 Welcome to Hawaii Together on the ThinkTech Hawaii Broadcasting Network. I'm Joe Kent, Executive Vice President for the Grasshirt Institute of Hawaii, filling in for Keilii Akina, he's the President of the Grasshirt Institute of Hawaii. And today we're talking about sharing, and we're talking about sharing homes. What if you wanted to share your home with a visitor, and that guest wanted to pay you in return? Well, in Hawaii, and at least in Honolulu, they're the latest county council to try to make that illegal. And today we're going to talk about all of the ideas to make this illegal, and whether that's a good idea or a bad idea, and how that will affect our economy. Today we're talking with Mary Levois. Welcome to the show, Mary. Thank you. Thank you. And we're talking a little bit about a few bills. Now, Bill 85 would basically ban short-term vacation rentals where the owner doesn't live in the home. And Bill 89 would only allow a very limited amount, about 1,700 bed and breakfast. So these are bills to basically crack down on the home-sharing industry. Is that how you see it? It's basically to close down the entire industry for any of the locals to participate in. It's economic suicide is what I call it. Bill 85 is very restrictive in a sense that nobody can room share, whole home rent. And if you do, there's enormous fines connected to it. So they are trying to close down a platform and an opportunity for local residents to participate in making a little bit of extra money. And Bill 89, what would that do? Bill 89 also is very restrictive. It cracks down on closing all whole home sharing whatsoever and will allow a very small number of room sharing. Currently, there's probably 8,000 whole home room sharing that's going on. There's about 352,000 homes in the Honolulu market and they want to possibly only allow a half a percent, which would mean most people would not be able to room share or whole home rent. It's interesting how some of the language involved in the creation of this policy is some people say, oh, this will allow, you know, this is a path towards legalization or a path towards permitting and a path towards letting home sharing happen in the state. But actually, if it's only 1,750 homes that are allowed to do this, some people say that's not really allowing it. That's more like banning it. Yeah. They've basically come up with language in the bill to protect just the hotel industry and we all know where that money goes and they pay the workers and the rest of the money leaves the island. Well, how much money are we talking about, especially when it comes to vacation rentals, Airbnb's and all of that? How much money does that generate for the economy in Hawaii? Do you know that? Well, currently, they say that it's a $1.2 billion industry annually and everybody knows somebody that's either room sharing or vacation renting their house, either they go on vacation or they're spending time away visiting their children going to college or if they're bi-coastal, everybody knows somebody that's already doing it and what we were trying to do is get the city council to embrace it in a responsible manner. And so far, they've come up with regulation, regulation, regulation and they are obviously being paid off by the hotel union and the corporations that came up with all this legislation to ban it in residential districts are A, R3, R5, R7, R10, pretty much everywhere that's... So it's an effective ban and there might be some special interest, well, there's a lot of interest here. There's actually special interest for medium density apartment only, so a few selective buildings and the hotel industry, that's it. They don't want anybody else in their business. And other parts of these bills are that we have these huge fines. Sometimes it's $1,000 a day, sometimes $5,000, sometimes $25,000 and sometimes $50,000 per day for doing the wrong thing, maybe advertising the wrong way or something when it comes to this. They are trying to scare all the local people to not advertise on any hosting platforms and that they are not allowed to collect any income or room sharing or whole rentals. So when it comes to these huge fines, and there's a lot of components we can talk about this with, that's what the huge fines, is that constitutional to have these huge fines? It's not constitutional to charge fines that are way out of line with the violation. And so there was so much opposition to just the fines alone that the city council did come down from $25,000, $50,000, $100,000, they reduced it down to, I think, $5,000, $10,000 and $25,000. Sure, sure. They adjusted fines. But it's still per day. It's crazy. So if it racks up, then you might have to pay still a lot of money. It's horrible. It's horrible. And also another component of these bills, there's a lot to talk about here, but one of the last component with the bills, as far as I can see it, is the neighbor against neighbor aspect, which is that if, let's say I am renting my home as a vacation rental, my neighbor can take me to court, and if he wins, he or she wins, then I have to pay for his attorney fees and all of that. There was so much opposition to pity neighbors against neighbors that they also did take that out of the bill. That's just not a nice neighborly thing to do. A lot of jurisdictions and other cities are embracing home sharing and room sharing and being neighborly that they actually have brochures that they give out the entire city and reminding people of being mindful of your neighbors and buy at hours and stuff like that. What about people who say, oh, well, Airbnb, my neighbor does Airbnb and maybe they're loud at odd times of the night or there's parking problems or I don't know, garbage problems or anything. Neighbors and neighborhoods have legitimate complaints and should be regulated. We are looking for fair regulation