Airbnb on Hawaii: What Is and Isn’t Legal?
Being an Airbnb host offers an opportunity to greet guests from around the world, share the aloha spirit, and earn some extra income. But there are several regulations that govern the Airbnb experience on our islands – many which currently make it difficult to legally host an Airbnb. While this information is not exhaustive nor legal advice, and it is only current at the time of writing, the following are some legal aspects to consider when thinking about becoming an Airbnb host.
Zoning laws dictate whether the property can be legally used as a short-term rental and differ on each island.
Oahu: According to Bill 89, also known as Ordinance 19-18 signed by Mayor Kirk Caldwell on June 25, 2019, there will be a limit on Bed and Breakfasts (B&Bs) on the island. Specifically, no more than 0.5% of the total number of dwelling units in each regional area on Oahu can be used as B&Bs. That’s 1,699 rentable B&Bs on Oahu; 183 B&Bs with legal permits on Koolau Poko (Kailua, Waimanalo, Kaneohe).
(Oahu short-term rental permit limits per district)
No more than 0.5% of the total number of dwelling units in each regional development plan area (DPA) can be used as B&Bs.
The new laws also dictate that new B&B owners can rent two bedrooms to guests and the property owner is expected to reside at home with guests by law.
Other noteworthy changes:
- Ordinance 19-18 would allow about 1,700 permits for B&Bs as soon as October 2020, based on a lottery system. Illegal B&Bs will be placed under heavy fines (think $1,000 to $10,000 a day!).
- Specifically for North Shore B&Bs, excluding Kuilima, no new permits will be given out to that area based on the North Shore Sustainable Communities Plan. However, currently, legal B&Bs at the North Shore can accommodate guests until October 1, when the City will begin issuing those new B&B licenses.
- An online registration system for permitting will be released on October 1, 2020.
- Kuilima Estates East and West, next to Turtle Bay Resort and Golf Course, now permits B&Bs and short-term rentals. The decision was made on February 10, 2020 by the Department of Planning and Permitting (DPP) because Kuilima Estates East & West is within 3,500 feet of a resort zone district greater than 50 contiguous acres. See the map below for the permitted area.
Maui: As of July 2019, there are more than 16,000 units that are legally eligible to operate as short-term rental homes (less than six months) without requiring a Bed & Breakfast Permit or Conditional Permit. They are generally in hotel zones, but homes outside the pre-existing criteria may be legally allowed to operate; as of November 2018, 353 vacation rentals had permission to operate outside of the hotel zone. It is illegal to do a short-term Airbnb rental of a single-family home on Maui. In the Maui county, short-term rental homes with permits can be rented without the owner present.
(Maui short-term rental permit limits per district)
Kauai: Airbnbs are legal in certain Visitor Destination Areas (VDAs) or districts that are zoned for hotels. There are around 3,000 to 4,000 vacation rentals in these areas, and Kauai no longer legally allows short-term rentals outside of these designated areas. If a vacation rental obtained a non-conforming use certificate before March of 2008, then the rental was grandfathered in.
(Kauai short-term rental permit limits by Visitor Destination Area - VDAs are highlighted in red)
The Big Island: Under Bill 108, short-term vacation rentals on the Big Island are now defined as dwelling units with no more than five bedrooms for rent, rented for 30 consecutive days or less, where the owner does not live on site. New short-term vacation rentals are not allowed in single-family residential and agricultural zones and are only allowed in hotel, resort, commercial and multi-family commercial zones. Airbnb is also expected to collect lodging taxes from guests of short-term rentals. All existing vacation rentals as of April 2019 must have registered by September 28, 2019.
COVID-19 added further limitations to Hawaii Airbnb, especially on Oahu.
The question of is Airbnb legal in Hawaii continues throughout the coronavirus pandemic and adds further restrictions for many Hawaii vacation rental owners and travelers who want to experience paradise outside a hotel.
Hawaii Airbnb laws became more complex on Oahu and the other islands during the COVID-19 pandemic. The mayors of Maui, the Big Island, and Kauai restricted vacation rentals in March 2020, but on June 16 they allowed legal Airbnbs to operate again – only to guests who do not have to do Hawaii’s mandatory 14-day quarantine, which is expected to be lifted on September 1, 2020.
