are owned by out-of-state property owners;6 accordingly, the revenues directly derived from short-term vacation rental operations primarily flow out of the county, and out of the State. Even if some Hawaii County local residents are currently benefiting from participation in short-term rental operations, the purchasing power advantage held by non-resident cash buyers and speculators, including both individuals and corporations, along with the highly lucrative nature of short-term vacation rental operations, will likely only lead to increasing rates of nonresident operation of short-term vacation rentals on Hawaii island.? Additionally, the conversion of residential housing to short-term vacation rental units may carry a range of economic 3 SMS, INDIVIDUALLY ADVERTISED UNITS IN HAWAII(VACATION RENTALS)3-4(2014). 4 SMS,THE IMPACTS OF VACATION RENTAL UNITS, supra at 9. 5 SMS, HAWAII HOUSING PLANNING STUDY 2016 63 (2016), available at https://dbedt.hawaii.gov/hhfdc/files/2016/12/State HHPS2016 Report 111416-FINAL-122216.pdf. 6 Notably, the Hawai`i Tourism Authority report found 45,075 total properties available for short-term vacation rentals, with between 21,295 and 23,002 as non-commercial vacation rental units advertised in 2016. 70% of these properties are offered by out-of-state property owners. See SMS,THE IMPACTS OF VACATION RENTAL UNITS IN HAWAII 2016,supra, at 5. 7 SMS, HAWAII HOUSING PLANNING STUDY 2016, supra, at 59-60. 2 and social costs: one study in San Francisco, which has a similar global demand for real estate and robust tourism industry, found a negative economic impact of$300,000 for each housing unit that is converted into a vacation rental.$ Accordingly, OHA again expresses its appreciation for the Committee's efforts to mitigate negative impacts of the unregulated conversion of Hawai`i County's housing inventory into short-term vacation rental units, and offers the following comments for consideration: 1. Enforceability and effective enforcement strategies are critical to any meaningful regulatory structure. Unfortunately, efforts by other counties to regulate short-term and transient vacation rental operations have been stymied by enforcement challenges. For example, Honolulu's zoning ordinances allow vacation rentals in resort zoning9 and certain Apartment (A-2) zoned areas only;10 these ordinances also permit approximately 775 grandfathered TVUs and B&Bs to operate under a Non-Conforming Use Certificate.11 However, in 2014, over 4,400 "individually advertised units" were found on popular vacation rental booking sites spread out over two dozen Honolulu communities, including 194 in Waianae, 263 in Kahuku, 372 in Kapolei, 480 in Hale`iwa, and 525 in Kailua.12 Similarly, in 2009, the County of Maui adopted a permitting system that requires individuals to apply to operate "Transient Vacation Rentals" and "Bed and Breakfast establishments." However, while only 130 permits were issued for Maui Island, five years later there were more than 8,000 vacation rental units advertised on the island.13 Not surprisingly, Maui continued to experience a dramatic decrease in available rental housing for all income levels, with residential rental listings dropping by 80% from 2011- 8 See CITY OF SAN FRANCISCO OFFICE OF THE CONTROLLER,AMENDING THE REGULATION OF SHORT-TERM RESIDENTIAL RENTALS: ECONOMIC IMPACT REPORT(2015), available at http://sfcontrol ler.org/sites/defau lt/fi les/Fi leCenter/Documents/6458- 150295 economic impact final.pdf?documentid=6457. 9 REV. ORD. HONOLULU (ROH) § 21-9.80-09. 10 Id. " ROH § 21-4.110-1. Fora list of permitted rentals, see http://honoluludpp.org/Portals/0/pdfs/HotIssues/NUCreport.pdf. 12 SMS, Individually Advertised Units, supra, at 9. 13 Similarly,while there are only ten permitted short-term vacation rentals on Moloka`i,with no permitted Bed and Breakfast Operations, Hawai`i Tourism Authority-commissioned research found that there is an average of 365 units advertised in Moloka`i for bed and breakfast, short-term, or vacation rentals every day. See PERMITTED SHORT-TERM VACATION RENTAL HOMES(STRHs) SINGLE FAMILY RESIDENCES OPERATED BY DESIGNATED MANAGERS available at http://www.co.maui.hi.us/DocumentCenterNiew/14762); INDIVIDUALLY ADVERTISED UNITS IN HAWAII (VACATION RENTALS) (2014), available at http://www.hawaiitourismauthority.org/default/assets/File/research/accommodations%20studies/Individually %20Advertised%20Units%20in%20Hawaii%20(Vacation%20Rentals).pdf. 3 2014;14 Maui County's ongoing vacation rental enforcement challenges have led the Maui Planning Commission to urge the Maui County Council to either repeal their vacation rental permitting system, or to place moratorium on the issuance of any new vacation rental permits until more residential housing is made available.15 On Kaua`i, the county administration's enforcement of a 2008 vacation rental law has left it "mired in dozens of contested cases . . . Some still-active cases date back to 2015"; some have suggested that "property owners may be using the administrative hearing process to 'game the system,' paying attorneys to delay the government from shutting down unpermitted rentals that [county planning director] Dahilig said can generate as much [as] $10,000 a day."16 Given the substantial enforcement challenges experienced by other counties, OHA urges the Committee to consider including "proven, effective enforcement" mechanisms as a major component of any regulatory proposal for short-term vacation rentals. OHA does note and appreciates the prima facie advertisement provision in the current bill; however, such a provision, standing alone, may be confounded by the obscurity provide by vacation rental listing services, which do not necessarily reveal the address or owner of advertised short-term vacation rental units, and by operators themselves, who may not necessarily provide accurate information or information sufficient to positively identify themselves. Accordingly, a more enforcement-conscious regulatory approach may be critical to the overall success of any new framework for short-term vacation rental regulation, including provisions 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; 14 RICK CASSIDAY,MAUI RENTAL MARKET AFFORDABLE RENTAL HOUSING STUDY UPDATE 2014(2014), available at http://dbedt.hawai i.gov/hhfdc/f i les/2015/02/RENTAL-HO USI NG-STU DY-2014-U PDATE-COU NTY-OF- MAUl.pdf. 1s See Council of the County of Maui Agenda, Regular Meeting of June 5, 2015, No.15-168, available at http://www.co.maui.hi.us/Archive.aspx?AMI D=226. 