because nobody likes a bad neighbor. I don't want a bad neighbor. So we're trying to get them to, instead of throw the whole industry out with all these huge fines and everything, but to embrace some of the industry and actually regulate the areas that need regulation. For instance, if you're a whole home rental, they can say something like you have to have parking on the property. That's it. If you break the noise ordinance, which is quite hours from 10 o'clock to 8 o'clock in the morning, that neighbor has an opportunity to call the police just like an alarm. Right. So you're basically saying that if there are issues when it comes to noise, if there's issues when it comes to parking, let's deal with that issue separately from the whole banning it all together. Give them a noise fine, let's say it's $500. And if there's a constant noise problem, because you're always going to have a few bad neighbors. Sure. They could be long-term tenants and be bad neighbors. Sure. So even without a vacation around the industry, you still might have a bad neighbor. If somebody is found to be that inconsiderate, bad neighbor, you give them a fine, $500 for the first time, $1,000 for the second time, $1,500 for the third time. And maybe after that, if they're consistently a bad neighbor, maybe not give them a permit. What about people who say that there's just too many vacation rentals and they're coming up the whole affordable renting market? So maybe, yeah. There's a little truth to that in a sense that there might be taking some of the housing stock, but not very much. When I say that, most of the people that are home-sharing aren't going to rent out their whole home anyway. Okay. A lot of the people that are home-sharing are seniors that are trying to pay their medical. They are trying to have a little extra money to pay their bills. Maybe the kids are away at college and they want to have that room open for when their child comes home, the room's open, or when family's coming to vacation, it's open. And when family's not here, they've rented out. There was a lot of testimony to seniors that loved being hosts, loved to spread the Loha spirit, patronized all the restaurants and shops in the neighborhood, and are very good responsible neighbors. So I don't think you should penalize everybody. But there still are some people who are using spaces that would otherwise be used for rent. And in that sense, you could say that the vacation rentals are putting a pressure on rent prices, which I don't know if they're being inflated because of that. They haven't really put a pressure on the rent. If you look at the rents that are out there right now, historically, they've steadily climbed up. You can still get a studio or one better for $1,000 a month. So I mean, that really hasn't had an effect on it. If you look on Craigslist right now, you'll see there's at least 3,000 vacant long-term rentals. If you look on the MLS right now, there's another 1,000 vacant rentals. What should policymakers do then if they're concerned about this trying to provide more units and more spaces for rent? Should they ban the whole vacation rental industry, which would maybe create a bunch of new rentals? Or what should they do? No, that won't create a bunch of new rentals because the people that still room share are still going to be there. They don't necessarily want to share that room full-time. Well, what about other things? The economic impact, and we talked a little bit about that, but I mean, getting in the weeds here, vacation rentals, they contribute to our economy. And I mean, the people who visit those rentals, they go on hikes and they go to restaurants and so forth. And if we cut off the market here, then presumably all that economic activity would leave. Well, look at North Shore. Can you imagine what's going to happen to the North Shore? You know how many North Shore people have come in to testify to say, what are we going to do with all these single moms that want to do the house cleaning and be able to pick up their child at two o'clock? They don't have the opportunity to drive in the Waikiki and work a job in town. They're just going to create more traffic. They need to work out where they live. And these jobs provide an opportunity for those people to have a better quality of life. They talk about how they fix up their homes. They can pay their mortgage. They can pay their rent. They're even putting some of the homeless people to work cleaning the yards and doing all kinds of stuff. So it's helping some of the economy. But there are people on the North Shore, and I would be remiss if I didn't say that there are some people on the North Shore who don't like vacation rentals and who want it, you know, just, you know, Hawaii as if we had no vacation rentals. And people say there's too many tourists here and all of that. So how would you respond to that? Well, we are a destination location. We have very little other industries other than small business, the military and tourism. So we need to embrace this travel trend because these visitors will just clearly go elsewhere. I mean, in the United States, it is a $36 billion industry in growing. And this is the way the Millenniums want to travel. They want options in all accommodations. And if we don't offer the accommodations, they'll just clearly go elsewhere. So we either lose the money and destroy the opportunity for the revenue stream, which the revenue streams will afford us the opportunity to pay for that noose around our neck rail. It fixes our streets, our infrastructure, our sewers, our parks, our beaches, all the erosion that's going on around the island, but we need that money. And if we don't collect it from the tourists that are happily willing to pay it and locals that are making money, that are willing to share that money, if we don't take it from them, the honest