Booking through Airbnb or VRBO in Hawaii may become a thing of the past
||| FROM SFGATE.COM |||
Two Hawaii bills that will allow counties across the Islands to phase out short-term rentals have been moving through the state legislature. If passed, the counties would have the power to eliminate vacation rentals.
The divisive proposals pit short-term investment property owners and online platforms, like Airbnb and VRBO, against housing advocates and hotels, who will benefit from the bills. It would also redefine where travelers can stay when visiting the Islands.
Proponents view the measures as a tool to handle Hawaii’s systemic housing crisis, exacerbated after the August 8 wildfire that devastated Lahaina, killing 101 people, destroying 4,000 housing units, and displacing thousands. Supporters hope that if the bills are approved, it will eventually provide Maui residents with adequate long-term housing, as well as serve other areas across the Islands that are highly impacted by short-term rentals.
“People are leaving. People are committing suicide. They just couldn’t take it,” Albert Perez, director of the nonprofit Maui Tomorrow Foundation, told SFGATE. Maui Police Department reported that 10 people committed suicide between the August 8 fire and December.
A recent analysis from the Council for Native Hawaiian Advancement estimates at least 1,000 residents have left the island since the fire. They join the hundreds of thousands of others who were born in Hawaii and now live in the continental U.S.
Last year marked the first time census records showed that more Native Hawaiians live on the continent instead of their ancestral homelands.
Jordan Ruidas, founder and organizer of Lahaina Strong, supports both bills.
“The thought of the possibility of my keiki [children] and my future grandchildren not being able to stay and live in Hawaii is haunting,” she said from a tent on Kaanapali Beach via Zoom.
Ruidas has camped with dozens of other fire survivors and advocates along the popular resort beach since November to demand long-term dignified housing. Their goal is to pressure public officials to convert short-term rentals into homes, particularly above historic Lahaina town where 87% of the housing stock are vacation rentals.
“If we continue down the wrong path and don’t get a hold on short-term rentals that are wreaking havoc on our housing crisis in not only Maui, but all of Hawaii, the amount of locals leaving will be detrimental,” she added.
I read the full article and there was an interesting line towards the end: “Currently, Maui is on a tiered tax system with non-owner-occupied homes being taxed significantly more than owner-occupied homes.” I am shocked that that is legal, but IF if is, perhaps that is something SJC should consider looking into? Admittedly it hasn’t solved Hawaii’s problem….
I was also surprised by the line: “According to University of Hawai’i’s Economic Research Organization (UHERO), out of 565,000 total housing units across the state, over 33,000 (or 5%) are listed as short-term vacation rentals…” I would have guessed a much higher percentage considering all the noise.
Not legal in WA.
Cindy,
Can you clarify your comment for me? It was my understanding that the Tax Assessor’s valuation of a vacation rental factored in/increased the assessed value of those residences. While they may pay the same rate per $$$, if their valuation has been bumped up, it has the same effect. I could be wrong so just asking for clarification.
Thanks, Patty
Patty –
1) The WA state constitution makes it illegal to set a property tax rate for second homes at a different rate than primary residences. That is different from how a permit affects the assessed market value of a home.
2) Current WA laws do not allow for a vacancy tax.
This is, of course, not a new idea. There have already been a number of communities that have implemented bans on short-term rentals, (with Anacortes having done so recently as just one example), and there will be more to come. But none that I’ve seen to date that are so far reaching in terms of the numbers and the land mass involved as what the state of Hawaii is proposing.
Calling for a ban on all short-term rentals as a tool to handle any community’s systemic housing crisis is no doubt an extreme measure. Even though short term vacation rentals have indeed wreaked havoc upon SJC’s housing market in a number of ways, they are such an important part of SJCs tourism portfolio that we can be thankful that our current county administrators were wise enough to set limits in place when they did.
Let’s face it, to much of a good thing is not always a good thing. And short-term rentals are a good example of this.
Let’s make it happen here. San Juan County has the worst income inequality in the state and the fact that these islands have become nothing more than an investment opportunity for private equity landlords and VRBO operators is a big part of the problem
The only reason why I can afford to live on Orcas Island is because I rent three quarters of my house as a vacation rental and I live in my master bedroom and bathroom with a cute little fridge in the closet and a separate entrance.
If I have to sell my property to pay my property tax and utilities I will be very sad.
I do my part to encourage long term rentals … I just can’t give up my family space for a year round rental.
