Maui rental fines not fine

From Grassroot Institute

Say you’re in desperate need of money and decide to rent a room in your Maui home through Airbnb.

You look at the other rentals being offered and decide to make your price competitive at $100 a night. You know this won’t make you a millionaire — you’re just hoping it will help with the bills.

But then you find out that a new Maui law means every night you rent out your room could represent a $9,900 loss per day, unless you have jumped through numerous legal hoops, paid all the appropriate fees and are within the legal quota set for your region.

You started out hoping to earn enough to pay your mortgage. Now you’re hoping you won’t lose your house.

For years, the Grassroot Institute of Hawaii has warned that the best way to deal with the increasing number of vacation rental properties — especially Airbnb rentals — is to create an easier path to legalization. But eager to generate tax revenue, the state and counties have opted for more stick and less carrot, proposing harsh levies and penalty schemes for vacation rentals seeking to come out of the shadows. Not surprisingly, this hasn’t persuaded many illegal rental properties to declare themselves and pursue the proper permitting.

Previously on Maui, the maximum fine was $1,000 a day. Now, after being approved by country voters last week, it is $20,000, with an additional $10,000 per day for each day the violation continues. Renting out your room illegally to someone vacationing on the island for 10 days would mean more than $100,000 in fines. And it could keep climbing from there.

On Oahu, the Honolulu County Council is considering a measure that would impose similarly excessive fines for illegal rentals, ranging from $25,000 to $100,000 a day. For perspective, the maximum fine for felony murder in Hawaii is $50,000.

There’s a difference between a reasonable fine that flows from the nature of the offense and an excessive, purely punitive fine. That difference is enshrined in the Hawaii Constitution, where Article 1, Section 12 protects citizens from “excessive fines.” It is worth noting that this same section prohibits excessive bail and cruel and unusual punishment.

Confiscatory fines are an oppressive tool that can easily be used to ruin someone’s life and livelihood. The decision to impose high fines is not one to be taken lightly, nor should it come into play when the violation in question is more of an annoyance to others than a danger.

Under the new Maui law, someone operating an unlicensed vacation rental could rack up $1 million in fines in only 90 days. It’s hard to imagine how that can’t be considered “excessive.”

The high fines raise the possibility that they will be successfully challenged in court, which could rebound financially on the very voters who approved them, since Maui taxpayers would be the ones ultimately footing the bill for the county’s probably futile legal defense.

There is a better way of dealing with unpermitted transient accommodations in Hawaii: Stop trying to grind down their owners with threats, fines and punishment. Create a simple, non-punitive path for owners to operate legally, and watch how many take advantage of the opportunity to comply with the law.

E hana kākou! (Let’s work together!)

Keli'i Akina, Ph.D.

President/CEO