Hawaii state law allows counties to phase out short-term rentals

Hawaii has passed a law giving counties more powers to regulate short-term rentals (STRs), including phasing them out altogether, in an effort to help relieve the state’s housing crisis.

Governor Josh Green signed Senate Bill 2919 on May 3. The law specifies that counties have the power to regulate the time, place, manner, and duration of land and structures, as well as to phase out STRs through zoning regulations in residential and agricultural zones. Counties also have the power to allow transient accommodations for up to 180 consecutive days. The law states: “The powers granted herein shall be liberally construed in favor of the county exercising them.”

This bill provides counties with home rule authority to prohibit vacation rentals. Counties must create their own legislation to regulate transient accommodations. Around 90,000 STRs are operating in Hawaii, according to the governor.

The law won’t affect properties participating in leasing programs for families in need run by state and federal agencies.

Following the passage of the state law, Maui Mayor Richard Bissen introduced a bill to phase out STRs in apartment districts in Maui County. STRs in these areas are on the “Minatoya list,” which was created in 2001 in a legal opinion by Richard Minatoya, then deputy corporation counsel for the county. According to the opinion, condos that were built before 1992 and had already been approved for STR use by their condo associations could continue to operate as short-term rentals of fewer than 180 days. To do so, they had to have a permit from the county or state and not pause STR use for more than 12 consecutive months.

Currently 7,167 of these properties are on the Minatoya list. Under the new county bill, 2,200 of those in West Maui would be phased out by July 1, 2025. The rest of the properties on the list would have until January 1, 2026, to cease operations as STRs.

The bill will be presented to planning commissions on Maui, Molokai, and Lanai for their recommendations. After those recommendations are added, the bill will be presented to the county Housing and Land Use Committee, then the Maui County Council will consider the proposal.

In Hawaii, STR income is subject to state and county transient accommodations tax (TAT) as well as general excise tax (GET). STR operators must pay the taxes based on their gross rental proceeds but can pass these taxes on to guests. Hosts must be registered with the state’s Department of Taxation and file tax returns as well as follow county lodging tax rules.

While STR 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 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.

Avalara 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.