Hosted STR owners question Hawaii isle regulatory offensive

from Grassroot Institute, Hawaii Together, January 31, 2023

Hawaii island landowner, coffee farmer and vacation rental host Joshua Montgomery has called on county officials to honor the first tenet of the Hippocratic Oath for doctors — first, do no harm — as they consider imposing additional regulations on short-term rentals that could negatively affect thousands of families.

Hawaii County passed a short-term rental ordinance five years ago aimed at regulating absentee hosts, Montgomery explained during this week’s episode of “Hawaii Together” on ThinkTech Hawaii. But now, he said, lawmakers there are looking to clamp down on “a very different part of the market” — short-term rentals whose owners live on the premises.

Montgomery is a founding member of the Ohana Aina Association, which represents thousands of homestay, farm stay and transient rental owners on Hawaii island. 

Speaking with program host Keli‘i Akina, president and CEO of the Grassroot Institute of Hawaii, Montgomery said an official bill has yet to be drafted, but the proposed regulations include proving that all home improvements were permitted and submitting floor plans and parking plans.

“Of the 7,500 families here that depend on this income to make ends meet, some of them — because of these hoops — are not going to be able to move forward [with their rental property]” he said. “So we need a really compelling reason as a community to implement those regulations, and I just haven’t seen those compelling reasons.”

Montgomery said he wrote an open letter to the County Council last week offering $10,000 to help fund a study of the issue, and “one of the points I made is that when doctors take their oath, they make a commitment to first do no harm … and it should be the same for legislation.” 

“As we implement new laws, we need to look at it and say, ‘Who’s going to be harmed by this? What are the unintended consequences of this?’ … ‘Should we do anything at all, … if it’s going to hurt people, unless we have a really compelling reason?’” 

Montgomery said community complaints about visitor behavior appear to be a motivating factor, but numbers provided by the county show the complaint rate last year — 65 complaints out of 1.69 million rental nights — was only 0.000062%.

Another justification, Montgomery said, is affordable housing, or “the idea that if we’re hosting a visitor for a night, that that’s a long-term unit that could be used to house a local family.”

He pointed out, though, that “The only way we can afford our housing is through short-term vacation rentals. … So from our perspective, you know, this industry makes housing affordable for local families.”

Montgomery said the effort “appears to be a solution in search of a problem” and emphasized that lawmakers should instead be looking for ways to reduce the red tape that prevents affordable housing from being built in the first place.

TRANSCRIPT

1-31-23 Joshua Montgomery with Keli‘i Akina on “Hawaii Together”

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

Today, my guest is Josh Montgomery. Josh lives on the Big Island, and he operates Guard Well Farm, where his family grows world-class coffee.

 He’s also a founding member of the Ohana Aina Association. That’s an organization of advocates for homestays, farm stays and transient rentals on Hawaii island.

Josh is going to join me in a moment to discuss the current state of short-term rentals on Hawaii island. There are a lot of members now on the Hawaii County Council that are starting to look at a law possibly regulating short-term rentals, and many in the community are concerned about that law. I’m going to ask Josh to talk about that in a moment.

Akina: Josh, I’m so glad that you’re able to join me today and just appreciate the work that you’re doing in the community. Welcome to the program.

Joshua Montgomery: Thank you. I’m very happy to be here and happy to be representing the Big Island and talking about this issue.

Akina: Tell me just a little bit about yourself, at least so that our viewers know who you are and what you do, and why in particular you’re interested in short-term rentals.

Montgomery: Sure. So I’m a recently retired Air Force officer. I wrapped up 12 years in the Air Guard with the 291st out of Hilo, Hawaii. And prior to — during my career in the Guard, I’m also an entrepreneur. 

I founded an internet service provider in 2006, and then founded a company called Mycroft AI that builds an open alternative to Siri or Alexa or Google Assistant, in 2015, and we moved here to the Big Island in 2019 to start a coffee farm and have our kids attend high schools in one of the safest counties in the United States. So …

Akina: You’re quite an entrepreneur and a member of our community here in Hawaii. Now, tell me a little bit about what led you into getting involved as an activist with regard to short-term rental issues.

Montgomery: Sure. So when we moved to the Big Island, we bought a small farm — five acres — and in order to make it sustainable from the standpoint of being able to make the mortgage and to afford to live in one of the most expensive markets in the United States, we took the home and divided it in half. 

So half of our home is a vacation rental, which we have guests in on a regular basis, and then we live in the other half of the home. And really that’s the only way that our home is economically sustainable.

