Hawaii County Law: Vacation Rentals And Legal Compliance

Hawaii's short-term vacation rentals are governed by a complex set of laws and regulations that vary across the islands and are constantly evolving. The discussion centres on the impact of short-term rentals on local housing availability and costs, with some arguing that they reduce housing stock for residents and drive up rents. A recent bill seeks to limit the number of guests in short-term rentals and impose various rules and fines on operators. The Hawaii County Council is considering legislation that would require hosted vacation rentals to register with the county, similar to laws for unhosted rentals. With thousands of Airbnb listings and a limited number of zoning inspectors, enforcement remains a challenge.

Zoning laws

Oahu

Short-term rentals are allowed in approximately 30 different buildings on Oahu, as of October 6, 2022. These buildings are located in resort-zoned areas such as Waikiki. There are also some homes or condos outside of resort-zoned areas that have a short-term rental license from the past. However, for the most part, if you run a short-term rental or Airbnb outside of the resort-zoned areas, then you're allowed to rent them for a minimum of 30 days.

Maui

As of July 2019, there were more than 16,000 units that were legally eligible to operate as short-term rental homes (less than six months) without requiring a Bed & Breakfast Permit or Conditional Permit. They are generally in hotel zones, but as of November 2018, 353 vacation rentals had permission to operate outside of the hotel zone. As of June 2021, the Maui Meadows area of the Kihei-Makena Community Plan and the Paia-Haiku Community Plan Region had reached their caps for permits for short-term rental homes or AirBnbs.

Kauai

Airbnbs are legal in certain Visitor Destination Areas (VDAs) or districts that are zoned for hotels. There are around 3,000 to 4,000 vacation rentals in these areas, and Kauai no longer legally allows short-term rentals outside of these designated areas. If a vacation rental obtained a non-conforming use certificate before March 2008, then the rental was "grandfathered in".

The Big Island

Under Bill 108, short-term vacation rentals on the Big Island or County of Hawaii are defined as dwelling units with no more than five bedrooms for rent, rented for 30 consecutive days or less, where the owner does not live on-site. New short-term vacation rentals are not allowed in single-family residential and agricultural zones and are only allowed in hotel, resort, commercial, and multi-family commercial zones. Roughly 95% of the Big Island is classified as conservation or agricultural land, so that leaves only a few areas to legally run an Airbnb. A popular place to search for legal short-term rentals on the Big Island is Waikoloa.

Taxes

Hawaii's short-term rental property owners are required to pay a variety of taxes, including the General Excise Tax (GET) instead of sales tax, and the Transient Accommodations Tax (TAT) at both the state and county level. They must also pay income tax on their rental income.

The GET rate for Airbnb businesses is 4% in the State of Hawaii. The TAT rate is 10.25% of gross rental proceeds, one of the highest in the US.

Additionally, each county has its own TAT rate. For example, the local TAT rate in Maui is 3%, while in Kauai and the Big Island, it is 3%. Honolulu has a city TAT of 3%.

To collect and pay these taxes, short-term rental operators must register with the Hawaii Department of Taxation for both GET and TAT licenses. They will receive a Hawaii Tax ID number, which they must include on their online listing.

There are some exemptions to the TAT. For example, military personnel with temporary lodging allowances, and low-income renters who receive government subsidies and rent for less than 60 days may be exempt.

Short-term rental operators must also be aware of property taxes, which differ according to the county. For example, in Honolulu, which encompasses the island of Oahu, there is a new property tax class for bed and breakfast homes (Class J), which is taxed at 0.65% of the assessed value. In Kauai County, the 2021 property tax rate for short-term accommodations is $9.85 per $1,000 net assessed valuation.

It is important to stay compliant with tax laws as failure to do so can result in fines and interest penalties.

Building and housing standards

It is crucial to understand that the regulations and standards may differ between residential and non-residential properties, as well as between the islands themselves. Therefore, it is essential to consult the specific codes and regulations applicable to the island where the vacation rental is located.

