Oahu’s short-term rental ban walking on thin ice, ignores root causes
by Grassroot Institute of Hawaii, November 8, 2022
A preliminary injunction against Oahu’s ban on short-term rentals of fewer than 90 days is a bad sign for the City & County of Honolulu, according to Malia Hill, policy director for the Grassroot Institute of Hawaii.
Hill spoke this past Sunday with host Johnny Miro on the H. Hawaii Media radio network. Referring to the Oct. 13 ruling by U.S. District Court Judge Derrick Watson, Hill clarified “it’s not the final decision,” but since “preliminary injunctions are intended to be used in situations where the plaintiff can show that he is likely to succeed on the merits of the case,” that’s good news for the plaintiffs.
Hill said the essential problem with the ban, Ordinance 22-7, is that it “redefined what ‘short-term’ means when it comes to renting a home” — bringing up a host of state and federal constitutional issues.
Hill said the challenge to the ban was really quite limited: “All the plaintiffs were asking for, really, was to be grandfathered in, so that the ban could go into effect for everyone else, but if you had previously been renting your house out for less than 90 days, you would be grandfathered in with a non-conforming use for a provision.” The county, however, “didn’t want to do that. … That’s how we got to where we are now.”
Asked by Miro what the Honolulu County Council and mayor should consider as they move forward, Hill said that if the ban is about noise and parking, “then address the noise and parking ordinances or enforcement of them.’” But if the problem is about housing, then the ban won’t make much of a difference, if any.
Hill said that according to the plaintiffs, “there are about 500 legal short-term rentals [on Oahu], and they say maybe a thousand in the whole state. A thousand is not going to make a dent in the housing situation.”
On the other hand, Hill said, “there is a lot of evidence about what could address housing problems, and those are, you know, streamlining the process for approvals and dealing with the permitting backlog and reducing regulation.”
So, Hill said, “if they want to mess with zoning laws, they should be addressing the zoning laws that really restrict how we can expand the stock of affordable housing in the county, not mess around with how long someone can rent a home for.”
TRANSCRIPT
11-5-22 Malia Hill on with Johnny Miro on H. Hawaii Media
Johnny Miro: Good Sunday morning to you. This is Johnny Miro with H. Hawaii Media’s Sunday morning public-access programming on our six radio stations here on the island of Oahu, and that would be 101.1, 101.5 FM, also 103.9 FM, 96.7 FM, 97.1 FM and 107.5 FM.
And the topic this morning: short-term rentals. And no better people to talk with than the people at Grassroot Institute of Hawaii. They are on top of all of these very, very important discussions. And joining me this morning would be Malia Hill from Grassroot Institute of Hawaii, and she is a policy director there.
Good morning to you, Malia. Thanks for joining us this morning.
Malia Hill: Well, good morning. Thank you for having me.
Miro: Oh, you’re very welcome. We’ll be talking for the first time. And, of course, when we discuss housing in general — a very important topic, controversial, so to speak, with the cost and also with short-term rentals these days — people need to be able to rent at an affordable price, and short-term rentals is now front and center.
So the City and County of Honolulu are right now embroiled in a lawsuit over those short-term rental regulations because of an ordinance adopted back in April. But before we get into the details of the case, Malia, can you explain what Ordinance — is it 22-7? — is about and what it actually does?
Hill: Yeah, that’s right. It’s Ordinance 22-7, and what it did was basically redefine what “short-term” means when it comes to renting a home. So there were already, in most places, a ban against rentals of less than 30 days. So all this did was, it extended that ban to 90 days. So unless you’re in a specific resort zone, you can’t rent your unit or your home for a term of less than 90 days.
It also put in fines of about $10,000 a day for any violations. This is less of the issue, but another thing the bill did was that, in areas where you were allowed to rent for less than 90 days — where that was still legal — owners who do want to do that have to register; it’s a $1,000 fee and an annual renewal fee of $500, and comply with some other regulations and such.
Miro: Now, you say the bill is controversial. Why is that, and who was arguing for or against the bill?
Hill: Well, you know, these vacation rental bills, this just fell into that category. Whether it belongs there is another matter, but they tend to bring out the same two sides.
