Hawaii short-term rental property owners urge judge to stop new ordinance from disrupting business

Short-term rentals in Hawaii may soon become illegal if the ordinance is enacted as planned.

by Candace Cheung, Court House News, September 7, 2022

A federal judge heard arguments Wednesday on whether to grant a preliminary injunction to short-term rental owners in Honolulu contesting an upcoming ordinance that would render the properties illegal after October.

The initial complaint, filed in June of this year, was filed by the Hawaii Legal Short-Term Rental Alliance (HILSTRA) and alleges that the ordinance will cause irreparable economic damages to owners that have been renting out properties for less than 90 days. The suit named the city and county of Honolulu and the Department of Planning and Permitting, including its director Dean Uchida, as defendants.

HILSTRA attorney Gregory Kugle of Damon Key Leong Kupchak Hastert, appealed to U.S. District Judge Derrick Watson for an injunction to get the case through the fast-approaching October start date, referring to the widespread irreparable harm the elimination of 30-day rentals will cause.

City attorney Deputy Corporation Counsel Brad Saito contests the need for an injunction, saying that the negative effects alluded to by the plaintiff are entirely economic and therefore do not constitute true harm. Saito cites other cases where genuine constitutional and civil rights were affected by rental properties. Saito said that the plaintiff presented speculative statements rather than actual evidence of actual harm.

“Injunction can be granted for privacy issues, but plaintiffs only assert property issues but not civil or Fourth Amendment rights,” he said.

“Given their long history, it is hardly fair to call these speculative investments,” Kugle said in response.

Ordinance 22-7 is set to come into effect within several weeks on Oct. 23, prompting the plaintiff to file for a preliminary injunction to stall its enforcement. Passed as Bill 41 in April 2022, the ordinance was established to curtail the proliferation of these rental properties that the city argues are driving up property prices in Honolulu and disrupting local way of life.

The ordinance, once enacted, will primarily redefine the time limit and location of a short-term rental property. HILSTRA members and other rental property owners have until this point operated with minimum 30-day leases, many of them for decades before the introduction of the ordinance.

The ordinance would bump that number up to 90 days, a change that Kugle argues would wrongfully harm not only property owners and their auxiliary management businesses, but also the traveling military and healthcare workers that rely on limited leases. The ordinance also limits the zoning districts for rental units, automatically making many of the preexisting units nonconforming. A point of contention arose between the parties as to their conflicting definitions of what is considered commercial or residential use.

HILSTRA and Kugle have proposed the use of a nonconforming use certificate, which Kugle called “symbolic on what this case is all about.” These certificates would be similar to certificates issued by the city in the 1980s when earlier rental legislation was introduced. The certificates would create an exception for short-term rental properties already in operation and allow those properties to continue renting outside of the ordinance’s zoning rules and 90-day limitations.

Judge Watson chose to defer and neglected to issue a decision on the injunction at this time. The parties have been asked to meet with U.S. Magistrate Judge Rom Trader to work toward a resolution before the October deadline.