Judge rules against part of new Honolulu short-term rental regulations

A federal judge has blocked part of a restrictive Honolulu short-term rental law shortly before it had been scheduled to go into effect October 23. However, the city started enforcing the rest of the ordinance October 24.

U.S. District Court Judge Derrick Watson issued a preliminary injunction prohibiting the City and County of Honolulu and Department of Planning and Permitting from implementing or enforcing the part of the law that bans rentals of between 30 and 89 days in non-resort areas. Under older laws, short-term rentals were defined as rentals of at least 30 days.

While the city is not enforcing the ban of rentals between 30 and 89 days due to the order, Honolulu Mayor Rick Blangiardi said in a press conference that it would aggressively enforce other provisions of the law, including the ban of rentals of less than 30 days in residential areas.

Under the ordinance, violations could result in fines of up to $10,000 per day. The new 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.

The city also launched its registration website on October 24, and short-term rental owners in resort districts, who can offer short-term rentals for less than 30 days, must register their properties there.

The judge’s ruling came in response to a lawsuit filed by the Hawaii Legal Short-term Rental Alliance Group in June. The group sought exceptions from the law for their legally operating short-term rental properties that were established prior to the law’s passage in April of this year.

Hawaii’s first short-term rental laws, passed in the 1980s, restricted short-term rentals outside of resort areas, offering exceptions to vacation rental properties that had already been established — at the time there were around 800 of them. Honolulu hasn’t issued any new short-term rental permits since 1989. However, it’s estimated that as many as 10,000 short-term rentals were operating on Oahu by the late 2010s.

In response to community concerns about neighborhood disruption and affordable housing issues, the city passed a new short-term rental law in 2019. Opponents of the new ordinance said that Honolulu didn’t effectively enforce the 2019 law. Implementation of the regulations were 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.

Honolulu isn’t the only county that has had its short-term law blocked by a judge recently. In June, a Kona judge overturned a Hawaii County measure that bans short-term rentals in agricultural districts. The county said it planned to appeal the decision.

In Hawaii, short-term rental income is subject to state and county transient accommodations tax (TAT) as well as general excise tax (GET). Vacation rental operators must pay the taxes based on their gross rental proceeds but can pass these taxes on to guests.

Hawaii 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.