The Bed and Breakfast Battle in Hawai‘i

Illegal vacation rentals have vexed Kailua and North Shore residents for years. A new city bill purports to solve the simmering issue, but it still won’t be enough. The real problem? The city can’t enforce the current law. We tell you why.

September 12, 2011

Tiffany Hill,

Illustration: Julia Minamata

Kathleen Pahinui has lived in Waialua for more than 20 years and has served on the North Shore Neighborhood Board for a decade. She’s helped fight against resort development and rallied for bike-path improvements. But there’s another problem she says is changing the character of the community. “You know these people are breaking the law, you know what’s going on and there’s nothing that can be done. We need to take back our neighborhoods,” she says. You might think she’s talking about meth labs, cockfighting rings or backroom gambling, when, in fact, what she’s fed up with are … illegal vacation rentals. Pahinui estimates there are 400 illicit operations on the North Shore.

On the other side of the island, in Kailua, Sharon Price says there are eight illegal rentals on her street alone. She and her neighbors noticed them a long time ago (Price has lived in the neighborhood for 24 years). Some residents have recorded license-plate numbers and taken incognito photographs, documenting the unlawful activity. Pahinui says they then turn over the information to the city, but officials don’t follow up. In the past, City Council bills to update the law and expand the number of permits allowed have been introduced—most recently in 2009—but none have passed.

For neighborhood advocates such as Pahinui, illegal B&B establishments and transient vacation units (TVUs), such as houses or condos, are real problems the city hasn’t successfully tackled in decades. “If someone is breaking the law, they should pay the consequences,” she says. “Right now there are no consequences.”

The city Department of Planning and Permitting (DPP), the office tasked with overseeing the regulations, has been shoddily enforcing the law for years and, as a result, the number of illegal rentals has skyrocketed. The lack of enforcement also stunts what could be a more viable alternative to O‘ahu’s traditional tourism model, especially given a recent assessment by Richard Lim, the new director of the state Department of Economic Development and Tourism, who stated that tourism “has been essentially flat for decades.”

Every year, tens of thousands of tourists seek homelike accommodations, whether on O‘ahu, Kaua‘i, Maui or the Big Island. There are 826 legal TVUs and only 49 legal B&Bs on O‘ahu, not even 1 percent of the island’s 25,500 hotel rooms. The city’s failure to effectively implement the 22-year-old regulations also means that it loses out on hundreds of thousands of dollars in fines every year, as well as tens of thousand of dollars in taxes and fees if more B&Bs were to be legalized. It all starts with enforcement, however, something the city seems to be acknowledging. In August, DPP officials started working toward introducing a new City Council bill this fall that could make it easier to bust illegal rental owners. In the meantime, neighborhood advocates stand united against proposals calling for B&B expansions, while some legal B&B owners are tired of having their legitimacy questioned.

Kathleen Pahinui wants to see all of the illegal vacation rentals shut down. Photo: Olivier Koning

What’s the Law?

In 1989, the city implemented a law to regulate and tax B&Bs. Owners who were already operating were given nonconforming-use certificates, which allowed them to keep running their B&Bs, but with new restrictions. They could only rent out up to two bedrooms in their homes for fewer than 30 consecutive days. Owners pay $200 annually for their B&B certificates, and $200 per bedroom every other year when they renew their licenses. Vacation rentals fall under a separate 1986 law, which allows owners to rent out their properties for less than 30 days, hence the vacation designation. The TVUs are only legally allowed in resort districts, such as Ko ‘Olina or Turtle Bay, and in Waikīkī. The biggest difference between a B&B and a TVU is the owner’s presence: B&B owners are supposed to live in the house whose rooms they rent out.

