Would be real estate investors and retirees who are considering purchasing a condo or single family home in West Hawaii and using it for a short term rental until they can move to Hawaii or for long term investment opportunities should be watching Bill 108 wend its way through the County Council on the way to the Mayor’s desk to be signed into law in 2019.
Bill 108 is an attempt to prohibit unhosted short-term rentals in residential and agricultural zones, while allowing them in hotel and resort zones as well as commercial districts. Existing rentals in disallowed areas would be grandfathered in after obtaining a nonconforming use certificate. The measure’s purpose is to “manage the impacts” of short-term rentals and would not apply to hosted bed and breakfast establishments or lodging located in designated zones. It’s aimed at preserving housing inventories in tight markets like the tourism-based West Hawaii, reducing neighborhood noise and traffic, and generating applicable taxes.
Vacation rental operators will have a few extra months to get their paperwork together, now that the County Council moved the effective date for a bill regulating their use to April 1. Under the bill, short-term rental owners would have to apply for operating approval within 180 days of the bill’s effective date of April 1, 2019. The measure still requires a second approval vote by a council majority, scheduled for November 20, before it may be sent to Mayor Harry Kim for his expected signature into law.
HOWEVER, as recently reported by West Hawaii Today, County Councilman Dru Kanuha, who won the race for the District 3 state Senate seat, and who co-sponsored Bill 108, has effectively moved off the council. The results of Tuesday’s election, combined with a council member who is not voting due to Hawaiian affairs issues, basically leaves the council without enough members on the council eligible to vote to pass any new legislation before December 3 when the newly elected council people take up their new roles. (Kanuha had to assume his new role on the Senate the day after the election).
This new twist in the continuing story of Bill 108 will keep it from becoming law for the short term, but will still be an important issue to watch as the Council takes up their work next month. LUVA Real Estate will continue to keep you updated.
If you are planning a trip to Hawaii to view possible vacation rental homes, you should be asking your Realtor questions about how Bill 108 will affect the ability to rent out the property.
Questions to consider:
- What is the zoning of the property? Is it designated agricultural by the state? If so, Bill 108 will affect the ability to to use it as a short term rental. Is the home 100% permitted? Are all permits closed? The future value of the home and it’s ability to be used as a rental, long term or short term, will hinge on legal permits.
- Has this home been used in the past as a vacation rental? If so, were all taxes paid on those rentals? Ask for the accountancy on the past rentals to be sure that the Transit Accommodation Taxes (TAT) were paid.
- Ask who will be responsible for necessary tax filings? Seller? Buyer? Rental manager? When Bill 108 passes, it will be very important to get the registration into the county within the 180-day grace period as the value of the home will be affected if the home is permitted to be a registered vacation rental.
LUVA Real Estate is dedicated to keeping our clients up to date on the latest information that pertains to future legislation that can have an effect on their investment. Please call us to learn more about working with our trusted Realtors in helping you buy or sell your home.