Hawaii looks to phase-out short term rentals. What would that mean?

An aerial overview of a town gutted by fire.

By Grace TooheyStaff Writer

April 12, 2024 Updated 10:52 AM PT

Hawaii lawmakers are hoping that phasing out short-term rentals could help ease its worsening housing crisis, where locals face the highest housing costs in the nation and one of the worst rates of homelessness.

Two bills that would allow for new regulation of “transient accommodations” have moved readily through the state legislature this spring, and if passed, could provide new avenues to limit the short-term home rental industry, which has exploded in recent years across the state’s four populated islands.

But the issue has been a challenging one for officials in cities and states across the U.S. — including Los Angeles, New York, Nashville and Bozeman, Mont. — who have looked for ways to rein in the ballooning popularity of Airbnb and other online home rental platforms without eliminating the economic benefits that such properties draw.

In Hawaii, last summer’s Maui wildfires have uniquely forced attention on the housing crisis — which was reaching a critical juncture even before the fires displaced thousands. Proponents of the short-term rental phase-outs hope this new sense of urgency could help push these bills into law in the coming weeks.

Here’s a look at how the bills could affect locals and visitors, and how soon.

What would these bills do?

The two companion bills, HB1838 and SB2919, would give counties new authority to change residential zoning, including the power to phase out short-term renting.

It’s important to note, though, that even if these bill pass, nothing would happen overnight. County officials — some of whom have said they want to change how short-term rentals are used and others who have previously tried to change such regulations — would have to adopt new rules to limit rentals. If they enact a phase-out, officials say, it would probably go into effect over several years.

“The bill does not enact anything specific to the regulation of those properties,” said state Sen. Jarrett Keohokalole, one of the co-authors on the Senate bill. “It simply ... makes it clear that the counties do have the authority to regulate vacation rentals if they choose.”

The bills essentially provide the needed legal framework for counties to limit short-term rentals in a variety of ways. Honolulu officials attempted to redefine the length of a short-term rental in 2022, but a federal judge recently ruled that current state law barred them from doing so.

State Rep. Luke Evslin, the chair of the House Committee on Housing, said even if these bills pass, they probably won’t eliminate short term rentals on the islands. Instead, Evslin said, the legislation would give local governments opportunities to define the neighborhoods where tourists could rent short-term units and, ideally, free up more homes for locals seeking long-term rentals. He said it won’t solve the state’s growing housing crisis, but he thinks it’s a first step to “stem the bleeding.”

“I think it’s one of the steps that we need to take to try and solve our housing crisis,” Evslin said, an author of the House bill. “On Kauai, for example, more units are becoming vacation rentals every year than we are building annually, so we have literally declining housing stock on Kauai, and the same thing is happening on Maui — even pre-fire.”

But a long battle looms

The bills’ supporters include many local housing nonprofits, hotel companies and local leaders, including Maui Councilmember Keani Rawlins-Fernandez.

“People are moving by the droves because there is no housing,” Rawlins-Ferandez said. She said it’s taken too long for officials to regulate the short-term rental industry, which has created this challenging fight with increasingly powerful interests.

There’s also a broad swath of opponents, including local homeowners who also rent units or rooms, Realtor groups, rental alliances and rental platforms. All of these groups have a financial interest in preserving property owners’ ability to do short-term rentals.

Airbnb’s Alex April, head of the company’s public policy for Hawaii, didn’t expressly oppose the legislation in her statement to legislators, but mentioned concerns including the financial losses that the state could see. April also cited ongoing work between Airbnb and Hawaii counties to help limit illegal renting, which has included memorandums of understanding to remove properties not operating within the law.

“We remain committed to working with you on fair and reasonable solutions that protect the rights of hosts and preserve the significant benefits that short-term rentals provide to Hawaii communities,” April’s statement said.

Airbnb also hired Hawaii’s former attorney general, David Louie, to argue against the bills, claiming in a lengthy testimony that the measures, if passed, could result in lawsuits challenging its constitutionality.

“Both Hawaii and federal litigation [have] recognized the principle that all preexisting uses of land are protected,” Louie wrote. A judge would not accept such changes to short-term rental zoning, he argued, because of how units have operated for years, leading to “substantial and unnecessary litigation.”

Evslin insisted that the bills are constitutional, but noted it will depend how counties chose to implement possible phase-outs if any further legal fight follows.

Why is this important now?

Months after the Maui wildfires, hundreds of displaced families are still living in hotels. Officials hope they will be relocated to long-term housing by this summer — a deadline that has continued to be extended.

Keohokalole, the state senator, said he wants to see the end of a system that has been “pushing local people out of their residential communities in favor of economic activity.”

“We’re seeing the wholesale conversion of residential communities in Hawaii, to speculative, short term rental development,” he said.

Hawaii Gov. Josh Green, after his annual state of the state address in January, said he was going to put “a lot of pressure” to curb short-term rentals because “that market should be for our local families,” according to the Associated Press. A majority of short-term rental owners don’t live in Hawaii, according to the governor.

Green, in a statement to The Times, said he supports the two bills going through the legislature that would allow for phasing-out such rentals.

“They would provide the counties with more tools to address vacation rentals in areas where they don’t want these operations to continue,” a spokesperson for Green said in a statement. “Gov. Green is open to additional changes to ensure that we can control the proliferation of illegal vacation rentals, to mitigate the years-long housing crisis that is causing local residents, our workforce of teachers, firefighters and other essential workers, to leave the islands.”

When could phase-outs begin?

Both bills have been voted out of their respective chambers and are moving into conference committee, where another round of changes can be made before a final vote — which must occur before May 3, the end of the state’s legislative session.

“Similar bills have been introduced every year for the last decade or so and never gone all that far,” Evslin said. “I don’t want to jinx it here, but I’m optimistic for their success. ... I think that this is different in that there is really broad support across the legislature for action.”

If the measures pass, it would be up to county leaders to look into phasing out short-term rentals and in what capacity — but legally any phase-out would have to be occur over a reasonable amount of time, likely years, Evslin said.