Study STR economic impact before advancing Bill 121

by Grassroot Institute of Hawaii, April 11, 2024

The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the Hawaii County Leeward Planning Commission on April 18, 2024.
___________

April 18, 2024, 9:30 a.m.
West Hawaii Civic Center, Council Chambers

To: Hawaii County Leeward Planning Commission
      Barbara DeFranco, Chair     

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

RE: Agenda item no. 7 — Bill 121

Aloha Chair DeFranco and other members of the Commission,

The Grassroot Institute of Hawaii would like to offer its comments in opposition to the proposed draft of 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.

We are concerned about the effect that this measure might have on existing STR operators, small businesses and the broader Hawaii Island economy.

Regarding its potential effect on the broader Hawaii Island economy, 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.

The study did not look at Hawaii Island specifically, but 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 rentals 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 indicates that many existing STR hosts — who maybe rent out a room or a second unit on their properties — 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.

Because no economic impact study has been conducted for STRs in Hawaii County, we would encourage the Commission to request the County Council conduct such a review before moving this legislation forward.

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 be unconstitutional.

Both the state and federal constitutions bar excessive fines, and the U.S. 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.

Should this bill move forward, we would urge the Commission to remove the language from the sections governing owner-hosted and operator-hosted STRs that dictate where the owners or operators can sleep.

The current draft would prohibit the property owners or STR operators from sleeping in a detached bedroom or a guesthouse. This provision would likely be hard to enforce and would not be necessary if the owners or operators were residing on the same lots as the STRs.

Thank you for the opportunity to testify.

Joe Kent
Executive vice president
Grassroot Institute of Hawaii
_____________

[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] 586 U.S. ___ (2019). 139 S. Ct. 682.
[5] 598 U.S. 631 (2023).