The Big Island’s vacation rental industry took a hit during the coronavirus pandemic, leaving county government unsure how it would pay for the extra staffers hired to process permits in the department.
The program was to be self-sustaining through permit and renewal fees and fines. But the county’s prohibition of short-term rentals during the height of the pandemic’s first wave and its continuing ban on the rentals’ use as quarantine facilities, coupled with families returning to live in their formerly rented units, led to an attrition of units on the short-term rental market.
The number of short-term vacation rentals requiring an annual renewal certification because they were grandfathered into nonconforming areas has dropped 22.3% this year compared to when the program first started, Planning Director Zendo Kern told the County Council earlier this month. There are now 768 STVRs with nonconforming use certificates, compared to an initial total of 988.
Once a property owner stops using the house as a STVR, it loses its ability to be brought back to that classification, under the county code.
“One of the situations we’ve run into is folks moved back in to their home. They were doing STVR, COVID hit, they moved back in. … Now it doesn’t meet the criteria for STVR,” Kern said. “It’s gotten tricky and it’s weird because every time we deny one, we’re taking revenue away. … It’s not a great scenario there.”
The county in 2019 hired seven new staffers in the Planning Department to handle what at the time was a deluge of STVR applications and requests for nonconforming use certificates as the county began regulating the previously unregulated short-term rentals. A special fund was created, which this year is budgeted at $643,000.
The money to pay for the employees was expected to come from registration fees. One-time registration fees were $500, with an additional $250 annual fee for preexisting rental owners wishing to be grandfathered into areas where additional rentals would be prohibited after 2019.
Applications dropped off drastically after the initial flurry of about 4,000 registrations. Since July 1, only 169 new STVR applications have come in, far below the rate of 500 needed to pay for the program for the year that ends June 30.
“The bill actually made it so we need to get more short-term vacation rentals every year. We’re dependent on it. Bring ‘em, bring ‘em, bring ‘em,” Kern said. “That’s problematic. Because STVRs should happen as they happen, as they occur.”
The county doesn’t track the number of STVRs in use in conforming areas such as commercial, hotel and resort zones because they don’t have to renew annually. But the Hawaii Tourism Authority, in a report released last week, said the supply of vacation rentals on Hawaii Island dropped 32.7% from 569,812 unit nights the first three months of 2020 to 383,519 the first three months of 2021. Still, STVRs on Hawaii Island and statewide outperformed hotels in occupancy rates, according to the report, which as prepared by Transparent Intelligence Inc.
New legislation is expected to be coming down the pipeline, as county officials grapple with how best to fix the program. An annual renewal fee for all STVRs, not just the nonconforming ones, isn’t out of the question, Kern said last month. The Planning Department is also looking at incorporating “vacation destination nodes” into its general plan later this year to allow STVRs in areas traditionally favored by tourists, such as Volcano.
“It’s not sustainable. Not sustainable at all,” Kern said. “That being said, I think the answer is amendments to our STVR code which is something that we’ll be working on later on in the year.”
Puna Councilwoman Ashley Kierkiewicz, chairwoman of the council Planning Committee, said Friday she’s currently in the “data gathering stage” of potential amendments to the STVR regulations.
“Ongoing review of the budget and speaking with Planning staff made it abundantly clear that an update is needed in order to make the program more sustainable and less burdensome for participants and the department,” Kierkiewicz said. “For example, there is an annual deluge of (nonconforming use) certificate renewals; it would be helpful if this were spaced out throughout the year. I’m committed to working with Planning and (the) community on this so that any changes are well-informed.”