And, you know, we’re one of more than 7,000 families here on the Big Island that are in some sort of similar situation — that make ends meet by renting a room or renting a portion of their home or renting an ohana [housing unit] to visitors to the island.

Akina: Now, that’s very interesting because sometimes short-term rental is portrayed as being driven by an industry and corporations. But what you’re talking about — in your own case as well as many others on the Big Island — is that this is something where local residents are able to have a means simply to make ends meet. Is that right?

Montgomery: Very much so. The big platforms like Vrbo and Airbnb are about customer discovery, right? They’re the platforms that help to connect families that are renting a home with visitors who want to stay there, but they’re not really what’s behind the success of the industry. 

You know, they do mark up the nightly rate, but a vast majority of the money that guests pay to come and stay in our homes goes to us and goes to the taxpayers. In fact, the taxpayers of Hawaii take home more money every night that my home is rented than Airbnb and Vrbo do.

Akina: I see. Now, right now the Hawaii County Council is considering some additional regulations on short-term rentals. 

Can you explain to us what those proposals are and what kind of impact they might have?

Montgomery: Sure. So, Hawaii County passed an ordinance in 2018 that regulated absentee short-term vacation rentals. 

So you could think of, you know, a rich person from the mainland who bought a home and wants to use it as an STVR 50 weeks a year and then only comes for two weeks a year. That type of activity has been regulated for nearly five years now. 

The new ordinance that they’re proposing is targeted at people like me and my family and, you know, many of our friends — folks who rent a portion of their own home to visitors in order to make ends meet. So it’s a very different part of the market. 

You know, in our case, because it’s a farm, the STVR plays a number of different roles. But one those is agricultural, right? Is that we run a coffee farm, and each time we have a guest come and stay, we provide them with a free sample of our coffee. 

And as you know, Kona coffee is the best coffee in the world according to many, many, many folks. And so they buy a pound when they’re here, and then many of them subscribe for a monthly shipment of coffee going forward. 

And so that vacation rental is, for us, a sales channel for our crop, right? It’s a revenue source that helps to make our farms sustainable. And then, of course, it’s providing a service for guests who’ve come to expect a different experience when they come and visit places like Hawaii.

You know, many folks no longer want that upscale hotel experience — they want to stay in a home that has a kitchen and has a little bit more privacy, that’s maybe a little bit more affordable, and we’re providing that service for visitors to the island.

Akina: Now, in its consideration of additional regulations, the County Council is relying on a distinction between hosted rentals and un-hosted rentals. Could you explain a little bit about that?

Montgomery: Yeah, so, the un-hosted rentals are already regulated — so that’s where there’s an absentee owner. 

What they’re targeting now is folks who live in that home or folks who might have a second home where they rent a portion of it to a family long-term, and they have short-term guests also on that same property.

And they’ve kind of justified the additional regulation by making the case that they’d had a bunch of complaints about, you know, the behavior of visitors in our communities. 

And the thing is, with hosted rentals visitors have a tendency to behave, you know, within the community standards, right? Because your host is staying on the site. 

And we know that because after they started discussing this ordinance, they actually gave us data on how many complaints they’ve had. And for hosted vacation rentals here on the Big Island, they had 65 complaints last year, and there were 1.69 million rental nights in that same year. 

So their complaint rate was .000062%. And yet, that’s a reason that they’ve given for regulating our businesses here on the Big Island.

And there’s a host of other issues like that have kind of come up during this process. As, unlike the absentee owners who aren’t really here and part of the community, you know, we as hosted rental operators have been able to organize and start to tell our story. You know, for many of us, this is our livelihood.

Akina: Well, that’s fascinating — those statistics. It seems as though for hosted rentals, the complaint rate is exceedingly low. And as you point out, the host lives right there on the property so that the values and the standards of the community can readily be enforced and monitored. 

And aren’t there laws already regarding noise and illegal parking and trash and so forth that could be enforced?

Montgomery: Yeah. For the rare instance where there’s a problem property, the county and the local government already have tools in place. And as I said, they already passed an ordinance in 2018 regulating un-hosted rentals. 

You know, as far as I know, they haven’t even fulfilled the enforcement positions for the first round. And so they still have open positions, you know, to enforce the rules for their existing legislation. 

And the other big thing that really has kind of come up is that the justification for the law — you know, the justification for making these changes and targeting our families — has been affordable housing. You know, the idea that if we’re hosting a visitor for a night, that that’s a long-term unit that could be used to house a local family. 

