My Turn: The economic reality of long term rentals

Recent letters to the editor on the debate between long term and short term rentals reveal a lack of understanding of the economic reality of property ownership:

The “Big Lie” is the economic delusion that more regulation of short term rentals will somehow result in more properties available for local, long term rentals. In fact, that will not be the result. The actual result will be higher rental costs across the board — for both short and long term rentals — in order to offset the costs of the additional regulation.

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Most owners of second homes in Hawaii would never consider long term rental of their properties.

A. Short term rentals generate higher revenues than long term rentals.

B. Hawaii has very weak laws that protect landlord rights. It is almost impossible to promptly evict long term tenants if they stop paying rents or abuse the property they are renting. Every day on TV we see the advertisements for legal firms: “Protect yourself against eviction.” The system is “gamed’ by lawyers and tenants while landlords are powerless to protect their investment.

C. “Progressive” politicians in Oregon recently passed a state-wide Rent Control Law. Hawaii landlords — quite correctly — are scared to death that progressive Hawaii politicians will try to do the same, although everywhere that rent control has been enacted results in fewer available long term rental properties.

Landlords who rent their properties only via the short term rental market are making sound, rational economic decisions. It is a failure to understand this economic reality that has resulted in a shortage of long term rental properties.

If Hawaii legislators were truly serious about addressing this issue, the two most effective legislative means would be:

1. Lower the property tax rates on properties in the long term rental market. These properties are being used as the primary residences of the renters and should be taxed as primary residences, not vacation properties.

2. Although it may seem somewhat counter-intuitive, enact comprehensive legislation that gives robust protection to landlord rights, and mandates swift and certain eviction of abusive tenants.

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In the present political environment, landlords are being painted unfairly as outsiders who are abusing Hawaii residents and neighborhoods. In fact, they are making rational economic decisions about their financial investments. The sooner Hawaii politicians learn to work in concert with economic realities, instead of opposing market forces, the sooner issues like long term rental availability can be successfully addressed.

Kenneth Beilstein is a resident of Kailua-Kona.