16 Stewart Yerton, Kaua'i's Crackdown on Airbnbs is Backfiring, Honolulu Civil Beat,January 24, 2018, available at http://www.civilbeat.org/'2018/01/kauais-crackdown-on-airbnbs-is-backfiring/. 4 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 examination of tax records; and o Publication of all legal short-term vacation rental units on a county- maintained website. 2. Permitted rentals should adequately account for residential housing needs In order to ensure that any impacts on housing opportunities for county residents are mitigated, OHA also urges a careful consideration of the types of vacation rentals to be regulated as short-term vacation rentals, and where and how current and future short-term vacation rental operations will be permitted, as follows: First, the Committee may wish to clarify the jurisdictional coverage of the bill, to avoid potential loopholes leaving certain transient rental operations without any applicable regulations. For example, OHA understands that as currently written, the language in this bill would exclude from regulation as short-term vacation rentals all residential dwellings with six or more bedrooms reserved for transient use. OHA notes that hotels are currently regulated and defined as "a building or group of buildings containing six or more rooms or suites which provides transient lodging accommodations, meals, entertainment, and various personal services for compensation";17 however, it is unclear from this definition and the definition in the instant bill as to whether any regulation would apply to a building or buildings with six or more rooms reserved for transient use, that does not provide "meals, entertainment, and various personal services." Accordingly, the Committee may wish to amend either the proposed definition of short-term vacation rental and/or the definition of "hotel," to ensure consistency in coverage and avoid any inadvertent loophole. Second, the Committee may wish to reconsider current policies underlying the permitting of "Bed and Breakfast establishments." OHA understands that the language in this bill would also exclude from regulation as a short-term vacation rental any residential dwelling where an owner or operator resides on the "building site." OHA notes that these types of arrangements appear intended to be regulated instead as "Bed and Breakfast establishments," currently defined and regulated as a single-family dwelling or guest house in which overnight accommodations and breakfast only may be provided for compensation; such establishments are required to be subordinate or clearly incidental to residential use, and must have an owner or operator on the building site." However, 17 Hawai'i County Code (HCC) § 25-1-5. 18 HCC §§ 25-1-5, -4-7. 5 given the extremely lucrative nature of vacation rental operations; the potential difficulty of verifying that Bed and Breakfast establishments are in fact subordinate or incidental to actual residential use, even when five out of six units are rented to transients; and the significant loss of residential housing opportunities that may result from the resulting conversion of on-site dwelling units, including standalone accessory units and apartment units, into vacation rentals, the Committee may wish to consider whether permitting up to five standalone units per Bed and Breakfast establishment will sufficiently safeguard housing opportunities for county residents. Third, the Committee may wish to consider explicit restrictions on short-term vacation rental use of newly developed housing units, including 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 Hawai`i in particular. To ensure that these developments actually provide the residential housing relief as intended, explicit limitations and heightened penalties should be placed on 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. Fourth, OHA urges the Committee to carefully consider and examine the geographic areas and communities where short-term vacation rentals may be permitted, particularly for whole-home rentals for unlimited days. Insofar as heightened housing costs have correlated with visitor destination areas, the sanctioned proliferation of vacation rentals in certain communities may potentially result in increased rents, property assessments, and other negative impacts on local renters and homeowners. OHA understands 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; close consideration should be given as to whether whole- home vacation rental operations may negatively impact the character, quality of life, and lifestyles of such unique and otherwise resilient cultural strongholds. OHA respectfully submits that 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. Fifth, 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. 6 Finally, the Committee should 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 regulatoryul ator violations. 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 Hawai`i 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 concerns, can help the county take a strong step towards addressing its residents' housing needs and quality of life, and looks forward to providinginformation and assistance to the countyadministration 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. 7