So the push for the bill mostly comes from those who have been sort of active in opposing vacation rentals. You’re looking at the hotel industry, of course, and also community groups who, you know, say that vacation rentals will drive up the cost of housing or you know destroy neighborhoods, that kind of thing.
And on the other side are the property owners, the people who say that these rentals are how they afford to continue living or afford their mortgage. There’s also those who say, you know, this is part of our tourist economy. It really reaches a part of the tourism sector that wasn’t really being addressed before.
And one of the interesting things that came out in the testimony about this bill was actually from the property owners on the North Shore, the ones involved with surfing competitions. They went and told the Council that this bill could actually just kill surfing in Hawaii.
That’s because the surfers who come to Hawaii for competitions, especially the young surfers, they can’t really afford to stay at a hotel, you know, or at Turtle Bay, especially not for a longer stay.
So without these shorter-term rental options, they say the surfers will sleep on the beach or in their cars or just not come. So this bill specifically really, really kind of got a lot of people going when it was in consideration.
Miro: You know, that’s the first I’ve heard about the issue with surfing on the North Shore. Very interesting.
Malia Hill joining us from Grassroot Institute of Hawaii. She’s the policy director over there. I’m Johnny.
What’s the evidence behind the claim, Malia, that short-term rentals drive up housing prices?
Hill: You know, this is one of those things where a lot of people have a lot of anecdotes. There’s a lot of sort of surveys and polls, but there’s not a lot of really hard data-driven studies. Not yet. It’s an emerging field.
There was a 2020 study from the University of Pennsylvania’s Wharton School, and they found that Airbnb does raise the price of housing, but really predominantly just for higher income brackets. Why?
Because short-term renters, you’re not often looking for housing in what we call affordable housing. They’re looking for well-to-do luxury rentals. And that’s something you get a lot, if you listen to the testimony when these kinds of bills come up. And I’ve seen it in different counties. You know, the people who own these properties, they’ll come forward and they’ll tell you, “My home is not an affordable home. It’s out of reach for the average family,” or “I only rent it because that way, I can make my mortgage.”
So it’s a strange thing to come out of this, and I think it really distorts the whole way that people look at it, especially when we’re talking about this specific ordinance, because, again, when we talk about vacation rentals, we’re usually thinking a vacation rental [of] a couple of weeks, and this bill was specifically banning anything less than 90 days.
It’s really kind of a distraction because when we’re talking about housing supply, we should be talking about housing supply and the ways to fix that. [But] we’re getting distracted with whether or not these high-end properties can be rented for two weeks, and what does that do to the housing market as a whole?
Miro: Um, boy, deep dive into the short-term rental issue, Ordinance 22-7, being discussed. Malia Hill from Grassroot Institute of Hawaii, the policy director over there. OK.
So after the ordinance was adopted, a group called the Legal Short-Term Rental Alliance, they filed a lawsuit challenging the new law. What is the basis of their lawsuit?
Hill: Well, you know, lawsuits, they like to put everything in there. But this specific group, they had a few major points that they were trying to make. These were people who own these rental properties that they want to rent out for these 30- to 90-day spans. And they basically were saying that the counties can’t just use the zoning law to outlaw something that was previously legal — that the state law forbids that.
They also said that this is a taking of private property, which violates the U.S. and Hawaii constitutions.
They say that the fines that were imposed for violating the law — like I said, $10,000 a day and it just accumulates and accumulates — that that is a violation of the excessive fines clauses in the Constitution.
And they also made some claims about how this ordinance would impair their right of contract and the due process clause.
Miro: OK. Alright. Well, can you explain then what “a government taking” is in greater depth, Malia?
Hill: [Laughs] I can give the CliffsNotes version. The full discussion requires an entire law school class.
Miro: [Laughs] OK. We don’t have time for that. Yeah, CliffsNotes.
Hill: But in the simplest terms, we all kind of know what a government taking is in the basic concept, when the government comes and they want to build a road or a rail line or a hospital, and they basically use eminent domain to take your property, and they’re required to give you the fair market value of that property in return.
But there’s another kind of taking where they don’t literally take your property, but the government does something that impairs the value of your property.
There’s different ways they can do that. Maybe they require everyone to put cable lines and cable boxes on your property. Well, that’s considered a taking — a small one but a taking nonetheless. Or if they passed a zoning law, which made it impossible to build anything and so that the land was basically valueless now. They didn’t take the land, but they made it impossible for you to do anything with it. So that would be a kind of a taking.
