Hawai‘i Home-Sharing Crackdown Could Devastate Oahu Economy

August 8, 2019
By Christina Sandefur

Earlier this year, we blogged about homeowners on the Big Island of Hawai‘i who face tens of thousands of dollars in fines for peacefully offering their homes as short-term rentals outside of a city-designated “resort zones.” Now, homeowners on the neighboring island of Oahu can expect the same thanks to Bill 89, which cracks down on home-sharing across the island (even in so-called resort zones).

As of August 1, Honolulu home-sharers are no longer able to advertise short-term rentals of fewer than 30 days without incurring significant fines. And starting in October 2020, the city will allow 1,700 short-term rentals in designated areas, but homeowners will have to vie for a spot via a government lottery, and they’ll be required to live on the property in order to rent. Anyone else wishing to rent their home to short-term guests will be out of luck—and the consequences could be devastating to the island’s economy. The Oahu Alternative Lodging Association estimates Bill 89 will cause a loss of between 50,000 and 80,000 visitors per month.

Thousands of Honolulu homeowners have already received enforcement letters from the city, threatening them with fines of up to $10,000 a day. Hundreds of homeowners who received letters say they’ve never even rented their homes—but they might have to spend considerable time and resources trying to prove it.

With so much at stake, Bill 89 is likely to incite protracted litigation. Indeed, an association of homeowners has already filed a lawsuit, with a preliminary hearing scheduled for August 15. More litigation could be on the horizon. After all, the Hawai‘i Constitution protects people from excessive fines. For the many homeowners who have rented responsibly for years, it’s difficult to characterize tens of thousands of dollars in fines as anything other than “excessive.”

Rather than express concern about Bill 89’s threat to the island’s economy and homeowners’ rights, the Director of the city’s Department of Planning and Permitting says she’s “excited” about this “new era of enforcement.” The city claims that in the past, many short-term rentals operated illegally, and they’re hoping these new penalties—which they admit are “heavy” and “draconian”—will discourage people from exercising their property rights.

But enforcing a ban on home-sharing consistently and fairly is practically impossible. That’s because it’s hard to tell whether someone’s breaking the law unless they cause an actual nuisance. Indeed, officials have resorted to cutting across public beaches, climbing over closed gates, and even entering private yards and homes without search warrants or the owners’ permission, in order to “investigate” whether a home is being rented in violation of the ordinance. But this raises the question: If government has to spy on a person in order to determine whether they’re breaking the law against short-term rentals, where’s the harm? Whether a person rents a home for one year, two months, two years, or for just a few days, that does not make the use any less legitimate or “residential.” The relevant question should not be whether an owner is renting her home on a short- or long-term basis, but whether the owner or tenants are causing nuisances.

Honolulu officials can protect property rights, embrace economic opportunity, and regulate effectively if they focus on eliminating noise, traffic, and pollution, regardless of whether those problems are caused by an overnight guest or the homeowner himself. But so long as the city enforces unenforceable bans, it can expect economic downturns, frustrated homeowners, and a litany of lawsuits.

Christina Sandefur is the Executive Vice President at the Goldwater Institute.