Hawaii home rentals ruled exempt from 90-day change

Jan. 1—U.S. District Judge Derrick Watson's order keeps the city from enforcing or implementing Ordinance 22-7, which essentially prohibits home rentals for anything less than 90 days.

A U.S. District Court judge has issued a summary judgement granting the Hawaii Legal Short-Term Rental Alliance a permanent injunction that carves existing home rental owners out of a provision in a city law that sought to increase the minimum rental period for residential properties on Oahu to 90 days from 30 days.

U.S. District Judge Derrick Watson's Dec. 21 order keeps the city from enforcing or implementing Ordinance 22-7, which essentially prohibits home rentals for anything less than 90 days. For property owners who were adhering to the legal 30-day minimum, the increase would curtail their existing ability to rent for anywhere from 30 to 89 days. Those who rent their homes for less than 30 consecutive days are considered short-term rental owners and are subject to different city regulations from the existing home rental owners covered in Watson's order.

Watson's order enjoins the city from enforcing or implementing Ordinance 22-7 insofar "as it prohibits 30-89 day home rentals lawfully in existence at its effective date, or the advertisement of such rentals, in any district on Oahu."

HILSTRA, a nonprofit statewide advocacy group for professional short-term rental managers, had argued that Ordinance 22-7, formerly Bill 41, caused "immediate and devastating " effects for property owners and operators who had purchased and legally rented their properties, because they would no longer be able to rent their homes during the 30-to 89-day window they previously enjoyed.

HILSTRA, which had filed a lawsuit in federal court in June 2022, requested that the court invalidate the entirety of Ordinance 22-7, which was signed into law April 26, 2022.

Prior to Ordinance 22-7's effective date of Oct. 23, 2022, Watson also had issued a broader temporary injunction that enjoined the city from enforcing or implementing Ordinance 22-7 insofar "as it prohibits 30-89-day home rentals, or the advertisement of such rentals, in any district on Oahu, pending further order from this Court."

Watson found HILSTRA's request overly broad, and chose to limit the scope of the permanent injunction. Still, some of the earlier reasoning that formed the basis for his preliminary injunction stood.

Watson's order explained, "Specifically, as the city has not pointed to any intervening changes in the facts or law that would alter the bases for this court's October 2022 grant of a preliminary injunction, the court finds that Ordinance 22-7 is preempted by HRS §46-4 (a )."

HRS §46-4 (a ), which was enacted by the state Legislature in 1957, endows the counties with the authority to promulgate zoning ordinances.

Watson's order said, "There is nothing to suggest that HRS §46-4 (a ) does not mean exactly what it says—that a county is barred from passing any law that would eliminate existing lawful residential uses."

It's unclear the impact that this latest legal action will have on the city's ability to effectively enforce against vacation rental owners who are not following city rules. At the time of the preliminary injunction, Honolulu Mayor Rick Blangiardi had expressed disappointment that the court did not recognize the importance of the 30-to 89-day restriction in curbing rampant illegal rental activity.

Various concerns about short-term rentals have been raised over the years by tourism industry groups like the American Hotel &Lodging Association, Hawaii Tourism Authority, Hawaii Hotel Alliance and Hawaii Lodging &Tourism Association as well as community groups like Hawaii's Thousand Friends, Save Oahu's Neighborhoods, Keep It Kailua, Save North Shore Neighborhoods and Hi Good Neighbor.

The impetus for Ordinance 22-7 came largely from complaints that the proliferation of illegal short-term rentals is changing the face of residential neighborhoods. They have been blamed for everything from making it difficult to manage visitor arrivals to overcrowded streets, increased traffic, insufficient parking, degradation of cultural and natural resources, and reducing the availability of long-term rentals for local residents.

But it's complicated. Vacation rentals also provide income and jobs for local people. They support neighborhood businesses, especially small ones.

They provide flexible lodging options for service members, traveling medical professionals, local residents who need to transition between homes or who have been displaced by disasters, and support a person's ability to travel as they prefer. Some studies suggest that visitors who stay in vacation rentals would be unlikely to visit if that lodging option were removed.

HILSTRA, Airbnb and Expedia did not respond immediately to the Honolulu Star-Advertiser's requests for comment.

