SB 2089 Advances Through the House

12 mile Kalalau trail leads to the picturesque Napali beach. Does the Bill SB2089 bring you Aloha?

On March 6th, the Hawaii State Senate passed 372 Senate Bills during its session. Shouldn’t that feel as exhausting as hiking the 12 mile Kalalau trail along the Napali coast? Perhaps, but do all these bills lead us to an image as picturesque as the Napali beach?

According to individual vacation rental owners rebelling against Senate Bill 2089, this one will certainly not.

Senate Bill 2089 was forwarded from the Senate Committee to the House. The vote passing it forth was a lopsided 24 in favor, 1 opposed.

Senator Sam Slom, the lone dissenting vote, answered a supporter’s question of what he saw in the Bill that made him oppose it. Senator Slom offered a succinct response:

Dear Gordon,
Thank you for your email. I saw:
1) An unconstitutional bill

2) An unfair cost burden to out of state owners.
It is as simple as that.
Aloha, Sam

Yesterday, March 8th, SB 2089 passed its first hearing by the House and is scheduled for a second hearing on Monday, March 12th.

In the meantime, homeowners continue to band together – creating action groups and strategizing on how they can best have their voices heard.

They continue to submit testimony in opposition to the bills. Other homeowners contend that SB 2089 violates NAFTA. Still others have reached out to the American Civil Liberties Union for support. Attorney Gregory Kugle is arguing that SB 2089 discriminates against non-residents and is therefore unconstitutional, a view echoed by many scholars of constitutional law.

John Eckel, a principal organizer of the homeowners group, summed up his opposition in six points, ending with an appeal:

1. It will do significant damage to tourism and non-resident property owners.

2. It reduces visitors’ right of free choice to decide if they would like to rent directly from an owner or instead go through an agent.

3. It will reduce property values since it will make it less attractive to own property in the State of HI. This will result in lower property taxes.

4. It is unconstitutional since it discriminates against non-residents.

5. The Department of Taxation testified in 2007 that there was not a substantial non-compliance problem. There has not been any hard data submitted to suggest that situation has changed.

6. This appears to violate the provisions of NAFTA (North America Free Trade Act).

These are all substantial issues that must be considered and addressed before the bill should be approved. This will take time. Please do NOT rush this bill through. The damages will be very consequential both for the State of Hawaii and the non-resident property owners.

One of the difficulties faced by individual homeowners confronting this law has been awareness of its existence. Although they’ve been actively working to get word out, there are organizational challenges. The homeowners – though many are out-of-state and distanced from the legislative process, in different time-zones – the homeowners communicate with each other on-the-go. Many are organizing using the same media they use to promote their vacation homes: forums, blogs, social media, email and phone trees.

Reading their exchanges on public forums, the confusion and anger caused by these bills is palpable. Homeowners feel they’re being railroaded with not one but three separate bills that, if passed, will cost them dearly. One of the Bills – HB 1707 – has been deferred. Attention is now focused primarily on SB 2089, which would require the following:

Requires any nonresident owner who operates a transient accommodation located in the nonresident owner’s private residence to employ a real estate broker or salesperson. Requires any nonresident owner who operates a transient accommodation located in the nonresident owner’s private residence in a condominium hotel to employ a condominium hotel operator. Requires relevant information about owners of the transient accommodation to be provided to the department of taxation for enforcement purposes. Requires the counties to provide the department of taxation with relevant owner information about every transient accommodation permitted by the respective counties annually. Establishes fines for noncompliance. Provides an exemption from the mandatory employment of a licensed real estate broker or salesperson or condominium hotel operator in certain circumstances.

Homeowners feel that they’re being faced with multiple, unclear bills that will compromise their business. What’s worse – doubts persist over whether or not Senators read through or even counted testimony against SB 2089 before it was sent to the House. One homeowner posted the following:

A friend of mine spent some time reviewing all the testimony on the SB 2089 posted last week, and gave me permission to share with you all. It is rather interesting:

• Total votes to support – 28
• Total votes to oppose – 706

1 vote to defer from Mike McCartney – Pres & CEO Hawaii Tourism Authority

FYI – Vast majority of those supporting were just a vote. No comments or documentation. Those opposed were very detailed and fact oriented.

In response, one user commented,

The legislators may be pinched for time, and aren’t giving the testimonies the time they should.

In reference to the State House passing 300 bills primarily aimed towards boosting the economy, another blogger wrote:

Any group of people that can pass 300 bills in what? a week? is not paying attention to what they are doing.

Why is Rentini so invested in these issues? This Bill hits close to home. Some of us run our own rentals in Hawaii via other states like NY and California, and we have friends – and clients – that do too. We support them as much as we support you.

Let’s hope the bill doesn’t pass. Either way, Rentini will stand behind homeowners. We are working on features to minimize the impact of the Bill shall it pass.

We would like to hear from you.

Why are you opposed to SB 2089? Are you a frequent visitor of the islands, or do you own a home there? Regardless of who you are we encourage you to submit your stories about dealing with individual owners versus management companies. We’ll publish your best stories and forward them to the journalists we know.

Let’s spread the word and fight this together!

Publish your stories as comments below.

Shh..don’t tell anyone yet…let the Bill get passed!!!

Gallery

A specter haunts vacation rentals by owner in the state of Hawaii. The problem is a pressing one.

