On Wednesday, April 13, Honolulu City Council voted 8-1 to pass Bill 41, an effective ban on vacation rentals across the island of Oahu.
Most significantly, the bill changes the definition of a short-term rental to ninety days and prohibits both whole-home rentals (called transient vacation units, or TVUs) and properties in which the owner lives on-site (called bed and breakfast homes) outside of the resort zones in Waikiki and those near Ko Olina Resort and Turtle Bay Resort – except for those with nonconforming use certificates issued in 1989.
Other provisions include fine increases up to $10,000 per day, an initial registration fee of $1,000, parking requirements, and occupancy limits. The bill will become law once signed by Mayor Rick Blangiardi, who proposed the bill, and will go into effect 180 days later.
Bill 41 was introduced in August 2021, two years after the previous council passed another restrictive law, Bill 89 (Ordinance 19-18). That bill was never implemented, largely because the county did not have a mechanism for enforcement. In late 2020, Expedia Group and Airbnb signed memoranda of understanding with the county to assist with enforcement in exchange for no further restrictions.
Richard de Sam Lazaro, senior manager of government affairs and community relations for Expedia Group, said in a statement, “In failing to implement existing law and the corresponding agreement Expedia Group signed to assist with enforcement, Honolulu County and its residents are being left without a policy solution that will meaningfully address community concerns.”
According to Key Data, from November 2020 to October 2021, there were 9,619 total properties across the island. Stays outside of Waikiki were, on average, three days longer than those in the tourist-heavy city and had an average daily rate $169 higher than those within Waikiki’s resort zone. So, despite about half of properties being concentrated in Waikiki (inside and outside of the resort district), 77% of rental revenue and lodging taxes were generated outside of the resort zone.
Proponents of the bill cited guest nuisance issues and the need for more affordable housing. According to Best Places, the average cost of housing in Hawaii is approximately 2.7 times higher than the US average.
Councilmember Andria Tupola, the lone no vote against the bill, questioned the lack of clarity in the bill, the transparency in its crafting, and the county’s plan for enforcement. She also asked why it had not considered alternative solutions to address housing needs.
“We’ve always talked about housing, and we want more of it, and Councilmember Tulba gave me this great idea that incentivizing or giving stipends to people that are doing vacation rentals in the neighborhoods, giving them the ability to actually possibly use the city stipend to house a local family – we could have found a win-win there,” she said in explaining her vote.
Outside of city hall, Bill 41 faced more significant opposition, not only from short-term rental operators but also from adjacent community businesses. In a video series published by the Oahu Short-Term Rental Alliance (OSTRA), local residents in fields like housekeeping and real estate shared how Bill 41 would have a domino effect on them.
“A ban on short-term rentals would impact my business mainly through the loss of the traveler who hopes to stay for longer than a few days,” said Sam Monaghan, a Waikiki restaurant owner. “I understand the need for regulations for short-term rental business, but I really wish the people making the rules think through who it benefits, and it’s not just massive corporations; it helps the little companies that actually hire local people like my business here.”
Property managers and multiple coalitions were among those who advocated for better solutions.
“Our leadership team and many of our property managers participated in countless meetings with Council Members, short-term rental advocates, lobbyists and attorneys to change the outcome, but it was clear there was very little appetite from the Honolulu City Council to reject the bill and work on enforcing the current law,” Andreea Grigore, CEO of Elite Pacific Property Management, wrote to the company’s homeowners following the vote. Grigore also leads the Hawaii Legal Short-Term Rental Alliance.
The vote also came one week after Dean Uchida, director of the Department of Planning and Permitting (DPP), voluntarily recused himself following an ethics complaint regarding a conflict of interest. Uchida’s wife is an executive with Aqua-Aston Hospitality, which owns several condo-hotel properties in Waikiki. The DPP is primarily responsible for drafting the language of the bill, an early version of which would have required condo-hotel unit owners to use the hotel facility management.
Tupola alluded to this issue in her vote explanation. “I cannot vote yes on a bill that’s cherry-picking areas instead of taking a countywide approach. I cannot vote yes on a bill that affects my district, and I still have not been consulted on these zoning changes. I cannot vote yes on a bill that’s showing up with preference, and I cannot vote yes on a bill that has not brought the stakeholders together,” she said. ”We are truly the last line of defense for the people, to make sure that policy introduced is fair and free of special interests.”
The board of OSTRA issued a statement following Uchida’s eleventh-hour recusal. “Corruption, sadly, has long cast a dark shadow over our island, and the darkness it has been allowed to breed has further diminished the trust the public has in our government. The entire process for Bill 41 has happened behind closed doors with the intent of supporting the hotel industry and the hotel industry alone,” they said.
“We ask our elected leaders now to truly lead and throw out the now invalidated Bill 41. To restore the integrity of the legislative process and begin to rebuild trust from our community, we must start anew with transparency and true collaboration from all stakeholders. We ask City Council to institute a balanced short-term rental advisory board to consider all legislation carefully, with data and facts, with all voices heard and represented, and with a focus on solutions that will actually work for all.”
Instead, multiple coalitions across the island are preparing for litigation.