Controversial Vacation Rental Bill Could Pass at Legislature

File photo.

By Sonia Isotov

Two controversial bills are making their way through the Hawaii Legislature. The bills, SB 2089 and HB 1706, would require non-resident owners of Hawaiian vacation rentals to hire local property managers to manage their homes and collect their revenue.

If the bills pass, the majority of Hawaiian properties would have to be taken off the private home rental circuit and be managed in bulk by property management companies.

Gregory Kugle, the attorney for Hawaiian Vacation Rental Owners Association, wrote a letter opposing the bill on constitutional grounds. Kugle stated that the bill discriminates against non-residents through the Equal Protection, Privileges and Immunities and Commerce Clauses and therefore, according to the Constitution, the bill should be invalid.

State of Hawaii Attorney General David M. Louie agreed in testimony saying that this bill would invite legal challenges and also raised concerns about enforcement.

The state Department of Taxation testified in favor saying, “It would assist the department in its effort to increase compliance and collection of the TAT. Currently, even if non-resident property owners are aware that the TAT may apply to their activities, it is difficult for the department to enforce the law if both owner and renter are located outside Hawaii, and money transfers via the internet (ie. Paypal) or other methods outside the physical boundaries of the state.”

Others testifying in favor of the passage of these bills were the Honolulu City & County Department of Planning and Permitting, Maui Hotel & Lodging Association; Condominium Rentals Hawaii; Poipu Beach Resort Association; West Hawaii Property Services, Inc.; Waikoloa Vacation Rental Management, and other individuals.

Maui condominium sales down in February. Photo by Sonia Isotov.

Testifying in opposition were Hawaii Vacation Rental Owners Association; The Travel Group; Trading Places International; Hanalei Bay Resort; Makana Mai Ka Lani; Hot Spot Tax Services; Sunshine & Rainbows, LLC; Humiston and Company, CPAs; and numerous individuals.

Rentini (http://www.rentini.com), a vacation rental website that has properties all over the world, including Hawaii, is concerned about how this bill will affect the future of vacation rentals. Rentini, and other similar vacation rental websites, have built themselves up to be a platform for homeowners wanting to manage their vacation rentals independently.

Disgruntled homeowners have banded together to oppose the bill, writing to House Representatives and starting petitions and action groups. Many have stated they will have to sell if the bills are passed, further damaging the property values in Hawaii. Others believe they will have to raise their rental prices to cover the costs, which will impact heavily on the Hawaiian tourism industry.

On March 6, 2012, SB 2089 passed the third reading by the committee although the majority of testimony was against the bill. The bill is now scheduled to be heard this morning, Monday, March 12 9:30 a.m. in the House.