Oahu Rules for Short-Term Vacation Rental Properties
/Since Oahu is a popular destination for travelers, owning a Short-Term Rental on Oahu, as an investment property, can be a great idea. But are vacation rentals illegal on Oahu? No, however, not ALL properties can be legally rented on a short-term basis. There are some strict limitations of short-term rentals on Oahu. Homeowners and investors should be aware of the current Oahu rules for short term rentals, to ensure that their Oahu vacation rental properties are operated legally.
WHAT IS A SHORT TERM RENTAL ON OAHU?
On Oahu, a short-term rental (STR), also known as a vacation rental, is a home or condominium that provides guest accommodations for less than 30 consecutive days. But not all short term vacation rentals on Oahu are legal.
Which Short-Term Rentals on Oahu Are Legal?
There are THREE Types of LEGAL short-term rentals on Oahu.
- Properties with a Non-Conforming Use Certificate (NUC).
In the City and County of Honolulu, there are two types of properties that have NUCs. The first is Bed and Breakfast Homes (B&Bs). To maintain a B&B certificate, the homeowner or permanent resident must live on the property and be present during a guest's stay. Only up to two specifically-designated bedrooms in the home may be rented.
The second type of NUC is a Transient Vacation Unit (TVU). A TVU may be an entire house or condo, and the owner need not be present on the premises during rental.
For both types, there is a maximum of two adults per room rented and additional off-street parking, one space per room rented, must be provided. Other requirements, such as insurance and payment of GET and TAT (taxes), and restrictions apply. Properties with a NUC must be renewed annually to continue operating as a STR. New NUCs are not being issued.
The current list of Oahu properties with a NUC can be found here. Most of these NUC properties are in Waikiki condominium buildings, but others are single-family homes in residential-zoned areas. These are usually in popular Oahu neighborhoods, near beautiful beaches, such as Diamond Head, Kailua Beachside, Kailua Lanikai, and Waimanalo, and on Oahu's North Shore.
- Properties in a Resort-Zoned Area
The second group of Legal Short Term Rentals on Oahu are the resort-zoned properties. These are allowed because of the zoning of the area in which they are located. Areas which are resort-zoned, or which include pockets of resort zoning, include Waikiki, Turtle Bay, and Ko’olina. Ask your realtor to verify three things when you are purchasing a home as a vacation rental:
- that a property is truly within a resort-zoned area or whether it has been grandfathered in
- that it is not within a period where it has been "dedicated for residential use," and also,
- that the particular resort-zoned building's AOAO allows STRs.
There are some buildings in resort-zoned areas that are eligible to operate as STRs, but their AOAO has decided not to operate as such and they have imposed minimum rental periods different that those authorized by the City and County of Honolulu. Also, in some cases, individual owners may have filed with the City to dedicated their unit for residential use for a 5-year period to obtain tax savings. If an owner wishes to change from residential to non-residential use during the applicable 5-year period, back taxes at the resort rate may be owned. Resort-zoned properties are taxed at a significantly higher rate than residential-zoned properties. See Oahu Property Tax Rates Here.
- Condotel Properties Specifically Grandfathered in as Legal STRs
The last group of legal Short Term Rentals on Oahu has been grandfathered into compliance. These are certain properties which are near resort-zoned areas and which have been traditionally operated as a Condotel property (with hotel front desk, etc.), though they do not have resort zoning. Examples are the Waikiki Banyan and Waikiki Sunset condominiums, which are both in Waikiki and have historically been operated as a hotel properties, with vacation rentals, but are in residential zoning districts.
RELEVANT STR LAWS
When considering whether to purchase or operate a vacation rental home, it is helpful to be aware of the short term rental laws on Oahu (City and County of Honolulu) and the history of vacation rentals on Oahu. Read on for more information. As always, laws are subject to change.
Bill 89 Passed
Bill 89 was adopted June 25, 2019. Bill 89 was opposed by short-term rental owner associations and promoted by the hotel industry, among others. Bill 89 added stricter penalties and enforcement provisions against Oahu property owners who illegally advertised their vacation rental properties for rental terms of less than 30 days. Another important feature of Bill 89 was that it would allow up to 1,699 new B&B permits, with restrictions, on a first-come-first-served basis or by lottery, starting October 2020.
Interestingly, people often refer to Bill 89 as the "law which made vacation rentals illegal on Oahu." In fact, short-term rentals not falling into one of the three categories stated above, have been illegal on Oahu for decades. Bill 89 just ramped up enforcement of the existing laws and increased penalties against these illegal rentals in operation. Also, those interested in STRs should note that the new B&B registrations by lottery proposed by Bill 89 never occurred. Of course, the pandemic changed a lot of things and this is probably one of them. No new NUCs were issued in October 2022, and, to my knowledge, there are no plans for this to change.
Bill 41 Passed & Enjoined
Even after Bill 89 was passed, local opposition to vacation rentals on Oahu persisted, with particular ongoing support from the very powerful hotel industry. The pandemic also helped to create a real estate landscape which made home ownership less affordable and decreased the availability of rentals. This created more momentum from affordable housing proponents and neighborhood groups, and pushed local politicians to pass even stricter vacation rental regulations on Oahu. This is Bill 41.
Bill 41 was signed into law on April 26, 2022, and the wide-reaching provisions therein were set to affect almost every homeowner on Oahu. The most impactful and also, unpopular provision of Bill 41 was that it would change the minimum rental period for all single-family homes and condos that do not fall within one of the three legal short term rental groups above, from 30 to 90 days. This would impact not just the vacation rental industry, but also short-term (30-90 day) rentals for military service members, traveling nurses, movie industry professionals, local homeowners doing construction, and other people needing short term accommodations that are not on Oahu for vacation.
Prior to its effective date of October 24, 2022, on October 13, 2022, a federal judge issued a preliminary injunction on the section of Bill 41 that concerned changing the minimum rental term from 30 to 90 days. This means that the 30 day minimum rental period is still in effect. In an interview with Hawai'i Public Radio, Honolulu Mayor Blangiardi stated that the City and County of Honolulu will not appeal the judge’s injunction.
Notwithstanding the injunction, other provisions of Bill 41 went into effect, as planned, in October 2022. Bill 41 also requires all legal Short-Term Rentals on Oahu to be registered with the City and requires a registration fee and annual renewal fee for all STRs. Currently (November 2022), it is $1,000 for the registration fee and $500 for the annual renewal fee. To check if a particular property is eligible for registration a legal short term rental, you can check the STR Eligibility Map for the City and County of Honolulu.
Also, the fines for illegally operating a STR have been raised. There is now a $5,000 fine just for advertising an illegal STR, and additional fines of up to $10,000 per day for non-compliance. If fines are not paid, the City may place a lien on the property illegally advertised.
RESOURCES:
The City and County of Honolulu has a website with more information on legal short term rentals and registration of your short term rental on Oahu. You can view it here.
Please note that the information above is not legal advice and it's subject to change. Please feel free also to reach out to me if you have questions about a particular property or if you are looking for an Oahu rental property, or to purchase a legal short-term rental or vacation home on Oahu.
Yvonne Jaramillo Ahearn
RB-20262 COMPASS OAHU
cell: 808.721.8088
