Oahu’s problematic short-term rental ban

from Grassroot Institute of Hawaii May 25, 2022

Will Oahu’s new ban on short-term rentals affect you?

It will if you have been renting out a room to help pay your mortgage, or you are a contractor or retailer whose livelihood has relied on servicing such rentals or the people who rent them.

That’s the view of Dawn Borjesson, chair of the Friends of Kuilima, a community group on Oahu’s North Shore. Borjesson was interviewed about “Oahu’s problematic short-term rental ban” by Keli’i Akina, president and CEO of Grassroot Institute of Hawaii, on the May 23 episode of “Hawaii Together” on ThinkTech Hawaii.

Akina said advocates of the ban claim it will protect Oahu’s neighborhoods and increase housing for locals, but others have grave concerns. The new ordinance essentially bans short-term rentals across most of Oahu by
lengthening the short-term vacation rental period to at least 90 days.

Speaking via Zoom from Juno, Alaska, Borjesson said the worst part of Bill 41 is that it was adopted without any data showing that it is needed. Until that data is obtained, she said, “we’re just kind of demonizing folks that rent out properties that are perceived as just vacation [properties].”

Akina asked: “So if it’s not data and research that is driving the decision that was made by the Honolulu County Council, what is driving that decision?”

Borjesson responded: “I would say the hotel industry. They have been trying for a long time to eliminate competition.”

She said the travel industry has “moved more toward people wanting to be able to stay in homes versus staying in a hotel,” and though “hotels are nice, … you don’t have the benefits of a kitchen, an area to lounge in necessarily, unless you really can afford it. And most families can’t. … The hotel experience is so costly. It’s cost-prohibitive.”

She said along Oahu’s North Shore in particular, others who use short-term rentals include professional surfers who participate in surfing competitions in the area. Many of them have entourages that include supporters, trainers and even medical personnel.

“A lot of these folks need to be able to rent a property that’s closer to the shore, because they have [to train], they have to get ready for the competition.”

Borjesson said Friends of Kuilima is “very much for affordable housing across the island. But taking a sledgehammer to the approach doesn’t seem to be the right thing to do.”

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TRANSCRIPT

5-23-22 Dawn Borjesson with Keli‘i Akina on “Hawaii Together”

Keli‘i Akina: Aloha, everyone, and welcome to “Hawaii Together” on the ThinkTech Hawaii broadcast network. I’m  Keli‘i Akina, your host, and president of the Grassroot Institute of Hawaii. 

Honolulu recently enacted Bill 41, which lengthened short-term vacation rental stays to over three months, and this basically bans short-term rentals across most of Oahu. Now, this has become a very sensitive issue, with passionate and well-meaning advocates on both sides. There are many people who believe that Bill 41 is good for Hawaii, that it will protect our neighborhoods and increase our housing for locals. Yet there are others who have grave concerns about Bill 41. We’re going to look at the views of one community organization today.

Our guest is Dawn Borjesson. She’s chair of the Friends of Kuilima, which is a community group on the North Shore bringing voice to those affected by this issue. Dawn, thank you so much for joining us today. Aloha to you.

Dawn Borjesson: Aloha to you, too. Thank you for inviting me.

Akina: Before we get started, very quickly, could you give our viewers a little bit about your own personal background and what you do?

Borjesson: Well, what I do right now us, obviously, [I am] the chair of the Friends of Kuilima. I’m quasi-retired. My family’s owned property on the islands since the ’60s. We’re working on right now relocating over there, probably permanently. But in the meantime, we’ve been very strong advocates of the North Shore, our family has been. And we’ve had property there, around the Turtle Bay Area, since the early ’80s. So this is a near and dear subject to us. We love the North Shore.

Akina: I can understand. Dawn, how did you get involved in the Bill 41 issue? Tell us a little bit about Friends of Kuilima.

