Bill 41 Could Alleviate Oahu’s Housing Shortage, But It Needs Reworking

Kudos to Honolulu Mayor Rick Blangiardi for introducing to the Honolulu City Council and for recently signing Bill 41 on April 26 that establishes stricter regulations for short-term rentals.

Bill 41 was met with strong opposition and even stronger support with both sides offering compelling arguments. Both sides rallied hard. But ultimately, the Mayor and the Honolulu City Council (with the one exception of Council member Andria Tupola who voted against the bill) were right to pass it; and that during these times of austerity and financial hardship our leaders must take on controversial legislation such as Bill 41 to address urgent concerns.

Curtail illegal vacation rentals, stop residents from feeling overrun by tourists in their own neighborhoods
What Bill 41 does is it increases the minimum amount of time a unit can be rented without a permit from 30 to 90 days, and restricts new vacation rental permits to resort-zoned areas such as Waikīkī and Ko Olina.

The primary intent of the bill is to curtail the number of illegal vacation rentals in areas like Kailua and other residential communities that are not zoned for tourism, but have become increasingly popular for short-term vacation rentals.

Island residents have been complaining that Hawaii’s tourism market – with the proliferation of online vacation rental companies – has gone way beyond Waikiki and penetrated into Oahu neighborhoods, causing disputes among homeowners, excessive noise, tight-parking, and even verbal clashes between vacation renters and nearby residents.

Some residents have complained that vacation renters have this attitude of entitlement  because they are paying for the rental, as if they were in Waikiki. But they’re not; they’re in our neighborhoods, and we’re the ones who need to get up for work early the next day while they party, some supporters of Bill 41 explained.  Some residents have also expressed concerns of safety.

Honolulu Mayor Rick Blangiardi said, “We live here, we work here, and we want to play here. And we don’t want to feel subordinated that we’ve wholesaled Hawaiʻi for the retail business where a bunch of people don’t even put money into local bank accounts.

“Anything and everything we can possibly do to direct our energies here to make the people who live here the priority — that’s what I’m going to be about,” Blangiardi said.

The legislation also imposes other new restrictions, fees and fines on short-term rentals; requires non-conforming rental units in residential neighborhoods to limit visitors to four adults; and requires an off-street parking spot for each room rented in residential areas.

Relieve some of the pressure of Oahu’s rental shortage problem
Besides some Oahu residents feeling overrun by tourists, there is a larger benefit that has come about due to Bill 41’s passage. And that is extending short term rentals to 90 days will help with the pressing housing-renters shortage on Oahu.

The 90 days minimum stay will make it more difficult to find short term vacation renters and will encourage property owners (mostly investors) to seek long-term leases with residents.

This ultimately adds to the supply of rental properties on Oahu, gets more residents into homes and helps Hawaii locals wanting to stay in Hawaii, to be able to remain on Oahu and not be pressured to leave with increased opportunities to find a place to rent during this housing crunch.

Basic economics also suggests that with more supply, this could also steady the ballooning cost of rent, and ultimately stabilize real estate prices as well.

“It’s really impacting our housing availability and housing pricing and rental prices,” said Larry Bartley, executive director of Save Oʻahu Neighborhoods, which supported Bill 41. “Those houses were built, those apartments were built for people to live in permanently or rent long-term. They were never intended for vacation rentals.”

Bill has room for improvement
While some opponents of Bill 41 have complained that it was rushed through, lawmakers were right to respond to the urgency of the current housing crunch by acting now versus waiting for more studies and data to be completed — which would have been too late for too many residents hard-pressed to find long-term rentals.

That said, opponents point to areas that clearly could be reworked and revisited. For example, not all short term renters are vacationers. City Council member Carol Fukunaga’s worry that Bill 41 could take away the opportunity of month-to-month rentals for medical patients, traveling health care workers, students, military personnel and others who are lodging on Oahu for reasons other than vacation. This is a legitimate concern and should be worked on in a future reworking of Bill 41.

Some other complaints over the classifying of resort areas and possibly expanding them minimally, and reassessing fees and requirements on legal longer-term rentals could also be reworked.

Another area which could warrant further exploration is exemptions to Bill 41. Those who meet certain income requirements and depend on those short term rental as primary income (for example some seniors), perhaps, depending on the location of the property, they could be granted an exemption. And the number of exemptions could be capped.

Future exemption or not, let’s be clear that vacation property rental owners still have the ability to rent out their units for longer leases to residents. They have income producing options. So the unfair burden some are claiming is actually about addressing margins of profit. Some have called this greed. But there are perhaps legitimate cases where hardship should require a possible exemption.

Encouraging to see
For many renters and residents clamoring for more housing availability, Bill 41 could materialize as a life raft of sort. While more needs to be done in the area of expanding affordable housing in particular, at the very least Bill 41 shows that Mayor Blangiardi and this Honolulu City Council (with one exception) are not completely tone deaf to such urgent calls.