Who will benefit from the enforcement of the regulations?
The county will get revenue from the fines but that is balanced by the additional costs of employing inspectors, additional legal costs, developing and running new systems and searching for illegal rentals.
Hotels will almost certainly see increased demand and may be able to increase both occupancy and rates.
Homebuyers may benefit from a decrease in real estate values.
Who will be adversely affected by the enforcement of Oahu Ordinance 19-18?
- Owners and managers of properties which are currently offered as tourist accommodation for stays of less than 30 days
- Providers of services such as cleaning, garden maintenance, pool maintenance, property management
- The State of Hawaii which will lose an estimated $50M annually in TAT receipts and $23M in GET receipts
- The County which will lose an estimated $2M in GET supplement receipts
- Home sellers who may suffer from a reduction in real estate values
- Tourist activity providers who may see a decrease in custom
- Independent restaurants and catering establishments who may see a decrease in custom
Can the 30-day Oahu regulations meet the objectives in terms of making more housing available to local people?
In Waikiki, it probably will make apartments a little more affordable for long-term rental as owners are forced to switch from short-term to long-term leading to a spike in supply on the long-term rental market, resulting in a small decrease in rental rates and an increase in availability. However, the majority of Oahu's former short term rental properties are at the high end of the market. Removing these from the short-term rental market can have no effect on availability of housing for families who are currently struggling to find decent housing.
What are the economic side-effects of Bill 89?
Side-effects are near-impossible to quantify in advance. Economic ripples of such changes tend to spread right though the economy of the region as those worst-affected have lower spending power and reduce their spending such that all local businesses are affected. The size of the side-effect for any particular sector does depend how far removed that sector is from those who a directly affected. For example a goods transport operator is very marginally affected, but the retail seller of those goods will be affected to a greater extent.
Could the regulation of short term rentals on Oahu affect Hawaii's GDP?
There is no doubt that the GDP of the state will feel the effects. The only question is by how much. Assuming full compliance, the direct loss to the community is estimated at $500M. Add in the lost tax revenues and trickle-down effects, the overall loss could exceed $1B. This is more than 1% of the GDP for the whole of Hawaii.
Will levels of crime fall due to Ordinance 19-18?
The idea that short stay tourists add to the crime burden of a region is not supported by any evidence. Tourists are much more likely to be the targets of criminality than perpetrators. Thus, with fewer tourists able to visit the region, crime against tourists is likely to reduce. However, the perpetrators will likely turn their attention to other victims, so that crime as a whole may not reduce. There is plenty of evidence from every State and every country that empty buildings attract crime. One of the effects of the restriction on short term rentals is that more buildings will be empty for longer periods. This indicates that crime levels are more likely to increase.
Will owners and managers of existing legal 30-day minimum stay properties be affected by Bill 89?
Definitely and severely. The rentals which were advertised as "30-day minimum stay" before the enforcement were a small minority of all tourist rentals advertised. After enforcement, it is likely that all rentals will be advertised as having the 30-day minimum. As the market for such long stays is very limited, we can expect rental rates to crash and in addition, the number of bookings will reduce, maybe ten-fold.
Are there any better models for Short Term Rental regulation than Bill 89?
Definitely. This type of regulation is far more destructive than constructive. It makes a cliff-edge change which reduces business confidence until things settle down. It, perhaps unfairly, generates massive opportunities for some but takes away livelihoods for others. Consider the owner of a property that has a NUC (Non-conforming Use Certificate). This owner can continue to take short-term guests and the competition from other providers has been removed at a stroke. This property now has a boost to its value. The surrounding properties without any NUC are now reduced in value.
Some jurisdictions impose additional taxes to balance STR demand against environmental and social pressures. Taxes can be brought in at a low level and increased in stages until the right balance is found. Taxes on tourist accommodation do not have detremental effects on the local economy and could benefit the County.
In some cities in Europe, there is a limit of the number of nights per year that a property can be booked for short term visitors. This is a relatively clever way to regulate as the number of nights can be changed from year to year so that effects are felt gradually and it limits the amount of money that can be made from STRs and thus reduces the demand for properties from STR investors. At the same time, it encourages residents to make best use of their properties and integrates visitors into the community.
Won't Bill 89 just drive short-term rentals underground?
Bill 89 does nothing to reduce demand from visitors. Therefore it seems inevitable that some hosts will be persuaded to offer short term stays quietly. The ability of guests to find hosts depends on a number of factors. Some may see advertisements for 30-day minimum stay properties and then ask the host to bend the rules. Others might get back in contact with the same host that gave them accommodation in previous years. New mechanisms may be developed to enable making contact without actually advertising. Website companies in countries beyond the reach of the Hawaiian authorities could spring up to offer these kind of services. It is very difficult to prove that a visitor is a paying guest if neither the visitor nor the host is willing to provide information. The net result would be an underground economy that is tax-free, an unfair competition for the legal rentals and for the hotel sector.