Borjesson: Friends of Kuilima actually started with Bill 89, which was in 2019. There were several parts of that bill that affected the North Shore community especially, but also around the resort area. And at the last minute, the resort area was actually left out of the bill. So we immediately became illegal short-term renters, period.

And I connected with several other people that lived there, as well as owned property, and we formed up this group because we had to go to an attorney to be able to get a declaratory ruling that we were actually resort property, we met all the requirements.

And as a result of that, we learned the hard way what worked, and what didn’t, just in educating folks. So when this Bill 41 came around, we fired up the band again and this time decided to go ahead and do it in a much more partnership manner and developed our website and our communications, and we’ve been partnering with a lot of different groups around the island.

Akina: I see. Now, Dawn, give us the nuts and bolts. Hold off, we’ll have a lot of time to hear your critique of Bill 41 later on. But just right now, the basic facts. What is Bill 41? What does it do?

Borjesson: What Bill 41 does is it basically kind of eliminates short-term rentals. Folks that had nonconforming-use certificates previously can continue on renting, but they have to register, and then they designated specific areas in resort property areas as being permitted to be able to do short-term rentals.

Anybody apart from that, if you didn’t have a NUC — that’s what those are called, the certificates — technically you’re not eligible to apply for or to be a short-term renter for your properties. So that affects a lot of people across the island. On the North Shore, there’s not only individual homeowners, but then there’s folks that have condo units and that type of thing.

Akina: Now, Bill 41 exempts the resort districts, however. So does that mean that people in resort districts on the North Shore can still do short-term rentals?

Borjesson: Yes, it does. We’re exempted by the tax maps that were included in Bill 41. Also, too, in Waikiki, there’s a couple of what they call condotels that were exempted and considered resort property, as well as Ko Olina. Unfortunately, in Ko Olina, they cut it in half, so a portion of that has continued to be resort property and then another portion of it, they kind of dropped off, similar to what happened to us a few years ago with Bill 89.

Akina: Now, your concern is for those who are not living in resort districts, and the impact this has on their ability to conduct short-term vacation rental businesses.

Borjesson: Yes.

Akina: Tell us a little bit about that impact. What kind of impact will that be upon, let’s say, the average individual who’s just renting out a unit, and what kind of impact will it be on businesses?

Borjesson: Well, I can certainly say for the small business owners, folks that do cleaning, property management, that aren’t part of a larger group, this is really going to have a detrimental effect on them because, of course, they’re going to lose some of that income, if not all of it in some cases. 

It also means that small businesses like plumbers, mechanics, those types of folks that go in and regularly take care of properties, those properties are no longer going to be rented, so it’s kind of a question on how that’s going to impact them.

One thing I will say is, throughout this entire process with Bill 41, is we’ve continually asked for data that supported the policy decisions that were made in order to say this is a good thing or a bad thing, and that this is actually going to lead to affordable housing, because we’re very much for affordable housing across the island, but taking a sledgehammer to the approach doesn’t seem to be the right thing to do.

Akina: So obviously, Dawn, you’re referring to the claim that Bill 41 will actually make more housing available that local people can afford. You’re saying, if I hear you correctly, you’ve asked for the data behind that, but you’ve not seen that.

Borjesson: No, there’s no data. In fact, we’ve done a lot of reaching out. We reached out to the University of Hawaii. They should have a report hopefully coming out sometime this summer about housing on the island. I don’t know if it’ll be just limited to Oahu but also the other islands as well. 

But there’s no appreciable objective data that we can locate. A lot of people refer to the Tourism Authority’s office as having data. But some people probably don’t know that’s self-reported data and a lot of it comes from the hotels, because that’s kind of their anchor on where they’re getting information.

So even at Turtle Bay, we would’ve heard if somebody wanted to know how many people were staying, what were the types of folks that were staying, because it’s not just vacationers that are using these short-term rentals. And that’s a big misnomer of what short-term rentals do. It’s not just vacations.

Akina: So if it’s not data and research that is driving the decision that was made by the Honolulu County Council, what is driving that decision? Putting you on the spot here, I suppose.

