Vacation rental ban won’t solve Hawaii housing crisis

by Keli'i Akina, Ph.D., Grassroot Institute, April 25, 2022

I hate to be the bearer of bad news, but banning short-term vacation rentals is not going to lower Oahu housing prices.

On Wednesday, the Honolulu City Council passed Bill 41 by a vote of 8 to 1. The bill would allow short-term rentals only in certain resort areas and require that rentals in residential areas be for at least 90 days.

The bill claims that, “Short-term rentals are disruptive to the character and fabric of our residential neighborhoods” and that they “increase the price of housing for Oahu’s resident population by removing housing stock from the for-sale and long-term rental markets.”

The bill’s purpose, therefore, is to “better protect the City’s residential neighborhoods and housing stock.”

Those are admirable goals, but as I’ve said many times, good intentions don’t necessarily make good policy.

To the point about short-term rentals being “disruptive,” this is a reference to issues such as parking and noise.

But the fact is, there already are city ordinances that deal with such concerns, and in an ideal situation, both short-term rental owners and their aggrieved neighbors would come together to find ways to make sure they are enforced.

As for the claim about “removing housing stock” from our neighborhoods, this is where the bill really goes astray. I think it is important to focus on the fact that a ban on short-term vacation rentals will do nothing to address Oahu’s — or Hawaii’s — housing crisis, but rather will cause grave economic harm to many Hawaii residents.

For example, during an episode of “Hawaii Together” on ThinkTech Hawaii earlier this year, I interviewed owners of vacation rentals who spoke about how this bill would make it impossible for them to afford their homes and could force them to leave Hawaii.

Meanwhile, I find it suspicious that heavy support for Bill 41 came from the tourism industry, whose fortunes were slammed over the past two years by the loss of visitors due to the coronavirus lockdowns.

Industry leaders touted the concerns about the effect of vacation rentals on neighborhoods and housing costs. But given that they were supporting regulation to eliminate their competition, it’s troubling that such arguments were taken at face value, especially when there is little evidence to back them up.

Research on how vacation rental bans affect housing costs is nebulous at best. There are nationwide studies suggesting that vacation rentals may drive up costs, but there are also studies like the one done by Santa Barbara City and County.

In 2016, Santa Barbara was considering a ban similar to the one just passed in Honolulu, but found that the impact of short-term rentals on the long-term housing supply was “negligible, far less than presumed.”

But we don’t have to depend on mainland studies. We can look at our own experience.

Though owners of vacation rentals often explain that their homes would not qualify as “affordable” housing or long-term rentals, Kauai, Maui and the Big Island have all enacted some type of ban on vacation rentals. Oahu tightened the screws in 2019. Yet, housing prices still went up. Even when vacation rental usage declined during the lockdowns, it didn’t result in a significant drop in housing costs.

The sad reality is that, once again, Hawaii policymakers are falling for easy answers. How nice it would be if something quick and simple like an “empty homes” tax or a vacation rental ban could solve the housing crisis.

But those aren’t real answers. What we need are policies that will encourage homebuilding.

As I mentioned in my column last week, “UHERO is my new housing policy hero,” we know that one of the biggest reasons for Hawaii’s high cost of housing is its regulatory barriers to homebuilding. The counties have played a large part in creating those barriers. Now, they need to start the tough work of dismantling them.

Instead of a ban on vacation rentals, which is not going to bring down the cost of housing in our state, our lawmakers should be spending their time enacting policies that have been shown to work, like the Tokyo Model of “light touch” density.

Hawaii’s housing crisis is the result of decades of misguided policy, and it could take nearly as long to fix. That is why we must work together now to identify and implement tried-and-true strategies that will provide us with the affordable housing we so desperately need.
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This commentary was Keli’i Akina’s weekly “President’s Corner” column for April 23, 2022. If you would like to have his columns emailed to you on a regular basis, please call 808-864-1776 or email info@grassrootinstitute.org.