Rental Rules on Oahu
Short-term Rental Rules on Oahu
Hawaii is both a vacation paradise, and one of the most expensive places to live in the country. It makes sense that many homeowners try to make some money by renting their properties out to tourists, but most of them aren’t following Oahu’s rental rules. Last fall, the Honolulu Planning Commission passed a proposal by Mayor Kirk Caldwell to regulate Oahu’s short-term rentals. Under the proposed law, short-term rentals – units rented out for less than 30 days – are capped at 1 percent of the housing stock in every planning district. Now it’s up to the Honolulu City Council to refine and pass a bill, which Caldwell hopes will be ready for him to sign this summer.
Thousands of Illegal Short-term Rentals Operating
According to Hawaii Business, there are an estimated 8,000 to 10,000 vacation rentals in operation on Oahu at any time. Many of them are illegal, since no new permits for such short-term rentals have been issued since the 1980s, but shutting them down isn’t an easy task for law enforcement. Although all you need to do is go online and check ads for short-term vacation rentals, that doesn’t mean that what the property owner is advertising is legal. Since just placing an ad isn’t against the law, inspectors generally respond to neighbors’ complaints when investigating a short-term rental.
Vacation Destination Area
In order to rent out a home short-term, the property must be located in a Vacation Destination Area (VDA). Areas outside the VDA permit long-term rentals, those exceeding six months.
Short-Term Rental Taxes
If you rent out your home on a short-term basis, you must collect and pay the appropriate taxes. You may owe federal taxes on the income, but you must also charge your visitor the Transient Accommodation Tax (TAT) for any rental of less than 180 days. If the guest stays longer than six months, you must charge the General Excise Tax (GET). In addition, you’ll need to acquire a permit and a business license registration. Violate the rules, and penalties are steep – they start at $10,000 per day. Mayor Caldwell admits that’s draconian, but it is a strong incentive for preventing illegal short-term rentals.
Other Rules Affecting Short-Term Rentals
While Oahu’s short-term rentals laws are important, they aren’t the only regulations to take into consideration if you considering renting out your property. Your homeowner’s association may not permit such rentals, even if your property is located in a VDA, and even more critically, neither may your mortgage company. The contract with your lender may contain language regarding renters vs. an owner-occupied property, and violating the terms of the contract could change your payment schedule and insurance coverage. Before going any further down the short-term rental route, contact your insurance agent. They will explain what you need to do to ensure you are covered if you rent out your property.
Contact Us
If you’re looking to buy or sell a home or find a rental property, you need a knowledgeable, experienced realtor. We’ll help you find the right home at the right price for you, or the right short-term or long-term vacation rental. Contact Island Realty Group LLC at 808-689-7407 or IslandRealtyGroup@irghi.com.
