Short-term rental ban deserves short life

By Keli'i Akina, Ph.D., Grassroot Institute, October 31, 2022

You probably have heard that if you want less of something, all you need to do is tax and regulate it.

Politicians are aware of this idea, which is why we have taxes and regulations on things such as alcohol, e-cigarettes and other products they consider “sinful,” unhealthy or a threat to public safety.

Those same politicians forget, however, that taxation and regulations apply to bigger things as well — such as entrepreneurship, transportation, healthcare and affordable housing.

Why are there so few job opportunities, so few medical facilities and doctors, and so few homes to buy or rent in Hawaii?

We all know that Hawaii is one of the most highly taxed and regulated states in the nation, so you can see where I’m going with this.

A concrete example regarding housing is Honolulu’s new Ordinance 22-7, which seeks to ban all housing rentals of less than 90 days outside resort areas.

Formerly known as Bill 41, the new law was supposed to go into effect this week, but a federal judge temporarily blocked it until its provisions can be hashed out in court.

One of the arguments in favor of the bill is that by prohibiting short-term rentals to tourists, more housing will be available for local residents.

But as Greg Kugle, my guest on this week’s “Hawaii Together” program explained, that contention is based on a misunderstanding about whom the ban is actually targeting.

According to Kugle, the attorney representing short-term rental owners in the court case, the people most hurt by a ban on rentals between 30 and 90-days won’t be Hawaii’s tourists but rather people for whom staying at an expensive hotel in Waikiki doesn’t make any financial or logistical sense.

Those include doctors, nurses and other medical personnel who are in Hawaii on short-term contracts, families from the neighbor islands who have traveled to Oahu for medical care, and people who have been displaced by disasters such as fires or the Red Hill fuel leak.

In short, these are people who can’t afford months in a hotel, would like to be closer to their jobs or medical providers, or would prefer to stay where they can cook their own meals and live something like a normal life.

Honolulu Council members were warned during the contentious hearings on the bill that another unintended consequence of the bill would be to kill Hawaii’s world-famous professional surfing scene on Oahu’s North Shore.

Young surfers from around the world who come to Oahu for the competitions can’t afford the rates at Turtle Bay, and those in the know believe that without rental units that allow for shorter stays, surfers will either end up sleeping on the beach or in their cars, or won’t come at all.

Kugle said the other big misconception about short-term rentals concerns who owns them. He said supporters of the ban suggest, “Well, these are really rich mainland or rich foreign owners who have second or third or fourth homes in Hawaii and who are making a lot of money doing this.“ But really, he said, that’s not the case.

“Many of these people … could be retirees who have a cottage on their property or who rent out rooms to supplement their retirement benefits and Social Security income. They’re local people.”

Kugle’s lawsuit against the ban makes a strong case for property rights, alleges the fines are excessive, and that state law prohibits the counties from using zoning law to bar uses of property that previously were legal.

Kugle said all the plaintiffs want is for their properties to be grandfathered into the law through a nonconforming-use certificate so they can continue to operate their rentals as they always have.

If the short-term rentals ban prevails in court, the people who suffer won’t be faceless corporations or wealthy mainlanders with three homes. It will be Hawaii’s ordinary families.

Moreover, housing will become more expensive and harder to find — because that’s what happens when you complicate matters with burdensome taxes and regulations.
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This commentary was Keli’i Akina’s weekly “President’s Corner” column for Oct. 22, 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.