truth is they're going to have to raise everyone's property taxes substantially. And we're going to talk about taxes as related to vacation rentals when we come back. We're here with Mary Levois. I'm Joe Kent from the Gratiot Institute of Hawaii. We'll see you when we come back. Aloha, I'm Wendy Lo, and I'm coming to you every other Tuesday at two o'clock live from Think Tech Hawaii. And on our show, we talk about taking your health back. And what does that mean? It means mind, body, and soul. Anything you can do that makes your body healthier and happier is what we're going to be talking about, whether it's spiritual health, mental health, fascia health, beautiful smile health, whatever it means, let's take healthy back. Aloha. Aloha, I'm Gwen Harris, the host here at Think Tech Hawaii, a digital media company serving the people of Hawaii. We provide a video platform for citizen journalists to raise public awareness in Hawaii. We are a Hawaii nonprofit that depends on the generosity of the supporters to keep ongoing. We'd be grateful if you'd go to ThinkTechHawaii.com and make a donation to support us now. Thanks so much. Welcome back to Hawaii Together on the ThinkTech Hawaii Broadcasting Network. And I just wanted to say thank you to ThinkTech for providing us this platform to, and many other people, the platform to speak about important issues. And the important issue we're talking about today is vacation rentals, home sharing. Should it be banned or not? And how much does it contribute to our economy? We're talking with Mary Levois and we ended by talking a bit about the taxes. So obviously, if vacation rentals, home sharing are contributing a lot to the economy, then presumably they must be paying a lot of taxes as well. Is that right? Or how does that work? I would say that some people are and some people aren't. A lot of the people that are renting out their guest cottage or their back room or their whole home when they're gone would like the ability to pay their fair share taxes. Some of them are already paying. Most of the whole home rentals that are managed by companies, brokerage companies, are already paying GENTA tax. They've been paying that for a while. They also pay the city a much higher tax rate. They pay residential A, which used to be $4 for tier one, and anything over a million dollars they were paying $9. That's kind of a different tax category, but basically it's for wealthier, non-ret, where they don't live in that property. Believe it or not, a lot of local people are paying that double taxation, triple taxation, whatever you want to call it. And the reason they're paying it is because instead of investing their money in the stock market, there was many, many local people that invested in a second property or they decided to hold on to a property that their family left them, belong to their mom, their dad, they're trying to keep it in the family. If that is the case, they are currently paying this residential A double, triple taxation. And that has already chased a lot of locals out of the market. When they introduced residential A, I sold off a lot of property for local people and they were just really forced to sell. When the taxes went up on that residential A category that we talked about, the million dollar or so homes are higher, then those houses, a lot of people wanted to sell those houses. Yes, lots of locals where they came out of the woodwork and said, we have to sell. If they were paying $3.50 per thousand, let's take $10,000, let's say they were paying $10,000 a year for property taxes. Overnight, Reze raised it to $30,000 or greater because they were fluctuating with the values at that point too. In Hawaii, some people are cash poor but property rich and those people couldn't pay the tax. Is that what you're saying? A lot of elderly people that were charging rent to tenants said, I can't raise the rent three times. My people aren't going to pay this kind of rent. We're already limited on what we can charge our tenants. We've got taxes on these homes, which is kind of a subset of the vacation rental industry as well because some of these homes are used for home sharing. People are supposed to be paying those taxes, the G-E-T, the T-E-T-A-T, but not everyone's paying. In the state, they passed a bill at the legislature, SB 1292, which would basically have what the vacation rental company, like Airbnb for example, hand over the bag of money to the state and that would be about $52 million that the state would get. The vacation rental operator would pay and collect the taxes basically. Correct. What's the problem? Well, we're waiting to find out whether the governor will sign that on June 24th. It passed by one vote. Very rare, by the way, to happen in Hawaii to pass by one vote. Yes. Okay. Now, Governor Igay did veto that bill back in 2016 because it was introduced before. A similar bill back in 2000, yeah, okay. And he vetoed it, so it didn't go through. I think at this point, I think the state and the city realize we need the money. Why are we not taking the money? We have so many initiatives and financial responsibilities that we are faced with that the only responsible thing for them to do is to take the money and people are willing to pay. So, if they embrace and he approves and signs that bill, he will be able to collect the G-E-T. It says here $52 million, at least in the most recent. They're estimating between the $52 million and $65 million annually. He'll be able to collect it from all the other islands and not Oahu. But then the problem though, yeah, if Oahu bans it, then that $52 million or whatever is going to go down. And so it's interesting that lawmakers in their zeal to get the tax money also are overzealous to ban it, in which case they would lose out on the tax money. So how does this make sense? Okay, so there's two sides to this