In addition to the building and housing codes, other rules and regulations may also apply to a potential Airbnb listing. These could include leases, HOA rules, or co-op or condo board rules. It is important for hosts to familiarise themselves with these rules and obtain the necessary approvals or permissions from the relevant parties.

Furthermore, enforcement of the laws and regulations can be challenging due to the large number of Airbnb listings and the limited number of zoning inspectors in each county. Online advertisements alone may not provide sufficient evidence to prove that a listing is illegal. Therefore, inspectors must gather information such as visitor names, duration of stays, and compensation documentation to establish violations.

Registration

Oahu:

Oahu has specific regulations for short-term rentals, also known as vacation rentals. The relevant ordinances are Ordinance 22-7 (Bill 41) and Ordinance 19-18 (Bill 89), which aim to balance the needs of hosts and renters while preserving residential neighbourhoods. The key registration points include:

• Types of Short-Term Rentals (STRs): Oahu defines two types of STRs: Bed and Breakfast Homes (B&Bs) and Transient Vacation Units (TVUs). B&Bs involve the homeowner or permanent resident being present during the stay, with a maximum of two rooms rented out and two adult occupants per room. TVUs, on the other hand, are "unhosted" or "whole home" rentals, allowing a maximum of two adult transient occupants per room.
• Zoning Restrictions: Short-term rentals are only permitted in designated resort-zoned areas and specific apartment-zoned areas. A limited number of homes or condos outside these zones may have "grandfathered" licenses from the past.
• Minimum Booking Period: For areas outside the designated resort and apartment zones, the minimum rental period is 30 consecutive days. This was previously set at 90 days but was changed to 30 days due to a court injunction.
• Registration Requirements: All STRs must be registered with the Department of Planning and Permitting. The registration process includes submitting an online application, providing required documentation, and paying a 2.35% city service fee by credit card.
• NUC Renewal: "Grandfathered" STRs that have been operating since before October 22, 1986, and hold a Nonconforming Use Certificate (NUC) must renew their NUC annually between September 1 and October 15 to continue operating.
• Advertising Disclosures: All advertisements for rentals must include the STR registration license or NUC number, as well as the tax map key of the property. Rentals that are not registered or permitted must include a statement specifying that the property cannot be rented for less than 90 consecutive days, and rental prices will not be adjusted based on usage.

Maui:

Maui has a different set of regulations for short-term rentals. Some key registration points include:

• Zoning Restrictions: Maui allows short-term rentals in hotel zones, and as of November 2018, 353 vacation rentals were permitted to operate outside these zones. However, as of June 2021, certain areas like Maui Meadows and the Paia-Haiku Community Plan Region have reached their caps for short-term rental permits.
• Owner Presence: In Maui County, short-term rentals with permits can be rented without the owner being present.
• Application Process: To apply for a Short-Term Rental permit, an application must be submitted through Maui County's Planning Department, along with a Zoning & Flood Confirmation Form. This process typically takes several months.

Kauai:

Kauai has strict regulations for short-term rentals, allowing them only in designated Visitor Destination Areas (VDAs) or districts zoned for hotels. Some key registration points include:

• Zoning Restrictions: Kauai no longer permits short-term rentals outside the designated VDAs. Rentals that obtained a Non-Conforming Use Certificate before March 2008 are "grandfathered" and allowed to continue operating.
• Minimum Rental Period: Any short-term rental of less than 180 days for a room within a home or an entire home/apartment is not permitted.
• Application Process: There is no application process to become an Airbnb host in Kauai if you do not have property in a VDA.

