Bill 41 passes the final city council hearing 8-1. The bill is headed to Mayor Rick Blangiardi’s desk despite a strong opposition from the public and the Honolulu Board of Realtors. What is Bill 41? What should we expect moving forward? What does this mean to you? How will this impact the real estate market on Oahu? What can we do now? Let’s start off with breaking down the bill and what each side had to say during the hearing.
Bill 41
To summarize, Bill 41 increases the minimum short-term rental period in Honolulu from 30 days to 90 days. Additionally, all properties EXCEPT those in resort zones with a special exception for Waikiki Banyan and Waikiki Sunset, will be subject to registration fees and restrictions. Restrictions include insurance requirements and parking regulations for guests. Lastly, it will prohibit any UNREGISTERED Short Term Rentals (STRs) from advertising nightly rates. The bill will take effect 180 days after it is signed, (around October).
Against:
As you can imagine the proposal of this Bill has caused quite an upset in the Real Estate and short-term rental community. Thousands of community members and small business owners, myself included, have submitted testimonies against Bill 41. There are countless reasons people are in opposition but here are the TOP 4.
First and foremost, this bill is a violation of property rights and could violate landlord-tenant code. Best stated from Honolulu Board of Realtor’s written testimony: “After undergoing a legal analysis of this bill, HBR is concerned with the retrospective laws and vested rights of owners whose properties were purchased before Bill 41. The passage of this bill will leave the City open to many lawsuits from owners who purchased or had their properties prior to Bill 41 being enacted. These individuals were able to rent their homes for 30 days or more and with Bill 41, they will no longer be able to do that, which represents a “taking” of their rights.” It arguably also creates a privileged class for the hotels who are not subject to the same registration fees and regulations.
Secondly, it reduces short-term housing options for a large population on Oahu. This includes professional surfers, traveling nurses, transient workers as well as those who are simply in between a move and need a shorter rental period. As you can see none of these are vacationing. This bill fails to distinguish between vacation rentals and short-term rentals and also paints all tourists as bad people when in fact, a majority of travelers on Oahu are upstanding citizens contributing to the economy.
Third, Ordinance 19-18 which was implemented in 2019 in effort to curb illegal STRs on Oahu was never enforced or given the proper attention that it deserved. The administrative rules to empower DPP to implement the Ordinance were never finalized or put into effect. The administration should direct its efforts to implement Ordinance 19-18 and allow it time to show its effectiveness before adopting a completely new ordinance for short-term rentals. If the true goal of both of these bills is to curb illegal STRs then increasing the minimum rental time does nothing to address the real issue at hand.
Lastly, Bill 41 takes away from the locals’ ability to benefit from tourism, while instead putting large mainland companies at an extreme advantage. Listening to the last 3 hearings we heard countless stories of local people who actually depend on rental income to help with their mortgages and the increasing cost of living here in Hawaii for their families. This bill is taking away a livelihood that locals count on, and eliminates the stimulation of the economy where these rentals are allowed.
For:
Those for Bill 41 are mostly among “Save Oahu’s Neighborhoods” and the “Hawaii Tourism Authority”. Those for Bill 41 argue to keep our neighborhoods local to decrease tourism in smaller communities that are not resort zoned. The main argument here is to help manage the housing crisis and keep rising costs down. A Nobel endeavor, as it is widely known that we are in a period of historically low inventory. But they also argue that STRs create a nuisance for community members and that tourists do not belong in our neighborhoods. This is is a very controversial stance. Many were surprised when DPPs head of planning stepped away from Bill 41 due to ethical concerns.
As I see it:
This is not a black and white issue. Stereotyping investors and tourists and categorizing them as ALL bad is an oversimplification of a much larger issue. Ultimately, on both sides of this bill are people who are FOR the locals and its economy. Most people believe that it is important for Hawaii residents to have access to affordable housing options and acknowledge that we are in short supply. We must create equal opportunities for FAMILIES AND INVESTORS alike. Both of these groups have intentions of improving the situation on Oahu. Enforcing Ordinance 18-19 would be a great place to start.
I truly hope Bill 41 sparks future conversations on more realistic regulations. Several other cities and countries are facing similar issues that have successfully implemented reasonable regulations. For example, a fair number of STR registrants and accurate monitoring. By simply raising the minimum rental time from 30 to 90 days we are hurting a thriving economy and not addressing a larger national problem. The recent decrease in affordability is affected by a multitude of factors, many largely induced by the COVID-19 pandemic. I believe that to solve these issues we need to start by having more well-rounded conversations. For all of the local investors who depend on rental income I’d like to stay positive and have faith that as a collective we can find a more sustainable solution for the future. In the meantime, you can find Bill 41 CD2 here to ensure you are compliant with current regulations and to protect yourself from unnecessary fines.
Please reach out to me directly to discuss your individual goals regarding your homes and investments.