In this case, what we’re talking about was taken was the right to rent your home or a unit of your home for between 30 and 90 days. That was something that existed before the ban came down. It has value. You really could do it. You could get money for it. And it was eliminated by the government and banned by the government. Therefore, the government took a piece of a property right.
Miro: Great explanation. It’s clear now. Great examples. Thanks, Malia.
Who are the people behind these lawsuits? Is it really just a bunch of rich people renting out their second homes?
Hill: You know, that’s definitely the misconception about who it is that’s renting homes, and I think it makes sense that people think, “Oh, it’s some rich mainlander, or it’s some corporate conglomerate,” because you don’t have to feel bad about that if you’re inconveniencing that kind of person. But it’s a straw man.
When you talk to the people who own these properties — and we’ve had them on previous episodes of our TV show “Hawaii Together” on YouTube, or we had the lawyer who represents them — we’re really talking about ordinary people, local folks, you know, people who rent out their property so that they can pay their mortgage. A lot of them are retirees or elderly couples who use this to supplement their income.
It’s just another way to help afford to live in Hawaii. And they’re not “others.” They’re not mainlanders. These are neighbors and friends and relatives.
Miro: Malia Hill joining us, the policy director for Grassroot Institute of Hawaii. It’s grassrootinstitute.org, for more information. And is there a policy paper up on this, on the website already?
Hill: Well, you know we have a lot of testimony and interviews and radio show-type things where we talk about this topic in-depth, and we did testify on this bill in the Legislature. And we’re looking at doing a deeper dive on the impact of vacation rentals on the housing market. But believe me, when we’re finished with that, everyone will know.
Miro: OK. Malia. Who’s really being harmed by the rental ban, other than the people who can’t rent out their homes?
Hill: Yeah, that’s the other side of this, and I feel like it hasn’t gotten enough attention. I’ve mentioned the surfers earlier, who won’t necessarily be able to find a place to stay for surfing competitions.
But, you know, it’s really important to pay attention to the length of the ban, because we’re talking about banning rentals between 30 and 90 days. So this is not a tourist family who comes for a week or two.
We’re talking about people who need temporary housing, really, and that’s a different kind of thing — people who need somewhere to stay for months but aren’t making a permanent move.
So think of a nurse or a doctor who’s come on a temporary contract, maybe to help with the hospital staffing shortages, or a family from a neighbor island that is coming to Oahu for medical care. They’re going to be here six to eight weeks. You know, they don’t want to stay in a hotel. Maybe they can’t afford to stay in a hotel for six to eight weeks.
Families that have been relocated temporarily, for various reasons. A good example would be maybe a family that was relocated because of the Red Hill [fuel] leak.
Yes, you could put them in a hotel, but people don’t want to stay in a hotel for two months. They want to make dinner and eat with their family and let the kids go outside and play. That’s really who this is for.
But this isn’t really about tourism, and I think that really got lost in the messaging on it.
Miro: All right. Ordinance 22-7 was supposed to go into effect in October. Now did it?
Hill: Well, yes and no. Not entirely. On October 13th, right before it was supposed to go into effect, a U.S. District Court judge issued a preliminary injunction, which prevented that less-than-90-day-ban part of the ordinance from going into effect.
The judge really, really leaned heavily on the state statute that prevents the counties from putting in a zoning regulation that would make something that was previously legal illegal.
And he also talked a bit about property rights, if that’s something you care about. It’s a good decision — if you’re interested in reading decisions — but technically, the county could… you know, there were other elements to it. Really, only the part that had to do with the 90-day ban — the part that was the primary focus of the suit — was enjoined by the judge’s order.
Miro: OK. What are the prospects, then, for this lawsuit? Now that the judge has issued this injunction, who’s likely to win?
Hill: Well, I suppose it has to be said, just to be technical and legal about it, that it’s a preliminary injunction. It’s not the final decision. It’s just something that comes before the case really proceeds.
However, preliminary injunctions are intended to be used in situations where the plaintiff can show that he is likely to succeed on the merits of the case, that they would suffer irreparable harm without an injunction, that this is the equitable thing to do, [that] it’s in the public interest.
