County to mull regulation of vacation rentals

  • A vacation rental on Alii Drive is pictured. (Laura Ruminski/West Hawaii Today)

HILO — An attempt by the County Council to regulate vacation rentals is drawing a lot of interest — and concern — from part-time residents who rent out their homes and condos to help pay the bills.

The measure, Bill 108, is set to get its first council hearing Feb. 20.

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“Short-term rental of residential units, as an alternative to traditional resort and hotel accommodations, is an emerging trend in the visitor industry that continues to grow in popularity,” North Kona Councilwoman Karen Eoff, one of two bill sponsors, said in a statement.

“Bill 108 is a means to provide visitors the opportunity to stay in this form of vacation accommodation, while at the same time, preserving our residential neighborhoods and housing for the people who live and work on the island,” Eoff said.

Regulation is needed, proponents say, to keep residential neighborhoods from being overrun with vacationers clogging streets with their vehicles and disrupting the quiet character of neighborhoods.

“We believe we have come up with a fair and well-balanced program that will serve to define where this use will be allowed, how it will be regulated, as well as providing an avenue for those currently in existence to apply for a nonconforming use certificate that would allow them to continue to operate in a non-permitted district,” said the other sponsor, Kona Councilman Dru Kanuha.

The bill has a grandfather clause for existing owners, but there are still more questions than answers from individuals contacted Wednesday.

“If they denied my application for whatever reason, I would absolutely have to sell,” said Heather Bandt, who lives in her Aloha Kona home four months a year and rents it out as a vacation home the rest of the year.

Zillow shows homes for sale in the neighborhood ranging from $425,000 to $684,000. Bandt said her family built their home, so it has a lot of sentimental value. But she needs to be able to pay her mortgage, property taxes and other expenses, she said.

“It would break my heart,” Bandt said. “It’s sentimental, but to a point. I’m not going down with the ship.”

Kona Realtor Gretchen Osgood said the broader picture is the impact to local real estate prices, and ultimately, the county coffers.

“(The county) will lose tax revenue since non-owner occupants currently pay more than twice as much as owner occupants, so if the owner has to sell their vacation rental since it is no longer profitable, most likely it will go to another occupant and the property tax revenue will drop … by over 50 percent to the county for that house,” Osgood said. “And since the county just raised property taxes, I don’t know how we would make the ever-rising budget work if even half of the vacation rentals owners sold their homes… it would be a huge loss in revenue.”

Osgood said the county is targeting nonresidents who don’t vote.

Planning Director Michael Yee said the bill is currently written generally, with specifics to be worked out to achieve a balance between residents and vacation rentals.

“We’re trying to address a shortage of housing, we’re trying to address integrity of neighborhoods, and trying to find that balance,” Yee said.

Yee emphasized that the bill doesn’t apply to short-term rentals of a dwelling unit that is the owner’s primary residence. It also does not include “hosted rentals,” meaning transient use of a single room or sleeping area of a residential dwelling unit or guest house where the owner or operator lives on the property.

For owners of property who currently rent out their homes for 30 days or less in the Vacation District, the General Commercial District and the Special Downtown Hilo District, registration is all that will be required. Also, those in the General Plan Resort and Resort Nodes will be required only to register, unless in a Residential District that falls within the Resort area.

The registration form, at a minimum, requires verification that state general excise tax and transient accommodations tax licenses are in effect, and certification that the required amount of parking is available.

Those currently operating outside of a permitted district — such as in a Residential, Rural or Agricultural District — will be required to get a Nonconforming Use Certificate. For that, the owner/operator must show they have been in use, declaring income on the commercial activity and in “Good Standing” prior to Jan. 20.

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Yee is unsure whether grandfathered properties should retain their designation forever, or whether it would change when, for example, property is sold.

“If vacation rentals are operating in places that aren’t ideal, would we want to grandfather them in indefinitely?” Yee asked.