Borjesson: Yes, you’re putting me on the spot. I would say the hotel industry. They have been trying for a long time to eliminate competition. And, as we know, with any type of industry, especially when it comes to travel, there’s always going to be change in the industry, and it has moved more toward people wanting to be able to stay in homes versus staying in a hotel for a very expensive nightly rate. 

And the hotels are nice, but you don’t have the benefits of a kitchen, an area to lounge in necessarily, unless you really can afford it. And most families can’t. 

You know, on the North Shore, we’ve got BYU right there, plus we have the surfing competitions that happen where folks need a place to kind of unwind and join family and friends and stuff. The hotel experience is so costly. It’s cost-prohibitive.

Akina: Now, you’re talking about surfing competitions on the North Shore. That has been, or at least it was prior to the pandemic, a huge thing for Hawaii, especially for the North Shore economy and for people who come from across the world to congregate and to experience something unique. What does this community of people who come together for the surfing have to say about Bill 41? How will this impact them?

Borjesson: We’ve talked to Robin Erb, who is the regional director [of the World Surf League] for North America and Hawaii. And their big concern is they need to have a location for the entourage; there is an entourage that comes with these athletes. And let’s face it, they’re athletes, they’re world-class athletes. The ones that are the very top tier have a lot of supporters can afford probably more expensive lodgings. And some of the sponsors do own property for the surfers. 

But for the regular ones that are just trying to work their way through the competitions, it’s very, very expensive for them, and they do need a place to be able to unwind. 

And by “entourage,” I mean it’s not just your support group. Some of them travel with their athletic trainers, as well as, in some cases, medical personnel if they’re having issues.

So it’s a lot for these folks, and to not have the ability now to be able to rent a property that’s closer to the shore, because they have training, they have to get ready for the competition, that’s a big concern.

Akina: And Dawn, I would imagine that in addition to the athletes and what you call their entourage, there are also the spectators, people from across our islands, locals, as well as people who come from across the world, who bring in dollars to the North Shore and to the Oahu economy whenever they travel to these surfing events.

Borjesson: Right, right, that’s correct. With any large group of folks, you’re going to have some of those that probably you wouldn’t want to rent out a place to. But that’s what the enforcement pieces are that were part of Bill 89, and yet the Department of Planning and Permitting really never did any kind of enforcement. 

Some of these neighborhoods were impacted, and not just on the North Shore, but speaking on behalf of the North Shore, yeah, you know, there’s party houses. They should have been reported. Folks should have been there. There should have been something taken care of.

I think, in some cases, probably there were, but you know, that’s a really big concern for the folks that are there, that’s their home, is you don’t want a party house to pop up because of some competition or something that’s going on.

Akina: Dawn, I hear that you’re acknowledging one of the concerns that some of the advocates of Bill 41 had. Many of them said that short-term vacationers change the nature of the neighborhood, that they bring in noise, debris, they violate the basic rules and laws that are in place in a neighborhood. But I also hear you talking about a failure of enforcement. What’s your overall assessment of some of the concerns of people over short-term vacationers?

Borjesson: I think that parking has been a big issue in some of the residential areas. With Bill 41, they did address that with the homes that are going to be able to continue to rent, that parking has to be corralled and respect the neighborhood, respect the neighbors, keeping vehicles, you know, off-street parking. 

Some of the other concerns that weren’t addressed that should have been were noise, and just the constant coming and going of vehicles, that type of thing. 

So I think had Bill 89 been fully implemented and enforcement actions taken, we might have been in a different place when they were proposing Bill 41.

Akina: Now, your group Friends of Kuilima, has also talked about other proposals, as you mentioned. And there’s also Bill No. 4, which you’ve addressed at the Honolulu County Council. That one, I understand, would increase property taxes of short-term rentals. Could you explain Bill 4, and tell us what your concerns are about it?