And yet, you know, that was the same justification for the law that they passed in 2018 for short-term vacation rentals. And if you look at the last five years, it’s not as though that that legislation in any way increased the affordable housing stock in our community. 

And so, you know, between the complaints and the affordable housing issue, we’re really struggling as a community to understand why this legislation is being brought to the fore. Like, what is the problem that they’re looking to solve? 

You know, people, as a result of the regulations that are being put in place — so they’re going to require you to prove that all improvements to your home are permitted, they’re going to require floor plans, they’re going to require parking plans, they’re requiring all these additional requirements despite the fact that they haven’t had any complaints — and because of that, many people aren’t going to be able to jump through the hoops or, you know, people may have purchased a home that had unpermitted improvements before they bought it and might not be able to get all their paperwork in order. 

Those people are going to lose their livelihoods. And in some cases, you know, those folks are going to lose their homes, right? And so that’s a very significant impact. 

And so if the government is going to impact families in that way, they really need a strong justification for why they’re going to put those laws in place. 

You know, when I joined the Air Force, I wrote a check to the federal government for an amount up to and including my life. It was a blank check, right? Because the purpose that the Air Force serves is very, very important; and for me, I was willing to make those sacrifices to fulfill the government’s purpose. 

In this case, the government is making the case that families should be making sacrifices in terms of their livelihoods and, you know, having to jump through all these hoops and hire lawyers and all these other things. But to what end? Like, what is the public purpose that’s serving? 

And I think that’s where we’re really struggling as a community to understand what’s going on here in the Big Island.

Akina: Well, you did mention housing and pointed out that short-term vacation rentals, at least hosted ones, don’t seem to have much of a negative impact upon locals being able to get housing. 

So what do you think is really driving this clampdown that is going to increase regulations?

Montgomery: I don’t want to put words in the mouth of the elected officials. I really don’t know what’s driving them. 

You know, my conversations with them have led me to believe that they have the best of intentions. But as we know, the road to hell is paved with good intentions, right? 

You know, I think that maybe they do believe that it impacts affordable housing. And, you know, one of the things that we’ve asked them to do — and just recently, actually last week, we volunteered to pay $10,000 to this end — was to actually go conduct a study and see what the effects are. 

Because in our case, the only way we can afford our housing is through short-term vacation rentals.So that’s an enabler of our affordable housing, and I know of thousands of other families that are enabled to live here because of the revenue driven from this industry. 

So from our perspective, you know, this industry drives affordable housing, it makes housing affordable for local families. 

You know, the flip side of the coin is people looking at that and saying, “Oh, that ohana could be long-term housing.” 

Now, that discounts the fact that many, many, many of these properties are in no way appropriate for long-term housing. They don’t have kitchens, they don’t have adequate storage, they don’t have — I mean, they’re just not suited for long-term housing. 

But setting that aside, you know there could be …

Akina: Wait.

Montgomery: Go ahead.

Akina: Let me just interject this and then let you continue.

Montgomery: Sure.

Akina: And if we’re talking about hosted dwellings, then indeed they may not be suitable for long-term rental because they may not be set up for multiple families. Is that right?

Montgomery: Exactly. Exactly. And the county — you know, both here and in Honolulu County — [has] taken extraordinary steps to keep people from putting in second kitchens and keep people from increasing the density of their housing. 

And so, in many cases, the houses just aren’t suitable for long-term housing. 

But the thing is is that before I build a home on the Big Island of Hawaii, I have to go and do studies. I have to do environmental studies, I have to do archeological studies. You know, if you’re building a larger development, you have to do traffic studies and utility studies, right? You as a taxpayer, as an entrepreneur, are required to jump through all of these hoops to prove that you’re not going to have a negative impact on the local community. 

You know, local government in this case has taken none of those steps. They haven’t done an independent study of, you know, does it enable affordable housing or does it prevent it, right? Well, we don’t know because nobody’s done their homework. And they haven’t done the studies based on the outcome of the 2018 law, and yet they’re proposing additional regulation today. 

And so what we’ve asked them to do is to go out and commission a study. The Ohana Aina Association has committed a $10,000 in matching funds to help to fund that study so that the county can go out and actually do homework and do research and find an academic and have it peer-reviewed to determine what the impact actually is going to be before we take steps as a community to impose regulation and additional hoops that are, I 100% guarantee, going to affect at least one family’s livelihood and are going to cost at least one family home.

