For the last 10 years the State of Hawaii has been trying to clean up the vacation rental industry in Hawaii and for the last 6 years Hawaii county has been trying to clean up the vacation rental industry on the Big Island. Many homeowners have become frustrated with the constant change of legislation as well as the fact that the county or state is trying to regulate what they do with their home.
We have been in the vacation rental business on the Big Island of Hawaii for over 20 years and have seen the necessity for regulation. While other islands deal with different issues there are many issues prevalent on the Big Island. Most of them fall with private homeowners that are trying to rent their vacation rental versus using a company that is familiar with the vacation rental laws and taxes in Hawaii. The laws and taxes are everchanging and most of the issues are ultimately out of lack of knowledge versus negligence. In the 20 years we have been in business we have seen the tax rates change 6 times and legislation be put in order with significant rules 4 times so the idea that you just sign up your vacation rental and rent it out without having to keep up with what is going on just isn’t likely to work out.
While this list is not comprehensive, here is a list of some of the items within the current bill, 108, that seem to present issues. If you want to view the bill in its totality it can be found here. These assessments are as of 1/24/2024. Given that, some of the aspects of the bill may change between today and the date you are reading it. For the most part I am just addressing unhosted conforming use vacation rentals, which are the vast majority of vacation rentals on the Big Island of Hawaii.
Hawaii Vacation Rental Registration Fees
Fee Increase – for most vacation rentals on the Big Island of Hawaii the initial registration fee will increase from $500 to $1000. This is a pro if the money goes directly to the department to hire more employees to help with the registration process. Currently it is evident that the department does not have enough employees dedicated to the registration process. It is a con if it is just money goes to the county.
Added annual fee- previously once the property was registered there were no fees that were incurred. Now there is an annual renewal of $250. This will add more work onto the department so if a portion of the money is going towards staffing then it is somewhat rationale.
Change of ownership fee- there is also an added fee of $250 to change the registration to the new owner.
Hawaii Vacation Rental Registration Process
While you may not agree with the added annual renewal fee, the necessity for the annual renewal is there. Just because an owner is paying property taxes and vacation rental taxes at the time they register their vacation rental, it does not mean that they continue to pay it. With the existing economic status it is likely that we may see an increase in foreclosures and typically when that happens the owners for a period of 1-2 years will continue to rent their place, but not pay their taxes.
Fine Schedule
This is probably the item that stands out to most because there are some pretty large fines. On top of these fines, the director can also fine an owner up to 2 times the amount of the highly nightly rate the property is advertised for. For the most part the amounts are necessary to get people to reconsider possibly doing something against the vacation rental laws set forth for the County of Hawaii.
Transient Accommodation Enforcement Account
In section 25-4-16.21 transient accommodation enforcement account is laid out and is probably one of the more important aspects of the bill in my opinion.
It states that all money will go into an account that is used for the administration of and enforcement of the vacation rental laws in Hawaii county. If this is truly the case, then it will help to make the registration process easier as well as it is ultimately enforcement that will truly get the vacation rental industry cleaned up.
While there are other aspects of this bill that stand out, I just wanted to address the larger ones that related to unhosted conforming use vacation rentals. I am sure this bill is likely to change some, but for the most part it seems on the right path. Overall what the State of Hawaii and County of Hawaii are seeking to do has good intentions, but the laws are continuously getting bent or people are finding loopholes so legislation is continuously having to be brought forth. I truly hope a solution can be found so there will not be continuous changes as that seems to be what most people are frustrated with.
Rod Dalton is the owner of Waikoloa Vacation Rentals on the Big Island of Hawaii and has worked in the vacation rental industry in Hawaii for over 20 years.