Bill 121: Proposed STR regulations pose threat to Hawaii Island economy

from Grassroot Institute of Hawaii

The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the Hawaii County Council Policy Committee on Planning, Land Use and Development on Jan. 23, 2024.
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Jan. 23, 2024, 1 p.m.

To: Ashley Kierkiewicz, Chair
     Holeka Inaba, Vice-Chair
     Hawaii County Council, Policy Committee on Planning, Land Use and Development

From: Joe Kent, Executive vice president
           Grassroot Institute of Hawaii

RE: BILL 121 — RELATING TO TRANSIENT ACCOMMODATION RENTALS AND HOSTING PLATFORMS

Comments only

Aloha Chair Kierkiewicz, Vice-Chair Inaba and Councilmembers,

Thank you for considering Bill 121, which would replace the existing regulations on short-term rentals with a new set of regulations covering owner-hosted, operator-hosted and unhosted STRs.

The Grassroot Institute of Hawaii is concerned about the effect that this measure might have on housing costs for existing STR operators, small businesses and the broader Hawaii Island economy.

On the last point, a 2020 study commissioned by the Hawaii Tourism Authority discovered that STRs are generally less expensive than hotels and that “30% respondents reported that if there was not a home and vacation rental option during their recent stay in Hawaii, they would not have made the trip.”[1]

Thus, these regulations could have a cascading effect, causing damage to other tourist-focused businesses, such as car rental agencies, restaurants and tour operators, as well grocery and other retail outlets and workers employed in cleaning, repairing and maintaining the STR units.

While the study did not look at Hawaii Island specifically, it did find that STRs added $6 billion to the state’s economy and sustained 46,000 jobs.[2]

The HTA study also surveyed the people statewide who own short-term rental and found that “70% of residents who indicated that they make their living unit available for home and vacation rentals report that they do so to either make incremental income or meet housing gaps (40% and 30%, respectively).”

Further: “Responses in 2019 track with reasons and proportions provided by respondents in 2016, where 60% of respondents indicated that they make their living unit available for home and vacation rentals to subsidize housing costs. The increased proportion can be partly explained by the ongoing rise in housing costs in Hawaii.”[3]

This statement is likely true for Hawaii Island especially, since the County has imposed strict operating standards on unhosted STR units since 2018. This indicates that many existing STR hosts — who maybe rent out a room or a second unit on their property — use their STR income to afford Hawaii’s high cost of housing. These existing hosted STRs also offer everyday folks the opportunity to participate in Hawaii’s tourism economy and build wealth for their families.

We are also concerned about the steep fines to be charged to those who violate the new law, as a $10,000 per day fine could quickly add up to an unpayable amount — and even result in the loss of property itself. Not only would such a fine be excessively harsh, but it could also be unconstitutional.

Both the state and federal constitutions bar excessive fines, and the Supreme Court’s decision in Timbs v. Indiana[4] establishes that the federal excessive fines clause applies to state and municipal actions as well.

Recent cases, such as Tyler v. Hennepin County,[5] indicate that courts are increasingly prepared to strike down aggressive state action that impairs individual property rights. Thus, we suggest that the penalties associated with noncompliance be reconsidered and restructured.

Thank you for the opportunity to testify.

Joe Kent
Executive vice president
Grassroot Institute of Hawaii
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[1] “Hawaii’s Home and Vacation Rental Market: Impact and Outlook,” prepared for the Hawaii Tourism Authority by JLL’s Hotels & Hospitality Group, April 20, 2020, p. 10.
[2] Ibid, p. 4.
[3] “Hawaii’s Home and Vacation Rental Market: Impact and Outlook,” prepared for the Hawaii Tourism Authority by JLL’s Hotels & Hospitality Group, April 20, 2020, p. 16.
[4] “Timbs v. Indiana,” Supreme Court of the United States, Feb. 20, 2019.
[5] “Tyler v. Hennepin County, Minnesota, et al.” Supreme Court of the United States, May 25, 2023.