You know, county government, a lot of times they look at regulation and they say, “Oh, it’s just a small thing,” right? “You just have to go and get your safety inspection,” right? Or, “You just have to, you know, submit this form to this guy,” or “You just have to jump through this small hoop — it’s not a big deal,” right? 

But the thing is — when you’re working two jobs and you’ve got a kid who’s in school and you’re taking care of your elder parent who might be suffering from dementia, right? And you’re dealing with a car that broke down and you’re trying to, you know, do maintenance on your home — that one little additional hoop that the government’s asking you to jump through can be the straw that breaks the camel’s back.

You just can’t do it, right? And so the county asking folks to prove that they have permits for every improvement to their home, to provide floor plans for their home, to provide parking plans, you know, for — and these are businesses that are already completely legal and are already in operation for which they’ve had no complaints, right?  — is just adding a little bit more burden.

And I guarantee you, of the 7,500 families here that depend on this income to make ends meet, some of them — because of these hoops — are not going to be able to move forward. It’s going to impact their livelihoods and their quality of life. 

So we need a really compelling reason as a community to implement those regulations, and I just haven’t seen those compelling reasons.

Akina: What do members of the community say? Are people up in arms against short-term vacation rentals? Or do you have support out there in the general community for hosted short-term vacation rentals?

Montgomery: So, for hosted rentals, you know, people really don’t care. I mean, everybody knows somebody on this island that depends on that revenue to make ends meet. Everyone knows. 

And as long as they’re not impacting the local neighborhood, it’s not really an issue. And as we’ve shown from the complaint numbers, here on Hawaii Island, it’s not an issue. 

This appears to be a solution in search of a problem, in our case. And, you know, to the credit of the officials involved, right? they started this process by presenting the legislation before they introduced it, by seeking community feedback, by holding information sessions. You know, they’ve been really good. And as near as I can tell, and I believe this strongly, they’re operating with integrity and honesty. 

And so, hopefully, they listen to the feedback that they’re getting from the community, take a step back, conduct the same types of studies that they would expect from us if we were going to make a change to our community, and then based on the data and the real-world information that they generate, develop public policy that serves the interests of the broader community instead of just waving our hands over our head and saying “Affordable housing!” Like, “How do we solve it?”

Well, you know, if they’re really looking for a solution, the solution to not building enough housing — and I know that this is stunning, right? — the solution to not building enough housing is: Build more housing. Pretty straightforward solution. 

And there are tons of contractors and builders out there that would love to build additional housing — at a significant profit to themselves — if the county would just get out of their way from a permitting and a studies and a regulatory perspective. 

And that’s not just me saying that, that’s the data saying that. There is one major city globally — one major city, globally — that over the last 25 years has kept housing stock in line with housing demand, and that’s Tokyo. 

And they did it by implementing by-right permitting, where if the property is zoned to multi-family, you can build multi-family, and you don’t have to jump through five commissions and four neighborhood feedback sessions and all of these other hoops. If it’s zoned for it, you can build it. And as a result their housing stock is kept up, their housing costs have stayed steady, and they’re one of the only major cities globally that’s been able to do it. 

Why don’t we learn lessons from our neighbors in Tokyo and build adequate housing instead of trying to take housing from families who depend on it for their livelihood, you know, and sacrifice it on the altar of affordability.

Akina: Josh, you’re certainly on the same page as the Grassroot Institute, which has studied and publicized the Tokyo model, as well as the fact that really, on the Big Island where you live, less than 3% of all the landmass is devoted to any kind of development or housing whatsoever. 

The vast majority of the land mass on your island is simply undeveloped whatsoever. Not that all of it is readily available for housing, but you certainly have enough land. So it’s not the supply of land that’s the problem. It’s exactly what you pointed out earlier: the level of government regulation, which is indeed exceedingly high in Hawaii County when compared to counties across the nation.

Montgomery: Yep. And that’s why Hawaii County is dead last — dead last, like, last — of all counties in the entire country in housing starts, right? Dead last. 

You know, when a developer has to wait two years to get a permit, he’s going to take his money and make money elsewhere, right? 

And, you know, the — it always fascinates me as we have these discussions about affordable housing. You know, when I want to regulate the auto industry, for example, you know, and you want to make cars safer and get more mileage and reduce, you know, carbon pollution and all these other things, one of the first people you would call would be an automaker, right?

And you’d pull all the automakers in, and you’d have a conversation, and you’d figure out a way to make things work, right? And, you know, in the case of the auto industry, they settled on a subsidy, right? A $7,000 per vehicle subsidy to help them to convert to electricity. 

