Hawaii Short-Term Rental Laws
(3) General excise tax: Hawaii has no sales tax; Instead, we have the General Consumption Tax (GET), which is levied on all business activities, including short-term rentals. The current GET is 4.712% on Oahu. The influx of short-term tenants has brought all sorts of problems to the local community, according to proponents of the legislation. As the vacation rental`s owner, April Perreira Pluss, told The Associated Press, “I just think the vacationer who comes here and rents for 30 days contributes to our community.” In Hawaii County or Big Island, there are no tax brackets for vacation rentals or short-term rentals. The tax rates that may apply to an Airbnb in Hawaii County are the Hotel/Resort Property Tax, which is $6.15 per net taxable property of $1,000 from July 1, 2021 to June 30, 2022. While a cottage industry began, benefiting tenants, landlords and other business workers, there were also problems that arose. Those who opposed these rentals argued that residential areas were being converted into resorts, reducing the already limited local housing stock and eliminating hotel jobs. HTA estimated that 25% of homes on the North Shore, for example, have been converted into vacation rentals. Influential hotels in Hawaii are trying to pressure Honolulu to enforce the 30-day regulation, which the city is unable to do. In a lengthy lawsuit filed in U.S. District Court in Honolulu, the Hawaii Legal Short-term Rental Alliance alleges that the city and county of Honolulu violated the rights of their members, who have legally leased their properties “for years and in some cases decades,” under the laws and protections of the Hawaiian and U.S. Constitutions. The organization claims to represent at least 1,000 rental properties.
“It`s about protecting our place. First and foremost, it`s about reclaiming our neighborhoods. Our neighborhoods have been clearly disrupted by the thousands of vacation rentals operating outside of designated recreation areas,” the Honolulu mayor said in an April 26 statement. “It`s a form of tourism management, but it`s also about getting apartments back on the market and protecting O`ahu`s natural resources for decades to come. The law, previously introduced in 1985, sought to ban these vacation rentals in Oahu in non-parkable areas for any rental of less than 30 days. The problem was that these units would have become unenforceable with the proliferation of online booking portals such as Airbnb and Vrbo. The new law claimed that up to 10,000 new rental units had sprung up in Oahu based on these websites. These were mainly located in areas where there were very few hotels.
Despite the 1985 Honolulu ordinance banning short-term vacation rentals altogether, the advent of online booking tools like Airbnb has led to an increase in such rentals in recent years. Powered by the new technology, about 9,000 to 10,000 such units have sprouted up on Oahu, most of them flouting the law. The rules for vacation rentals in Hawaii are constantly changing, and now it`s the turn of the island of Oahu. This means that areas like Lanikai, which can be seen in the main photo, will no longer welcome guests in the short term. It started when the Honolulu City Council passed a controversial new bill that extends the minimum booking period for certain rentals to at least 90 days. Unless the Federal Supreme Court sees it differently. On the other hand, opponents accused rental operators of turning residential neighborhoods into recreational areas, stealing jobs from unionized hotel employees, and taking apartments from tenants at a time when Oahu was facing a housing shortage. A 2017 study by the Hawaii Tourism Authority found that more than one in four homes on the North Coast and 5% to 15% in Kailua and Lanikai have been converted to vacation rentals. Oahu`s powerful hotel industry also shouted, urging city officials to enforce an ordinance that proved nearly impossible. Opponents of the law (including many real estate professionals like me) would hurt the economy, landlords who make short-term rentals, and sellers like cleaners, landscapers, plumbers, and electricians.
The total impact on potential buyers of investment properties remains to be seen, but future legislation should be taken into account when purchasing these properties. Its origins lie in a series of ordinances passed in the 1980s by Honolulu due to a state law designed to prevent the islands from being invaded by tourist accommodation. Watson`s order cites the legislative history of state law, which states that “temporary vacation rentals should not be permitted if the lifestyle of permanent residents is unreasonably disrupted.” Contacted by Frommer`s, Honolulu Department of Planning and Permits officials confirmed that legal short-term rentals in eligible areas can continue to stay for less than 90 days.