In January of this year, two bills were introduced to the Hawaiian legislature that could effectively end the practice of vacation rentals by owner as we know it, and turn the industry in Hawaii on its head.

The first Bill, Senate Bill 2089 calls for any non-resident of Hawaii who rents out their vacation rental accommodation to employ a property manager who has been approved by the real estate commission. The second, House Bill 1707, requires that any non-resident property owner in Hawaii who rents their housing short-term must do so through a licensed real estate salesperson or broker. The middleman must then collect all applicable taxes for the rental of the property or the owner is penalized.

One proponent of the measure evidently sent an email to fellow Realtors and property managers celebrating the possibility of 1707’s passage. The email is telling:

I didn’t have time yesterday to provide written testimony but they passed the initial Bill with a complete affirmative vote from the House…The Bill will require all mainland owners who rent their homes or condos out to have a licensed Realtor on island …ie …Bayer …vinson… Berndt…this way the State can make sure everyone is paying their GET and TAT… yee hahhhhlll! But don’t tell anyone yet…let the Bill get passed! !…then we can get some $$$…unless they find a cheap Broker who will represent them for cheap…

But it was too early to celebrate a victory. Concerned homeowners mobilized and took action. At a public hearing on February 23, thanks in large part to the testimony from vacation rental owners that pay their taxes on time and employ local Hawaiians to maintain their homes, HB 1707 was “deferred”. A temporary victory for vacation rentals by owner in Hawaii, but it would be premature to start dancing the Hula just yet.

The ending of HB 1707 is not an outright win, as that first Bill – SB 2089 – still awaits its hearing. If proponents have it their way, on Tuesday, February 28th, SB 2089 would again interject a middleman into already established private rental businesses in Hawaii.

Tuesday’s hearing will again bring proponents of this bill out into the open, revealing the powerful Realtors interests that gave birth to these bills. Many vacation rental owners who would be adversely affected by this bill are not aware that it is out there. If owners do not push back, SB 2089 could pass.

To Submit testimony online, click here and hit the blue Submit Testimony button.

To ensure the CPN Committee receives the testimony it is essential to duplicate the message to cpntestimony@capitol.hawaii.gov by 10:00 am Hawaiian Time on Monday Feb 27.

Meanwhile, many are challenging the constitutionality of the bills. Attorneys and constitutional scholars point to the targeting of non-residents of Hawaii as blatantly discriminatory and unconstitutional. Gregory Kugle, representing the Hawaii Vacation Rental by Owners Association, authored a widely distributed letter in opposition to the bill on these grounds.

The technology of the Internet has made do-it-yourself solutions more popular than ever. It is no surprise that vacation rentals by owner has grown into such a huge industry, one that continues to threaten management companies that have traditionally acted as intermediaries, charging large sums of money and taking up to 50% commission plus other fees on rental transactions.

Individual owners have long complained that this arrangement is deeply unfavorable to them. With a simple Internet connection, many have taken the responsibility of management upon themselves.

SB 2089 can be viewed in this light. If it passes on Tuesday, the old way of business will enjoy a revival while the fate of vacation rentals by owner in Hawaii will likely take a nose-dive. Many homeowners familiar with the bill say that the stakes are too high and they will sell if it passes.

One homeowner I spoke with from California ended the conversation by saying:

I know most of the management companies on the East side of the Big Island, and I wouldn’t trust any of them with my house or my money. To me, this is the realtors wanting this legislation. I just don’t think it will work the way they think it will. Two realtors [I know of] (one of them a vacation rental property manager), has lost one home to foreclosure and the other one had to file for bankruptcy. My help on the island had her realtor’s license, but I think she let it expire. What I don’t get, is that I would have to give up the handling of the rent completely and it would go through a management company in Hawaii. I think I will sell before I do that.

If SB 2089 passes, it may be Hawaii that loses in the end.

A Hawaiian resort before bill SB2089

Think of it as it was before and after!

... and after bill SB2089

Do you own a property in Hawaii?

What is your position on SB 2089 and HB 1707 ?

What if every state adopts the same practice to force all out-of-state residents to employ a broker for running vacation rental business?

 

 

Does the SB 2089 sound unconstitutional to you?

Attorney’s letter to Senator Baker from Hawaii Vacation Rental Association

 

 

 

No more Aloha in the Aloha state if you are a vacation rental owner outside the islands!

Tax Breaks, and Your Place: Benefits of Renting Your Second Home

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Did you know that if you rent out your second home for fewer than 14 days a year, then it is not considered a rental property? Did you know that the money you collect by renting for fewer than 14 days a year is tax-free?


That’s right. It’s known as the “Masters Provision,” named after the Augusta National Golf Club in Augusta, Georgia where the Masters Tournament takes place each year. Homeowners around this sprawling, green golf course have caught on early that they can rent out their homes and collect a pretty penny from visitors attending the tournament, and simply pocket the money – tax-free. But you don’t have to have a house in Augusta, Georgia to do this. And you don’t have to rent out your second home for such a minimal amount of time to make a big profit.


Check out this article written by Lauren Baier Kim of the Wall Street Journal to learn how taxes work for vacation rentals. For an in-depth look at taxes for second homes, refer to what the IRS says regarding the Rental of Vacation Homes.