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HomeMy WebLinkAboutCOM 0739.393 2016-2018 P/Cecil COMM.739 CENTERHAWAVI APPLESEED FOR LAW I JUSTICE c9 a`C3 x10 Board of Directors Testimony of Hawai`i Appleseed Center for Law& Economic Juste David J. Reber Esq. President Commenting on Bill 108 (2018) in Hawaii County -� Nathan Nelson,Esq.,Vice President .- County Council Planning Committee —t a Patrick Byrne,Treasurer °' C7 Naomi C.Fujimoto,Esq.,SecretaryMonday,November 1961,2018 ". 9 Michael R.Cruise,Esq. David Derauf,M.D. Hawaii County Council should add restrictions to its permitting process Joyce Lee Ibarra set forth an enforcement strategy before passing Bill 108. en -- Neal Milner Blake Oshiro,Esq. The Hawaii Appleseed Center for Law & Economic Justice is working to build a Garret Sugai Hawai`i where everyone has genuine opportunities to achieve economic security andfu/Jiill their potential. We change ystems that perpetuate inequality through research, policy development, education, coalition building and advocacy. Co-Executive Directors Victor Geminiani,Esq. Thank you for the opportunity to testify regarding Bill 108. Gavin Thornton,Esq. • Hawai`i Appleseed recognizes Bill 108 as an important first step in establishing a regulatory framework for short-term vacation rentals (STRs) on Hawai`i Island.With the second highest per capita homelessness population of all 50 states and the District of Columbia, and with the highest housing and rental costs in the nation,it is imperative that Hawai`i, including its counties,begins to control what has been an unfettered expansion of the STR industry to protect its long-term housing supply. The AffordableHousing Proble m Currently the housing supply in Hawai`i is not keeping up with demand. Hawai`i gained 8,458 housing units from 2011-2014, but this pace is insufficient to create the 24,551 units it needs between 2016 and 2020.' Hawaii Island in particular will feel the demand squeeze in the next decade as its population continues to rise."In 2016, 17% of the units in Hawai`i County were "unavailable," three times the number of unavailable units in Honolulu. What's more is that we can expect low-income populations to be hit the hardest as approximately 74% of the total housing units required by 2025 in Hawai`i will be needed for households making less than$75,000 per year.' The prevalence of STRs is exacerbating this problem by taking units out of the long-term rental market for those that need it the most,and perhaps permanently. In Hawai`i.County in 2014 there were 4,986 individually 119 Merchant St,Suite 605A advertised short-term vacation rentals, demonstrating that 1 out of 16 Honolulu,HI,96813 housing units may have been stripped from the residential market for STR. (808)587-7605 hiappleseed.org Comm. No 1. . Pt�burl �1 RefRef. To:nate NOV 2 0C 2018 Hawaii Appleseed Center for Law and Economic Justice November 14,2018 Page 2 of 5 Moreover, a large number of STRs are owned by non-residents that have less of a stake in the progress of local communities. It is estimated that 42.9% of homebuyers in Hawai`i County are non-residents. Local researchers suggest that it is the expansion of such investor ownership that is especially reducing the housing stock and driving up rent,''in particular where the rentals are for ' entire homes. On Hawai`i Island approximately 49% of STRs are for entire homes or condos,and 93% of STR listings are for entire homes throughout the state."The unregulated proliferation of STRs is thus making it even more difficult to curtail the existing housing crisis in Hawai`i County and the state. Economic Costs Although Hawaii derives some benefits from STRs through increased tourism spending and tax collection, the benefits are far outweighed by the costs. San Francisco,which like Hawai`i County has struggled with high housing costs and a proliferation of STRs, found that every housing unit withdrawn from the market to be used as an STR produces a net negative economic impact, even if the unit generates host income,visitor spending,and hotel taxes. San Francisco estimates that their local economy loses up to $300,000 per STR per year.The impact of STRs in Hawai`i County is likely to be similar. In particular, STRs could cause significant job loss and a decrease in wages for the local population. As platforms like Airbnb detract visitors from hotels, hotel workers could lose their jobs entirely. If these workers are able to find jobs with a platform,their wages could still decrease substantially.A Los Angeles report estimated that the Airbnb workforce (consisting of domestic cleaning services) makes $4.08 an hour,resulting in$1.1 million less in wages than hotel workers per week, or$54 million less per year.