Short-term rentals a convenient scapegoat?

by Keli’i Akina, PhD, President/CEO Grassroot Institute, January 22, 2022

Based on how short-term vacation rentals are so often portrayed, I wouldn’t blame you if you thought their owners were all terrible people, with no aloha for their neighbors or Hawaii.

Mostly they are just local folks who are renting out a room to make some extra money. But more likely you have heard they are heartless rich people living on the mainland, turning away local renters in favor of tourist dollars.

They are blamed for Hawaii’s lack of affordable housing and high rents, and for hosting unruly visitors who take up all the street parking, party late into the night and generally are callous about community norms.

No wonder they are the target of so much acrimony. Despite the fact that short-term rentals have become an important part of our tourist economy, local officials continue to try to regulate them out of existence, as if that would solve all the problems they are being blamed for.

On Oahu, for example, the Honolulu City Council is considering Bill 41, which initially sought to limit “short term” rentals to no less than 180 days — almost half a year — as well as increase fees and fines, and compel some condo owners to operate their units as hotel rooms, among other changes. 

Mayor Rick Blangiardi, whose administration introduced the bill, has said he wants to shut down short-term rentals altogether. 

To the point of 180 days, after significant pushback from rental owners, the Council on Thursday amended the bill to make it 90 days, but that is still unreasonably stretching the definition of “short term.”

In any case, what the mayor and most of the City Council do not seem to realize is that shutting down short-term rentals means hurting ordinary people who are just trying to make a living in a state that is increasingly expensive and unfriendly to small-business owners.

If enacted, Bill 41 will hurt people like Ed Jones and Peggy Aurand, my guests this week on my “Hawaii Together” program on ThinkTech Hawaii.

Ed and Peggy are not profiteers or faceless corporate managers. They are people who have lived in Hawaii for years and depend on their short-term rentals to make ends meet. 

Peggy has a four-bedroom home that has been in her family for 50 years. Now that she is retired, she counts on the income from renting out rooms to supplement her Social Security checks.

“I figure if I went with the long-term rental thing, long-term rental rates are a lot lower than short-term rental rates. Usually, I can get people here for a week. If I followed Bill 41, I could make $7,000 in a year. I can't do that. I wouldn't be able to pay my taxes. I wouldn't be able to pay the expenses of running this house and I'd have to sell it,” Peggy told me.

Ed is in a similar situation. His two rental rooms help pay his bills, but they won’t if Bill 41 becomes law.

“If I'm forced to do the two six-month leases, I might as well just say, ‘I'm just going to rent it long-term,’ and that would bring me probably $7,000 to $8,000 a month for that particular house because it sleeps a lot of people. But that's still barely enough to pay the taxes and keep the place running and keep it well-repaired and looking good from the street,” Ed explained.

Ed and Peggy are just doing what they have to do to afford to live in Hawaii. In this case, that means renting out space in their homes to tourists or people making short visits. 

Moreover, their business helps the local economy. Peggy said that between the money she spends to keep her rental maintained, the amount her renters spend at local businesses and the $55,000 a year she pays in taxes, the impact on Hawaii’s economy “for one little old lady's house” adds up to about $625,000.

“Multiply me times 4,000, and you’ve got in excess of $2 billion a year,” she added.

Both Ed and Peggy said they pay all their taxes and make every effort to comply with local nuisance laws — which, they hastened to emphasize, are supposed to apply to everyone, not just short-term rentals.

But, they said, instead of being welcomed as a valuable component of the local tourism industry and Hawaii’s economy overall, short-term rentals are used by politicians as a convenient scapegoat.

“If there’s a problem with affordable housing,” said Peggy, “they blame the vacation rentals. If there’s a problem with noise in the neighborhood, they blame the vacation rentals."

She continued: "I have a situation in my neighborhood where I have noise from 1 a.m. to 4 a.m. I have drunks in the middle of the street, in the middle of the night, throwing trash in my yard. We have naked trespassers invading people’s houses. The parking is so bad that rescue vehicles can’t get down the street. Nine people died at this place in 2021. And no, … it isn’t a vacation rental. It’s a beach park, and guess who put it in place? The City and County of Honolulu.”

As for their impact on the local housing market, Ed said he has yet to see any evidence that banning short-term rentals would make any difference.

“I think most affordable rental projects are feel-good, look-good things that politicians put on the table to get elected, and once they get elected, they face reality and it gets too expensive,” he said. “I think there have been more cancellations of affordable rentals in that department than there have been people buying houses that are otherwise vacation rentals. Mine is not an affordable rental house anyway.”

Ed said he is hoping that" folks in the City Council, in DPP [the Department of Planning and Permitting] and in the proponent groups will gather around the table and talk about what we do and the benefit that it has for the community as a whole. 

“We believe that we're part of the solution when it comes to affordable housing, not the problem. I'm at a loss because no one has provided me with any kind of evidence at all that renting rooms has a negative impact on the community.”

The good news is that the Honolulu City Council did scale back the prohibitive reach of Bill 41, which will now be given a public hearing. 

For people like Ed and Peggy, what happens next may determine whether they will be able to continue living in Hawaii or become another story about locals who were forced to leave because of Hawaii’s bad economic policies. 

Isn’t it time we stopped pursuing policies that chase people out of our state and start embracing policies that make it possible for them to stay?
E hana kākou! (Let's work together!)

Keli'i Akina, Ph.D.
President / CEO
Grassroot Institute of Hawaii