Hawaii (Big) Island:

The Hawaii (Big) Island has specific regulations for short-term rentals, also known as Short-Term Vacation Rentals (STVRs). Some key registration points include:

• Definition of STVRs: Bill 108 defines STVRs as dwelling units with no more than five bedrooms for rent, rented for 30 consecutive days or less, where the owner does not live on-site.
• Zoning Restrictions: STVRs are not allowed in single-family residential and agricultural zones. They are permitted in hotel, resort, commercial, and multi-family commercial zones.
• Non-Conforming Use Certificates: Existing STVRs that do not meet the zoning requirements can apply for a Non-Conforming Use Certificate to continue operating in an unpermitted area.
• Application Process: To apply for a Short-Term Vacation Rental, download and complete the Short-Term Vacation Rental Application Packet and STVR Statement of Compliance. This packet includes instructions and necessary forms.
• NUC Renewal: Non-Conforming Use Certificate (NUC) owners must renew their NUC annually using the prescribed form.

Compliance

Hawaii County has specific laws and requirements that govern hosted vacation rentals, and compliance is essential to avoid legal issues and ensure a positive experience for both hosts and guests. Here is a detailed guide to help you navigate the compliance landscape for hosted vacation rentals in Hawaii County:

Zoning Laws and Permits:

• Zoning laws in Hawaii vary from island to island and dictate whether a property can be legally used as a short-term rental. It's important to check the zoning regulations for the specific island and area where you plan to operate.
• In Oahu, short-term rentals are generally allowed in resort-zoned areas, such as Waikiki. Some properties outside of these zones may have a short-term rental license that was "grandfathered" in from the past.
• Maui has a significant number of units legally eligible to operate as short-term rentals without requiring a specific permit, mainly in hotel zones. However, there are caps on the number of permits issued in certain areas.
• Kauai allows short-term rentals in designated Visitor Destination Areas (VDAs) or districts zoned for hotels. Rentals that obtained a non-conforming use certificate before March 2008 are also allowed.
• The Big Island, or Hawaii County, defines short-term rentals as dwellings with no more than five bedrooms, rented for 30 consecutive days or less, where the owner does not live on-site. These rentals are permitted in hotel, resort, commercial, and multi-family commercial zones but are not allowed in single-family residential and agricultural zones.
• To comply with zoning laws, it's important to understand the specific regulations for your location and obtain any necessary permits or licenses.

Registration and Licensing:

• Hosted vacation rentals in Hawaii County may be subject to registration requirements similar to those for "unhosted" short-term rentals. This means providing information such as site and floor plans, contact details for owners and managers, and notification to surrounding properties.
• Oahu has specific registration requirements for short-term rentals, including an annual renewal process for Nonconforming Use Certificates (NUCs).
• Maui requires an application through the Planning Department, including a Zoning & Flood Confirmation Form.
• Kauai does not have a separate application process for Airbnb hosts but focuses on enforcing zoning laws and ensuring compliance within designated areas.

Tax Compliance:

• Airbnb hosts in Hawaii must obtain a Certificate of Registration from the Hawaii Department of Taxation and post their Tax ID on their online listings.
• Hosts are responsible for paying the Transient Accommodations Tax, which applies to stays of less than 180 days, and the current rate is 10.25%.
• The General Excise Tax (GET) is assessed on all business activities, including short-term rentals, and the rate varies by island (e.g., 4.712% on Oahu).
• Property taxes also apply and differ by county. For example, on Oahu, short-term rentals fall into the bed and breakfast home (Class J) property tax class, with a tax rate of 0.65%.

Other Regulations:

• Compliance with building and housing standards is crucial. Oahu's Building Code and Housing Code specify the minimum requirements for construction, maintenance, health, and safety.
• Hosts should also be aware of other rules and regulations, such as leases, HOA rules, or condo board rules, that may apply to their specific situation.
• Some counties have additional regulations, such as limiting the number of guests and prohibiting commercial events without special permits.
• It's important to stay informed about changing laws and regulations, as counties are actively working to address the impact of short-term rentals on housing availability and community character.

By understanding and adhering to these compliance requirements, hosted vacation rental operators in Hawaii County can ensure they are operating within the law and contributing positively to the local community.

Frequently asked questions