City spokesperson Scott Humber said in an email to the Star-Advertiser, "The city is evaluating the court's ruling and its legal options. At this time, the city has not decided whether it will appeal the court's decision."

Humber said the city is analyzing the court's ruling ; however, it understands "that the permanent injunction prohibits the city from enforcing the 30 to 89 day rental restriction in Ordinance 22-7 against lawfully-established 30-89 day rental operations that existed prior to the effective date of Ordinance 22-7."

Moreover, he added, "Neither the Court's order nor the Land Use Ordinance require permits or registration for nonconforming 30-89 day rentals."

Humber said the city has not enforced the restriction against 30-to 89-day rentals outlined in Ordinance 22-7, because the court entered "a preliminary injunction that prohibited the city from enforcing its restriction."

However, he said the city has "enforced all other portions of Ordinance 22-7, including the vacation rental registration and advertising requirements."

To be sure, the city said that since Ordinance 22-7 took effect Oct. 24, 2022, the city Department of Planning and Permitting's Short-Term Rental Enforcement Branch has issued 1, 022 notices of violation. DPP advanced 246 of these to notices of order, which are subject to further enforcement.

The city added that it also has been adding enforcement tools, including increasing STREB to a five-person branch and implementing a process to send violators to collections.

"Prior to Dec. 1, 2023, the branch consisted of just the branch chief and one investigator, so our ability to enforce the short-term rental ordinance has improved significantly, " a city spokesperson said.

The city said 29 STRs that owed money to the city have been referred for collections to the Aargon Agency. The total of the referred debt is $4.64 million, with the amount per STR ranging from $2, 000 to $2.2 million. So far, Aargon Agency has recovered $14, 514 on four accounts.

Moreover, the city said it is evaluating proposals for a new STR portal that will assist with compliance and enforcement as well as registration and renewal applications for legal short-term rental operators.

Kathleen Pahinui, head of Save North Shore Neighborhoods, told the Star-Advertiser on Sunday that she hopes the city will appeal Watkins' ruling as the permanent injunction potentially adds another complication to enforcement.

"It would have been better to say that no one gets grandfathered in. They are pulling a class of people out, so that makes it harder for DPP to enforce, " she said. "They are going to have to vet all the owners very carefully who say that they were doing it before."

Larry Bartley, executive director of Save Oahu's Neighborhoods, told the Star-Advertiser on Sunday that he hopes the city establishes clear criteria in this instance as it did back in 1989 when short-term rental owners had to use records to prove that they had previously been operating.

But Hector Trapani, an Oahu resident who tracks illegal STR operators and reports them to the city, told the Star-Advertiser on Sunday that the city does not need a 90-day minimum stay for effective enforcement. Rather, he said the city needs to continue staffing up the STREB and to exhibit "a willingness to put their foot down, " especially against egregious habitual violators.

Trapani said setting rules and threatening enforcement works to curb illicit behavior in a majority of instances. He noted that about 400 of the 700 or so illegal vacation rentals on Oahu that he has followed over the years have folded.

Vacation rental supply on Oahu in November had dropped 11.6 % since November 2019, according to the Hawaii Vacation Rental Performance Report for November released Dec. 26 by the state Department of Business, Economic Development and Tourism.

"The majority of people, when they get visited by an inspector, they pull out, " Trapani said. "However, there's a group of people that keep going and going. It's a lot of money and they don't stop."

Humber said, "Mr. Trapani is a valuable resource in our enforcement of illegal short-term rentals. We investigate as many of his referrals as possible."

However, Trapani expressed disappointment that the city has not made greater progress on a list of the 40 worst illegal rentals in metro Oahu that he compiled and shared. He said most were advertising large family-size rentals for short-term us, and were undeterred by city enforcement measures.

"They are in places like Kaimuki, Kalihi, Niu Valley—places where there's not even a beach nearby, " Trapani said. "It's places like these that caused my daughter to have so much difficulty finding a three-bedroom rental for her family."

He said many of these operators advertise only on weekends and holidays in an effort to avoid detection by city inspectors.

"There has to be more enforcement, and there have to be better consequences, " Trapani said. "There's a guy in Kaimuki that has 12 (illegal ) listings and even rents cars. It's like a travel agency right in the middle of Kaimuki. It's egregious."