You know, when it comes to affordable housing, the people who really need to be forefront are the builders. And when you talk to builders, you just go talk to, like, pick up the phone book and just start calling builders and ask them, like, why aren’t you building more housing? One-hundred percent of them will come back and say regulation. I mean, it’s regulation, you know? And … yeah?

Akina: So to blame short-term vacation rentals for the housing crisis on the Big Island is really looking for a scapegoat rather than actually dealing with the real causes of the shortage of housing, and so…

Montgomery: Very much so. 

Akina: Right.

Montgomery: And when doctors — and I wrote an open letter to the county commission last week, you know, offering $10,000 for a study and, you know, one of the points I made is that when doctors take their oath, you know, they make a commitment to first do no harm, right? 

Like, you know, they’re experts, and they have the patient’s best interests in mind. But at the end of the day, before they do anything else, the goal is to not hurt the patient, right? 

And it should be the same for legislation. Like, when we look at legislation, you know, yes, you know, regulation does have a place, right? And, you know, I wouldn’t want to live in a community that had no regulations about anything. Like, you know, anarchy is — you want anarchy? Like, go live in Somalia. 

But, you know, as we implement new laws, we need to look at it and say, “Who’s going to be harmed by this? What are the unintended consequences of this?” You know, “Should we do anything at all, right, if it’s going to hurt people, unless we have a really compelling reason?” 

And, you know, in this case, there just isn’t.

Akina: As you go around the community and as you tell the story of what’s going on right now, what are you letting people know about what they can do in order to change the minds of their public officials?

Montgomery: Yeah, so, we’re doing a couple of different things. 

We’ve got people writing emails and letters. 

We’ve had some of our community members who will really be impacted — I mean, one of the big constituencies that’ll be impacted by this is retirees. There’s a whole group of retirees who bought property here on the Big Island that might have an ohana []unit[ or a guest house that they count on that guest house income for their livelihood. Like, this is their retirement plan. 

And if the county makes that illegal, many of these people don’t know what they’re going to do. Like, they just don’t have a, there is — when you’re 75 or 80 years old, there is no starting over, right? And those people are really in a bad place. 

So we’ve had them recording testimonials, and we’ve created some videos just really telling the story of the people that this will impact. 

And then, you know, we’ve encouraged Heather and Ashley — Heather Kimball and Ashley Kierkiewicz — to host listening sessions. And so, you know, I believe over the next several weeks, they’re going to actually be hosting some listening sessions around the islands that we’re going to facilitate so that they really can hear feedback from their constituents.

And I’m hopeful that they listen, right? And everything I’ve seen as I’ve been speaking to them indicates that they will and, you know, withdraw this. Or we’ve actually proposed an alternative bill that walks back a lot of these regulatory hoops and simply is a registration where you register and say, “I’m running a vacation rental at this address. If there are any issues, you know, this is who you call,” and you pay a small fee every year. Like, something like that, we’d be very supportive of. 

It’s the stuff that involves a planning department that’s already two years behind on permits, you know, and makes all of it contingent on the opinion of an unelected bureaucrat — those are the pieces that we’re really concerned about and we’ve asked them to take out. 

So we’re trying to tell our story, we’re trying to get the word out, and we’re trying to get folks to really communicate to the County  Council exactly how this will impact their lives.

Akina: That sounds great, and I want to thank you for all that you’re doing. 

If any of our viewers would like to get a hold of you or Ohana Aina Association, how can they do that?

Montgomery: Sure thing. They can visit us at ohanaainaassociation.com, just do a little bit of Google. Join our group. You know, we’re an advocacy group for everybody who’s running vacation rentals on the island, whether they’re hosted or un-hosted. 

Our goal is to help tell the stories of the families that own and operate these and the employees who work for them. You know, our organization is rooted in the concepts of honesty and integrity and transparency are our core values.

You know, either they can join the group if they have a vacation rental and they want to have somebody out there speaking for them or just register on our contact list and make sure that they’re getting updates about the legislation. We’d love to hear more from them.

Akina: Well, Josh, I want to thank you for being on the program today — appreciate all that you’re doing and wish you the very best. 

And, viewers, do get a hold of Josh and the Ohana Aina association. They’re doing good work. 

And until next time, I’m Keliʻi Akina on “Hawaii Together” on ThinkTech Hawaii broadcast network. We’ll see you again, aloha.