If there are corporations buying up properties for vacation rentals – then yes, we should maybe look at that – but as far as vacation rentals owned by Orcas Island residents and local small business … Banning vacation rentals would hurt many of us. If there’s a developer out there that wants to buy all of my property and turn it into high density housing they can make me an offer. Sorry for my sarcasm but balance is needed. My permit was an investment. I plan to keep it.
Please ignore or delete my last comment.
I just need to stop letting these get to me.
I really appreciated what you said in your original comment., and don’t see any need to ignore or delete it. You were speaking YOUR truth, and it is as valid as anyone else’s.
“The only reason why I can afford to live on Orcas Island is because I rent three quarters of my house as a vacation rental and I live in my master bedroom and bathroom with a cute little fridge in the closet and a separate entrance.”
It’s a tough call to move out here and then have your circumstances change, and have a tough time making it and end up having to make decisions that may not be in your community’s best interests in order to make ends meet.
“If I have to sell my property to pay my property tax and utilities I will be very sad.”
You and many others who are in the same boat. If you moved due to these reasons it would sadden me too Wendy. SJC having a regressive tax system predicated upon the highest possible re-sale value of one’s property is predatory in nature. It’s an attractant to the investor class, and is a game-changer for the many who moved here figuring they’d be here for their entire lives, only to end up having to sell out because they can no longer afford to stay here. We pride ourselves as being a rural community, yet the “system,” (the tax system) itself is the very reason why we subdivide down to the smallest possible quadrant, and why we lose our farms and our open-spaces to developers. When I listen to the horror stories of those I know who are being overly taxed in this manner, (some who have lived here for 50-60 years, some on land that is multi-generational), it’s enough to make a man cry. Perhaps there would be some change if SJC citizens organized, and did a tax-revolt? This has worked in other areas.
“I do my part to encourage long term rentals … I just can’t give up my family space for a year round rental.”
You do more than most… I honor you for that.
“Sorry for my sarcasm but balance is needed.”
Vacation rentals are an important part of our landscape… kept within limits they help create balance.
“My permit was an investment. I plan to keep it.”
Yes, everybody but the SJC Assessor’s Office seems to understand that vacation rental permits increase the value and the salability of properties. From an investors point of view a vacation rental permit makes total sense.
“SJC having a regressive tax system predicated upon the highest possible resale value of one’s property is predatory in nature.” Bingo! – You nailed it, Michael. As long as this County’s largest revenue sources are sales tax (including lodging) and property taxes, both of which rely heavily on tourism and vacation rentals, there will be no incentive for change. This, of course, stems from Washington’s regressive revenue system.
I would argue that the only ways to change that are: 1) to implement consistent regulation of vacation rentals across the entire county and, 2) to commit a larger share of County revenue and resources toward housing solutions.
The EPRC, among others, has recommended additional regulations which would protect and favor full-time resident STR owners to this and former County Councils over the past several years. None of those recommendations has ever been addressed. There’s an issue for our next Council candidates.
In appealing our property tax assessment before the Board of Equalization (yes you can file a petition to challenge your assessment) we presented ten comparable sales and the Assessor’s office presented three to justify their evaluation.. We found that two of the Assessor’s properties were vacation rentals located on a different part of Orcas. We challenged the Assessor’s comparables by saying vacation rentals are basically commercial properties because their market value is based in part on income they can generate. This is especially true because vacation rental permits go with the land when a property is sold. The Board chairman said the Assessor has done studies that show that property market value is not affected by having a vacation rental permit. Numerous studies in other parts of the US have shown that vacation rentals do impact property values. If this is true and the Assessor fails to recognize this then similar properties without a vacation rental permit will be assessed at higher values. Putting this in the context of San Juan County almost every residential property assessment is inflated by this. I have asked the Assessor’s office for the studies on the impact of vacation rentals on property values.
“Putting this in the context of San Juan County almost every residential property assessment is inflated by this.”
There are lots of studies that show vacation rentals raise the market value of a property. What’s also true, and is not being recognized in SJC, is that active vacation rentals, at the same time, (in terms of market value) devalue the surrounding properties. Active vacation rentals, while attracting investors, make neighboring properties less desirable for people who are looking to move here. They are therefore less saleable on the market.
By the SJC Assessor failing to recognize these two points properties without a vacation rental permit are being assessed at higher values in SJC.
The bottom line is that our property’s market values are being artificially inflated by short term vacation rentals.