`''It is also important to consider that decreasing the workforce at hotels could threaten them with collapse.Appleseed urges council members to carefully consider these economic and social costs when deciding whether to pass the current draft of Bill 108. BID Appleseed appreciates that Bill 108 sets forth a permitting system that will enable the county to identify STR units, thereby providing a tool for enforcement. Indeed,maintaining access to the addresses of these units is the only way to ensure adherence to zoning laws at the foundation of this bill. We also recognize the importance of the provision that stipulates that a unit's STR advertisement is prima facie evidence it is being operated as such. Shifting the burden of proof to the host will significantly decrease the load that would be imposed on an already under-resourced and under-staffed enforcement agency. While Appleseed recognizes Bill 108 as an important first step in regulating STRs in Hawai`i County, there are sections that should be strengthened if it is going to have a genuine impact. The Permitting Process First, the permitting process itself could include regulations that would function to better safeguard the character of Hawai`i Island and its housing market,and place STR benefit in the hands of locals ,4 Hawaii Appleseed Center for Law and Economic Justice • November 14,2018 Page 3 of 5 • as opposed to investors and non-residents.As it stands,Bill 108 does not distinguish between commercial STRs held by owners with multiple units and other STRs. This distinction is important. Tightening regulation on commercial users,at the permitting stage at the very least,gives the county control over its long-term housing stock to ensure that its units are distributed fairly among locals, investors, and non-residents. Grandfathering The grandfathering clause in the bill is problematic as it will likely permanently take significant numbers of long-term housing units off of the market. The County's contention that it is required to grandfather in all active STRs under its "single-family dwellings" provision has no clear legal basis. When the County limited occupancy of residential housing units to one family per unit, there is no evidence whatsoever that it intended to incidentally license unlimited transient vacation rentals. It seems obvious and likely legally supported that STRs are a distinct industry that would require specific and explicit legal approval. The County's failure to enforce its own zoning code, resulting in the proliferation of STRs and now grandfathering all illegally operating units could likely result in litigation for inappropriately permitting by residents. Appleseed urges the Hawai`i County Council to obtain a written legal opinion on the legality of the grandfathering clause in the bill. Additionally, the provision that allows registration to automatically rollover to a new owner, regardless of whether that owner already owns several STRs,will also decrease the county's ability to regulate its own housing stock and protect is own neighborhoods.Accordingly,in addition to reconsidering inclusion of the latter three provisions,Appleseed encourages Hawai`i County Council to adopt the following: ❖ Limiting the Numbers: • Limitations on the number of STR units a single owner may have and limitations on how many STRs are allowed in areas with the highest demand for affordable housing ▪ Limitations on the number of non-conformance units an individual may have,as well as limitations on expanding the non-conformance unit beyond its original size • Creating Classifications for Different Types of STRs: Including classifications that distinguish between STRs for single units and commercial STRs (owners that have purchased multiple units or homes in a certain area) ❖ Scaling the Registration Fees: Establishing registration fees for new STRs as well as scaling registration fees for new and existing STRS based on the aforementioned categories and how many units the owner maintains. Charge$250 for the first unit,$500 for the second,and$1,000 for the third. ❖ Preventing Immediate Conversion: Requiring an owner to live in Hawai`i County for 5 years before being able to convert their unit to an STR ❖ Protecting New Housing Developments: Restrictions on STR conversion in newly developed housing units planned for Hawai`i County that are meant to provide affordable housing for local residents Hawaii Appieseed Center for Law and Economic Justice November 14,2018 Page 4 of 5 ❖ Host Transparency: Requiring that all unit and host information is disclosed in the registration packet for both regular registrations and non-conforming use certificates (NCUCs) ❖ Restricting STRs to natural persons Enforcement Strategy Finally,Appleseed urges Hawai`i County Council to consider regulating beyond the registration process by including an enforcement strategy in Bill 108. Successful regulators across the country, such as enforcement agencies in San Francisco and Portland,have found that a permitting process alone,largely ignored by hosts and platforms,is insufficient v"Evidence of this phenomenon is apparent in counties around Hawai`i as well. For example,in Honolulu,while only 775 STRs and B&Bs were permitted in two zoning areas,up to 4,400 "individually advertised units"were found on booking sites across two-dozen communities.