Borjesson: Sure. Right now, Bill 4 has, it’s added a new tax classification for TVUs, which is the transient vacation units. Bed-and-breakfasts right now already have their own classification. For some folks that might have been following this, there were about 800 or so people that they were saying were registered or had certificates. Of those 800 units or properties, there’s only 34 that are actually bed-and-breakfasts, which means there’s a whole tax classification right now for 34 properties. Meanwhile, this new classification will affect pretty much everybody else.

There has been some thought that there might be a two-tier addition to this bill before it passes, so that it would be based on property values, would be how properties would be assessed. But Bill 4 right now is the structure of the taxing mechanism. It’s not the actual tax rate. The tax rate will happen next spring as it goes through its normal process for the following property tax year.

Akina: Dawn, you and your group are also concerned about Bill 9, which would tax empty homes. Tell us a little about that.

Borjesson: Yes. So this would be a home that would be for folks if you lived in your property and you were out away from it for 180 days or more, you would be subjected to an increase of a 3% mill rate for being away from home. They do have a medical exemption and they do have a military exemption in that. But the problem is, it doesn’t stipulate whether or not it’s a contiguous 180 days or if it is throughout the year.

For medical for some folks, as you might know, sometimes ongoing medical problems are going to be ongoing. And right now, the way it reads, is it’s a one-time exemption that you would get, which would not be a good thing for folks that live there. 

For a second home, pretty much it pushes you into that situation where you need to rent your property. 

And the idea behind it was they don’t want vacant homes. That’s why it’s called the empty home tax. They want those properties available for people for affordable housing. But again, this is a sledgehammer approach to something. 

When you’re talking about a property that’s affordable, if the median value of a property is over a million dollars, I don’t know if somebody that’s just working one or two regular jobs could even afford to live in that property. 

It’s suggesting that it’s going to address a problem, but really the problem itself isn’t being addressed as far as how do you get affordable housing available for folks that are making the regular wages, not somebody that has a much higher value property.

Akina: Well, Dawn, I appreciate the critique you’ve given of Bill 41, and other bills as well before the Honolulu County Council. But what do we do? Is there a better way to regulate short-term vacation rentals? What are your thoughts, as we close?

Borjesson: My thoughts are, again, I’ll go back to the data. We don’t know really how many folks are renting out a room in their house as a bed-and-breakfast in order to make their mortgage. 

There’s single moms out there with kids that need that extra income to be able to get by. We’ve got seniors, elders that are doing kind of the same thing, that they’re renting out parts of their home in order to be able to keep their home. 

The data would provide us with some demographics about who actually is doing rentals, short-term rentals, longer-term rentals, and know where those properties are, and figure out how can we better help the Council formulate policy to be able to address the housing shortage. 

But without this low-hanging fruit, we’re just kind of demonizing folks that rent out properties that are perceived as just vacation. But in fact, we’ve got medical folks that come over. We’ve got first responders that come over and they need to stay someplace for 60 days, or for the military transitioning in and out. 

So I think getting involved, being educated, we have on our website, we try and keep up on the bills that affect the short-term housing, short-term rentals, just trying to get out there and let people know when bills are coming up. It’s really about folks getting involved and really getting educated.

Don’t just listen to what’s on the news. Don’t just listen to one Council member saying something. But really get educated about what the contents of a bill are. That’s probably the single biggest thing going forward.

And we’re hoping to maybe help clean up some of the language that was in that bill, at some point, working with the Council, to address some of those issues. 

But until we’ve got some data, it’s really difficult to kind of forecast and say, “This is going to work.” There’s no one thing right now I think that’s going to work.

Akina: Dawn, I want to thank you. Your information has been very helpful, and I think many people will benefit from it. Thank you again for being with us and for all your work with Friends of Kuilima. 

My guest today has been Dawn Borjesson. She as mentioned before, she’s chair of Friends of Kuilima and I’m Keli‘i Akina with the Grassroot Institute on ThinkTech Hawaii’s “Hawaii Together.” We’ll be back with you next time. Aloha.