Hawaii Airbnb on Oahu continued to have added laws to follow. Honolulu Mayor Kirk Caldwell still has emergency orders prohibiting Airbnbs and vacation rentals from operating, as of this writing in mid-July 2020. Mayor Caldwell said on June 26, 2020, “Illegal rentals remain a problem on Oahu, and until we see the impact of the out-of-state travel modified quarantine and whether people are breaking quarantine to stay in illegal rentals, I would not want to see violators in our communities, where it is more difficult to monitor them.”
Airbnb listings – whether legal or illegal – must abide by Hawaii tax laws.
(1) Certificate of Registration: Airbnb hosts must obtain a Certificate of Registration from the Hawaii Department of Taxation, as required by Hawaii state law. After successfully obtaining the Certificate of Registration, Airbnb hosts are required to post the Tax ID on their online listing.
(2) Transient Accommodations Tax: After registering and obtaining a Tax ID, Airbnb hosts are ready to pay their taxes to the state! The Transient Accommodations Tax is applied to stays of less than 180 days. As of January 1, 2018, the Transient Accommodations Tax is 10.25 percent.
(3) General Excise Tax: Hawaii does not have a sales tax; instead, we have the General Excise Tax (GET), which is assessed on all business activities, including short-term rentals. The current GET is 4.712 percent on Oahu.
(4) Property Tax: The property taxes in Hawaii differ according to county.
As of July 1, 2020, Honolulu City and County, which encompasses the island of Oahu, has a new property tax class: bed and breakfast home (Class J). A legal Airbnb in Hawaii on Oahu would most-likely fall into this class, and the tax is 0.65% of the assessed value. Read more about Honolulu property taxes here. In short, bed and breakfasts are defined as rentals of less than 30 days where the homeowner or another operator is present during the stay, which is ultimately the definition of an Airbnb in Hawaii. A typical B&B might be when someone has a room rental in their own home where they live. Transient vacation rentals (TVRs) are defined as “unhosted” or “whole home” rentals of less than 30 days, where an owner or operator is not present; TVRs are taxed in the hotel & resort class at 1.39%.
The real property tax rates on Maui County, which includes the island of Molokai, is $11.08 per $1000 net assessed value for “short-term rentals,” like Airbnb, and $10.70 per $1000 net assessed value for “hotel and resort” zoned property, as of July 1, 2020.
In Kauai County, the 2020 property tax rates for short-term accommodations are $9.85 per $1000 net assessed valuation for “vacation rental” properties and $10.85 tax rate for “hotel and resort” zoned properties.
On Hawaii County, or the Big Island, there is no vacation rental or short-term rental tax classes. The tax rates that may apply to an Airbnb in Hawaii County are the hotel/resort property tax, which is $6.15 per $1000 net taxable building, as of July 1, 2020 to June 30, 2021.
Construction laws and neighborhood rules add additional regulations to Airbnb listings.
Building and Housing Standards: Oahu’s Building Code and Housing Code specify the minimum requirements for construction, maintenance, health, and safety. Regulations differ between residential and non-residential uses and between islands, so consult the codes for more information.
Other Rules: There may be other contracts or rules that regulate your potential Airbnb listing, such as leases, HOA rules, or co-op or condo board rules. Read lease agreements or check with the appropriate parties if applicable.
Enforcement of the laws and regulations is not an easy endeavor.
The Hawaii Appleseed Center for Law and Economic Justice estimates 23,000 vacation rentals exist in Hawaii, many of which are illegal.
Inspectors on each island try to enforce the zoning laws. But with thousands of Airbnb listings and less than twenty zoning inspectors in each county, enforcement is problematic. Online advertisements do not provide enough evidence to prove an Airbnb listing is illegal. Inspectors must obtain information like the visitor name, the duration of their stay, and documentation of compensation. Once the inspector does have enough evidence and issues a violation notice, the Airbnb host has 30 days to make corrections, or they will be fined.
Also, it is difficult for the state to determine whether Airbnb hosts pay the state taxes. Because of privacy laws, the State Department of Taxation is currently trying to obtain a subpoena to collect host information from Airbnb.
Lastly, the City and County of Honolulu released an online form on 12/23/2019, asking the public to report any suspected illegal Airbnb rentals. So far, there have been many reports of inspectors following up on leads.
While there are several controversial and potentially changing regulations that govern Airbnb listings, the benefits of becoming an Airbnb host may outweigh the bureaucratic burdens. Consult a lawyer, an accountant, the Department of Planning and Permitting, the Department of Taxation, or other county or state agencies for more information.