Ken Wood: According to the article, above historic Lahaina town, 87% of the housing stock are vacation rentals. By any measure this is impactful enough to cause a lot of “noise,” even up the hill or out in the sticks where other neighbors & neighborhoods realize that they too are in the crosshairs.
Things to know about VRs when you listen to campaign speeches:
1) The County can only adopt a tax which has been defined and authorized by the State.
2)The Washington State Constitution says you cannot tax additional residences at any higher rate than primary residences.
3) WA State law does not currently allow a vacancy tax.
4) WA state law does not allow the County to tax the property of an out of state or out of county property owner at a higher rate than a county resident.
5) WA law only allows the expenditure of Lodging Tax funds for the promotion of tourism and the operation of tourism related facilities. The County cannot use LTax for housing.
6) It would be helpful to understand Takings before you believe anything any candidate has said so far about the ability to change that VR permits run with deed or can be removed without a cost-prohibitive legal process in order to enforce operating conditions. VR permits attach to the property as a permitted land use. About the only framework we found that would work to quickly shut down VRs that violate noise and nuisance violations is to require, in addition to a land use permit, a County business license to that can be tailored per business sector with conditions of operation. A business license is much easier to suspend or remove. The full Council at the time was not interested in vetting the idea for possible adoption, so if this idea is of interest to the public, it needs to be chewed over by lawyers familiar with land use and the business regulation tools available to Counties.
Washington State’s system of taxation as embedded in the State Constitution is very regressive. Real estate and sales taxes take up a far higher percentage of lower income budgets than higher income budgets, even though more valuable real estate is more heavily taxed. Attempts to enact (by constitutional amendment) an income tax (that would enable lowering of real estate taxes) have been blitzed by high income opposition. Washington is the half-time-plus-one-day residence of many Californians and Arizonans because it has no income tax, and so file their tax returns as Washington residents, thereby escaping the other states’ income tax burden.
Cindy has it right. This is a tough one to slice down the middle. It would be nice if the county put some resources into looking more closely at this problem.
“5) WA law only allows the expenditure of Lodging Tax funds for the promotion of tourism and the operation of tourism related facilities. The County cannot use LTax for housing.”
Presuming this is an accurate summation of the state law, what is the definition of “the promotion of tourism”?
It would be a rational argument to claim that affordable housing makes any community a more resilient, more pleasant place to live and a more pleasant place to visit; thus promoting tourism. Are the workers at every business or service utilized by tourists not working at “tourism related facilities”? Both of these examples are, of course, loopholes rather than good legislation. But unless and until the county council is willing to push back against laws from Olympia that don’t suit our unique county circumstances, we will be stuck with laws and regulations that limit the will of the people. Laws are made to be changed and the first step is to push back against the existing laws and regulations that aren’t working.
In the spirit of an informed electorate, I urge everyone to read and familiarize themselves with our Home Rule Charter (our county “constitution”): https://www.codepublishing.com/WA/SanJuanCounty/html/SanJuanCountyCH.html
Ken,
The Prosecuting Attorneys Office provides the County with legal counsel based on professional expertise in textual interpretation, case law and other legal precedent. I generally don’t try to bush lawyer and prefer to ask them since they must defend Council decisions in court. The way this particular code is written is pretty explicit. I invite you to read RCW 67.28.180-186. For definitions start at RCW 67.28. You have to read the whole thing because the first part is only for big counties. Long story short, in the state of WA, Counties with more than 1,500,000 residents may use Ltax for affordable worker housing. Otherwise, it is not an allowable use.
Much as people may wish it, the county can’t “push back against” [disobey or act in excess of granted authority] state law. If the county can disobey or act in excess of its legal powers, so can everyone else.
The county does have broad power under Article 11 section 11 of the State Constitution, but once the Legislature has dealt with a subject as it has in the case of the use of taxes for tourist promotion, that topic is been preempted”from the list of county powers to be creative. Technical misuse of tax money would, in the course of county audits by the state, attract the attention of the State Auditor. Been there.
The county can, however, lobby for legislation, which is how the owner-built housing law got past. In the instant case, the county would face strong lobbying, and may legitimately decide they’d be wasting time and money.
And yes, we all feel that the voters of of the county, expressing “the will of the people” as we believe it to be, should control the tone and tenor of our communities. This is not, however, the full description of how a representative government works.
Like every other community, we are a mixture of different interests and concerns resulting in the multifaceted community we live in statewide, and here. Under present circumstances, we need to live with it or manage to change the law.