Honolulu City Council passes new short-term rental restrictions for Oahu

Oahu vacation rentals in residential areas will have a minimum rental period of 90 days under a new ordinance approved by the Honolulu City Council. Operators currently offering rentals for stays of between 30 days and 89 days will be able to continue offering those for 180 days after the new rules go into effect; after that, they must offer minimum stays of 90 days.

The law also restricts permits for vacation rentals to resort-zoned areas including Waikiki and Ko Olina, and prohibits vacation rental guest parking in rural, apartment, or residential zones. Under the new rules, short-term rental renewal fees are reduced from $2,000 or $500.

Mayor Rick Blangiardi signed the bill into law on April 26, and it will go into effect in mid-October.

Opponents of the new ordinance assert that Honolulu doesn’t effectively enforce its existing short-term rental law, which was passed in 2019. Implementation of the regulations was delayed due to the COVID-19 pandemic and potential issues with the law, and new enforcement positions that were created with the legislation were never funded.

Airbnb — after several court battles — agreed in 2019 to share some information on its short-term rental hosts with the state, making it easier for authorities to enforce tax regulations.

Over the past few years, Airbnb and Expedia Group (parent company of HomeAway and Vrbo) entered into agreements with Honolulu, Kauai, and Maui authorities to enforce short-term rental laws. Under those agreements, the marketplaces require hosts to provide government-issued property identification and/or tax registration numbers in order to be listed. However, because Honolulu never issued the new short-term rental permits allowed by the 2019 law, the agreements with Airbnb and Expedia didn’t go into effect.

Oahu isn’t the only island in Hawaii getting stricter with short-term rentals. In January, Maui banned new construction of transient accommodations, including short-term rental properties, timeshares, and hotels, for up to two years, unless the county approves new legislation to address tourism management before then.

Hawaiian counties have also increased taxation on vacation rentals, with the help of a state law that allows counties to levy their own transient accommodation tax (TAT) surcharge of up to 3% in addition to the state’s 10.25% TAT. Hawaii, Honolulu, Kauai, and Maui counties have all passed their own TAT surcharges. Vacation rental operators must pay the tax based on their gross rental proceeds, but can pass these taxes on to guests. Short-term rental income in Hawaii is also subject to state TAT and general excise tax (GET), which can be passed on to guests.

Honolulu transient accommodations operators must be registered with the state’s Department of Taxation, file regular tax returns, and pay county taxes to Honolulu tax authorities and state taxes to state authorities.

While vacation rental marketplaces such as Airbnb and Vrbo collect taxes on behalf of their hosts in many states, they’re not allowed to do so in Hawaii. That means Oahu hosts are responsible for taking care of all tax obligations, including registering, filing lodging tax returns, and paying taxes to both the state and the county.

MyLodgeTax can help Hawaii short-term rental hosts automate registration and filing for state and county TAT and state GET. For more on lodging taxes in the state, see our Hawaii vacation rental tax guide. If you have tax questions related to vacation rental properties, drop us a line and we’ll get back to you with answers.