story. So the states collecting the G-E and the T-A-T tax, okay. Effectively almost 5% on G-E and 14% on T-A-T, okay. So they're collecting a good bulk of money, okay. The city feels short change in a way and they're like, well, we're not getting any of that money. But what they fail to recognize is by registering all the BNBs with a registration fee for a permit by registering all the TVUs, let's just say they register 7,500 BNBs and 2,500 TVUs, they're going to collect $11 million annually just right there. Just from registrations. Yeah. They could charge $1,000 for BNBs. They could charge $2,000. Oh, like an annual registration, you say, I see, okay. And then in addition to that, they're failing to recognize all of those people are paying a little higher rate of tax, property tax. So if they drop, if you're renting anything short term, you automatically fall into resume. Right. Okay. So homes that are under a million dollars, which are a good portion of the homes that people share their room, they need that money. Sure. So they fall into that $4.50 range. Right. Because they're under a million dollars. Yeah. Okay. Sure. Then whole home rentals, which make more for renting a whole home, would fall into the $10.50 category. Axis. Right. Okay. So they're collecting all of that too. So everybody gets their fair share. Right. The homeowner makes a little bit of money to offset the high cost of home ownership in Honglulu. And the renter who is paying these high rents has a little opportunity to make a little bit more if they're not fully utilizing, there's a lot of times. People say the problem with the state bill, though, to collect the taxes is that it doesn't give over the private information of where the homeowner lives and what kind of Airbnb they're renting and it doesn't sort over that information. It doesn't. So if you have the TVU or the BNB, you put their registration number on their ad. Sure. Okay. But the registration on their advertising that they are registered here is my registration number and the platform is collecting the tax. That's all they need to know. Sure. You know, there's such a thing as property rights and privacy and you know. Are people putting those numbers on the ads or is that a big problem right now? No, because the state hasn't embraced it and nor has the city. People are trying to get them to say, you haven't issued a permit since 1989. For God's sake. Issue some permits. So there's kind of a culture of fear then around people who are in the shared home sharing industry that, okay, you want us to, you know, put our signature on the line, but if I do that, then what? Are you going to attack me for it or what? At the same time, those people are being scapegoated as, oh, they're not in compliance. They're illegal. They're all illegal and all that. Well, I make everybody feel like criminals. You know, and these are property owners and people that are just trying to get by. Well, at the end of the day though, what does this mean for the average person who's struggling to make it in Hawaii? It means that the kids will have to forgo the extra piano lessons, the extra camping trip, the extra vacation, maybe forgoing private education. I mean, we're all working so hard to give our kids a better life. The city council has put into place to make our lives a better place to live. They're supposed to take care of our parks, our streets, our sewers, our trash. Make Hawaii a better quality of life for us. With these bills, they're harming the economy, they're killing businesses, killing jobs. You know, why don't they go after the real problems, like homelessness? And you know, how about all these homeless people that are roaming the neighborhoods? They're ruining the neighborhoods. Now, what about going back to the economy, and you mentioned there's probably a $1.2 billion impact that the home-shared market is having, if they basically ban the home-sharing industry, then what will that do to our economy? I mean, how is the tourism market going right now, and what would happen? Okay, I think a couple of things are going to probably happen. There's going to be a lot of people that would just go underground. Oh, it would be a black market. Everybody knows somebody in Hawaii, and they're going to be couch-surfing. There might be some new app or something. My family, friend wants a rent, blah, blah, blah, blah. So they'll be all of that, okay? So the state and the city stand to lose all of that, because people invite people to come and stay at their house all the time. What are you going to stop them from giving you money? They're going to give the people money. And the problem with the black market is that black markets are more dangerous, normally. I mean, it's hard to trust people in a black market, because there's less of a rating system, and let's say it's legal and everyone can see it, you've got a five-star rating system. So, you know, the host and the guest are kind of rating each other and trying to verify their experience. Where if it's a black market, that's all secret, and you lose that sort of, I guess, transparency. You also just turn away a lot of visitors. Here we are spending, the state's spending billions of dollars on attracting people to come to our state. Now we're trying to tell them you're not welcome. Sure, and Southwest just came here. And if we cut off the vacation rental industry, then maybe there'd be less demand from those people looking for a deal on flights, too. So, well, I'm sure we could talk a lot more about this issue, and these bills and policies will continue for a little while, at least. But we'll see what happens. Thanks so much, Mary, for joining us on the show. We really appreciate it. You're welcome. Thank you. And my name is Joe Kent. And you've been watching Hawaii Together on the Think Tech Hawaii Broadcasting Network. Thanks for watching.