Vacation Rental Legislation is Deceptive04/16/2012
Is it really about unpaid taxes?
The Hawaii Legislature, under the guise of enforcing existing tax laws, is proposing to essentially deprive off-island property owners of their legal rights to manage their own properties.
Why? Because hotels and property managers are seeing their traditional model of a monopoly visitor industry placed at risk due to a burgeoning direct rental movement.
So they are trying to change the rules.
Current landlord-tenant law requires that an off-island owner must appoint a local agent for emergency response. There is no restriction on who that agent can be. It could be a neighbor, a housekeeper, a local contractor.
Proposed changes will limit who that person can be. It can continue to be a neighbor, a housekeeper, a local contractor BUT they can only be an agent for a single owner. And who can represent multiple owners? You guessed it – a licensed realtor or property manager!
Is it really about consumer protection?
Proponents will say – the visitor needs a local contact 24/7 and a non-resident owner cannot provide that. So the name of the local contact must be listed in all advertising. Really?
So – there is a tsunami warning. Quick – let’s look up that VRBO ad and see who our local contact is! Or – quick – let’s look at our rental agreement and see who to call!
No – this is about vigilantism. This will allow “someone” to police our ads to see if the same local contact name appears more than once and then to presumably pressure them to drop the client or report the local contact to the DoT for enforcement action.
So who is not transmitting taxes to the state?
Nobody really knows because there are no real studies identifying that there is a problem or what the extent of the problem might be.
Will these new laws result in better tax compliance and will they reduce illegal operations?
No. The legality of transient rentals is determined by county laws – not state laws. The county needs to enforce existing laws and the Department of Taxation needs to do the same. Adding this new layer of laws penalizes existing legal vacation rental owners, enriches property managers, and destroys the livelihood of thousands of Hawaiians who are providing housekeeping, maintenance and construction services to the off-island owners. And when these owners sell their properties because they can no longer afford to operate them after the property managers take their hefty cut, the tenuously recovering real estate market will once again spiral into decline.
Visitors are noticing. Can Hawaii afford to be branded an unfriendly place for visitors and investors?
About the author: Meera Kohler grew up in India and has lived in Alaska since 1976. She is the CEO of a non-profit rural electric utility that provides electricity to 54 small, indigenous Alaskan communities. As many Alaskans who identify with Hawaii as their sister state, she has been a regular visitor to the Islands since 1990. Her only grandchild is named Hana, in honor of the wonderful island of Maui. She and a friend invested in their Hawaiian dream in 2009 and share their oceanfront condo with family, friends and visitors through the Internet.