`'Similarly,although Maui has only issued 223 STR permits, the number of active STRs on the island is estimated at 9,000. A lack of enforcement on Oahu and Maui has made the ability to cheat the permitting system all too easy, and has rendered these bills ineffective. The inability to enfo.ree has also hurt law-abiding residents. In Maui a DPP memo noted that STR owners who had gone through the registration process saw a decrease in occupancy,as they were unable to compete against illegal rentals with lower rates.'A lack of enforcement not only fails to catch those already cheating, but also could potentially deter otherwise law-abiding citizens from obtaining a permit and following other provisions of this bill. Consequently,Bill 108 should at least lay the groundwork for an enforcement strategy. As a start, 4ppleseed recommends the following enforcement provisions: ❖ Impose Platform Transparency and Liability:Hawai`i County must mandate that platforms share information to help local enforcement teams identify noncompliant hosts. Hawai`i must also hold internet platforms accountable for illegal advertisements on their sites,instead of placing the burden of compliance solely on hosts. In practice, this means fining platforms for posting noncompliant listings and failing to share information with the county. ❖ Institute a pass-through registration system: Under this system, hosts would register their units with Hawai`i County_through vacation rental platforms.This ensures that unregistered hosts cannot post advertisements and helps hold platforms liable. When hosts must register for a permit through a platform,platforms will not be able to plead ignorance about noncompliant listings on their sites. ❖ Fines and an Enforcement Fund: It is critical to fine hosts and platforms daily for posting advertisements without permit numbers and for other violations of Bill 108. Fines should increase with each violation, commencing at the issuance of the first notice of violation, and including disgorgement of profits derived from the unit or banning the property from being used as an STR. Collected fines should be funneled to the county's enforcement fund. Maui instituted a $20,000 fine in June of 2018 to discourage operators from considering fines as part of the cost of doing business.' ❖ Increase Community Involvement: Hawai`i County should either require that (1) operators post NCUCs or registration numbers on conspicuous places visible from public streets on which an STR is located, or (2) establish,a website where legal operations can be Hawaii Appleseed Center for Law and Economic Justice November 14,2018 Page 5 of 5 identified. Furthermore, the county can give presentations on neighbors'rights and distribute letters to neighbors detailing how to identify and report illegal STRs. ❖ Establishing a Complaint Process: It is important to set up a clear process for taking and registering complaints that utilizes the intake and investigative resources of the local police. Hawai`i County should create a complaint hotline and set clear deadlines for•responding to complaints, setting hearing dates,and making decisions. Conclusion Appleseed appreciates that Bill 108 establishes the groundwork for a regulatory framework attempting to balance permitting STR growth with protecting the long-term housing stock and local residents. Appleseed believes that the bill as it stands, however, doesn't do enough to fulfill its latter purpose. • With further consideration of the aforementioned recommendations as a means of regaining control of the housing market,Appleseed believes Hawai`i County will be one step closer to a more balanced approach and a more prosperous community. Mahalo for the opportunity to comment on Bill 108. Hawai`i Housing Planning Study,SMS Research&Marketing Services for Hawai`i Housing Finance and Development Corporation,Dec.2016(p.5,34).Available at https://dbedt.hawaii.gov/hhfdc/files/2016/12/State_HHPS2016_Report_111416-FINAL-122216.pdf Nancy Lauer,Big Island population rises:Census estimates show Hawai`i County making biggest gains,Hawai`i Tribune-Herald,March 23,2017. Hmvai'i Housing Planning Study,SMS Research&Marketing Services for Hawai`i Housing Finance and Development Corporation,Dec.2016 (p.35).Available at https://dbedt.hawaii.gov/hhfdc/files/2017/03/State_HHPS2016_Report_031317_fmal.pdf '°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 2017 Vi sitar Plant Inventory,Hawaii Tourism Authority,2017(p.60).Available at http://www.hawaiitouris mauthority.org/de fault/assets/File/rep oris/acc ommo dation s/2017%20 V I SITO R%20PLAN T %20IN VENTORY%2OREPORT%20%2001-17-2018.pdf AirBnB,Rising Rent,and the Housing Crisis in Los Angeles,Los Angeles Alliance for a New Economy,March 2015 (pg. 15).Available at https://www.laane.org/wp-content/uploads/2015/03/AirBnB-Final.pdf VII Simone McCarthy,San Francisco to Airbnb:Enforce the rules or pay the price,The Christian Science Monitor(June 15,2018,9:00 AM),https://www.csmonitor.com/Business/2016/0608/San-Francisco-to-Airbnb-Enforce-the-rules-or- pay-the-price;Steve Law, City tries new softer approach to regulate short-term rental companies,Portland Tribune (June 15 2018, 9:00 AM, https://portlandtribune.com/pt/9-news/387932-278421-city-tries-new-softer-approach-to-regulate- short-term-rental-companies- ROH§21-4.110-1.For a list of permitted rentals,see http://honoluludpp.org/Portals/0/pdfs/HotIssues/NUCreport.pdf. u Memo Report,County of Maui Department of Planning,August 18,2016.Available at https://www.mauicounty.gov/DocumentCenter/View/105774/091316-Agenda-Item-D 1-Resolution-16-93- Enforcement-Procedures-for-STRHBB Officials Advance Higher Penalty on Illegal Vacation Rentals,U.S.News and World Report(June 7,2018, 1:43 PM), Available at https://www.usnews.com/news/best-states/hawaii/articles/2018-06-07/officials-advance-higher-penalty- on-illegal-vacation-rentals