That’s a lot of legalese, in a very legalese way, to say that it’s just a really good sign for the plaintiffs.
All the plaintiffs were asking for, really, was to be grandfathered in, so that the ban could go into effect for everyone else, but if you had previously been renting your house out for less than 90 days, you would be grandfathered in with a non-conforming use for a provision.
And the county didn’t want to do that. Honolulu just wasn’t interested in doing that. That’s how we got to where we are now. And it still remains to be seen. It looks good for the plaintiffs in the case, but, you know, it’s not done.
Miro: But the county is still interested, though, in restricting the short-term rentals, right? Are there any ways it could change Ordinance 22-7 to get around the lawsuit?
Malia: You know, that’s a really interesting question, because after the injunction came down, Mayor Blangiardi talked about how they were going to fight the lawsuit and aggressively enforce the remaining parts of the ordinance, which then prompted the lawyer of the plaintiff to remind the mayor that they can’t do anything that would violate the judge’s order.
So that leaves us in an interesting place. We could see them just try to do what it is that the plaintiffs have been asking for this whole time, which is, create this sort of path for a non-conforming use so that people who are already operating legal short-term rentals could just continue to do so.
But they also talked about trying to change state law. Now, maybe what they’re talking about is the part of a state law that, you know, addresses how much counties can restrict vacation rentals. Or maybe they’re talking about the part of the law where the state prevents the counties from phasing out a use if it was already legal.
But in either case, it’s a weird ground for them to be on, because, in that injunction, the judge also talks about constitutional rights. There’s still this whole question about — regardless of what shenanigans you play with the law — there’s still the constitutional property right, the question of whether you took something, and that would still have to be addressed.
Miro: Yeah, obviously. So, Malia, what’s your message to the county, other than the lawsuit? What are some things the County Council and the mayor should consider as they move forward on regulating short-term rentals, in your opinion?
Malia: Well, I know this has been a really hot issue, and it’s something that the county’s interested in, but if they wanted to bring me on as an advisor — which I’m free [laughs] — I would tell them to focus on the actual problems they’re trying to address, because, you know, if this is about noise and parking and that kind of issue, then address the noise and parking ordinances or enforcement of them.
You know, just narrowing it down to the idea that someone who rents a house for 60 days is somehow responsible for all the noise and parking problems of a home neighborhood, that seems unscientific.
If the problem is about housing, well, this is not going to make much of a dent. You know, the plaintiffs, they say there are about 500 legal short-term rentals, and they say maybe a thousand in the whole state. A thousand is not going to make a dent in the housing situation.
And there’s not a lot of evidence that it would, but there is a lot of evidence about what could address housing problems, and those are, you know, streamlining the process for approvals and dealing with the permitting backlog and reducing regulation.
You know, if they want to mess with zoning laws, they should be addressing the zoning laws that really restrict how we can expand the stock of affordable housing in the county.
There’s a lot better ways to address that fundamental problem of affordable housing than by messing around with how long someone can rent a home for.
Miro: Well, hopefully, listeners out there are more informed, as I surely am, on this topic. Malia, you’ve explained it very well, and I believe easily for the listeners to understand.
Anything else that we didn’t go over that you might want to let listeners know about this Ordinance 22-7, the short-term rental ordinance that’s out there?
Hill: Yeah. It’s just… I think the thing that I just want to keep reminding people over and over again [is] that this is not the way to deal with our housing shortage. It’s an easy scapegoat, you know, like many other things are.
Vacant homes is an easy scapegoat. And people who own more than one home and outside buyers. These are all these scapegoats that we get distracted by, and we’re not really dealing with the core problem: the barriers that the county and the state itself put in place that make it difficult to build new housing, or even adapt existing housing to more use.
Miro: Thanks so much for spending some time with us, Malia Hill, the policy director at Grassroot Institute of Hawaii, part of Keli’i Akina, who’s the president and CEO’s deep bench of talent, as you can hear. We’ve had a couple of other individuals on, and they are so knowledgeable about each and every topic.
It’s grassrootinstitute.org for more information on that. Malia, thanks so much once again. Have yourself a fantastic Sunday. I hope to be speaking with you soon.
Hill: Well, thank you.