Sharon Price, owner of the legal B&B, Sharon’s Serenity, wishes more B&Bs were licensed and isn’t afraid of the competition. Photo: Olivier Koning

The Law Has No Teeth

Sharon Price lives in a quiet neighborhood. Her single-level home sits on the bank of the Kaelepulu Stream overlooking Mid Pacific Country Club. For 23 years, Price has run Sharon’s Serenity, a legal B&B. Sporting a colorful tunic and bright-pink lipstick, the 70-year-old says she doesn’t feel threatened by the competition from illegally operating neighbors. “With my rates, I don’t have to worry about what they’re charging,” she says; she charges $80 to $95 a night, much lower than others, who charge from $125 to $225 a night. And yet she wants to see them get permitted. “It seems so silly to me that they don’t legalize more. I used to go to the Legislature and talk and I was finally told [last year] I’m beating a dead horse,” Price explains, sitting on the beige leather couch in her living room, her Shih Tzu, Bailey, on her lap. Trade winds rustle the trees outside, which surround her in-ground swimming pool.

On the north side of O‘ahu, Gary and Cyndie Quinn talk story with their visitors, a young couple from Australia. The Quinns own Santa’s by the Sea, a Christmas-themed B&B in Pupukea, and play host to a couple of hundred visitors every year. They keep the fridge stocked with juice, milk, muffins and condiments, offer a welcome book on the small kitchen table listing their favorite restaurants and activities, and have even painted, “May your days be merry and bright,” on a short wall fronting the kitchen.

For years, the Quinns, both former Pan Am and United flight attendants, dreamed of opening a B&B. Two years after they married, they bought a split-level duplex. After months of renovation, they opened their bed and breakfast in 1984, naming it after a Christmas craft fair they used to hold in their home. The Quinns were lucky: They started their B&B before the law kicked in. Today, Santa’s is the only legal B&B on the North Shore.

“It’s safe to say that there are a lot of people in Hawai‘i who could share the aloha on a more personal level if they were allowed to run bed and breakfasts,” says Gary, who also supports expanding B&B licensing.

Expanding B&B licensing is a perennial issue on O‘ahu. (It most recently made front-page news in August.) Each time the topic appears on the City Council’s agenda, vocal opponents storm Honolulu Hale and the bills rarely make it past a second reading. Why? Many residents in attractive, popular communities, such as Kailua or Haleiwa, staunchly embrace a “not in my backyard” mentality, and not just with B&Bs. They have beef with beach-access parking in Lanikai, a Haleiwa hotel development and the slated Target in Kailua. When it comes to B&Bs, they have the city’s poor enforcement-track record to back them up: Hundreds of owners have subverted the law for years, and have easily gotten away with it.

Larry Bartley is one of those unwavering B&B opponents. He is currently the vice chair of the Kailua Neighborhood Board (he was first elected in 1989). Throughout the years, Bartley, a mechanical engineer who says he only vacations at places where he can stay with family or friends, has amassed gigabytes of information and statistics to argue one of his points: The DPP doesn’t enforce the law and illegal rentals adversely impact the community.

Bartley says opponents’ main objection is “the city, with its lack of enforcement and the inability to know what’s going on behind closed walls,” he says. In 2005, he started the community opposition group Save O‘ahu’s Neighborhoods (SON), with the goal of “ending the war and getting our neighborhoods back,” he says.

Kathleen Pahinui has also been a long-time opponent of the illegal B&Bs and TVUs surrounding her North Shore neighborhood. She is the vice chair of the North Shore Neighborhood Board and is also a member of SON. As neighborhood advocates in attractive, coastal communities, both Pahinui and Bartley say they each receive a few calls every month from residents complaining of illegal vacation rentals. For Bartley, most of the calls come from Lanikai residents. Pahinui gets calls from Sunset Beach community members. Neither of them have B&Bs or TVUs in their own neighborhoods, however.

“It’s the loss of community, the loss of peace and quiet,” says Pahinui. She adds that her neighbors don’t like the rotation of short-term renters and complain of congested roads caused by tourists vacationing in illegal beachfront rentals. Bartley says residents adjacent to a vacation rental sometimes resort to calling the cops because of loud parties at 2 or 3 a.m.

Pahinui’s and Bartley’s disgust with unlawful vacation rentals spills over onto the licensed B&B establishments. “If you have your permit and you’ve had it since 1989, so be it,” says Pahinui resignedly. She even has a good friend who runs a B&B. But she claims that some owners pose as B&B proprietors “because they think it sounds better,” which is probably true, even if not all B&B owners are skirting the law.

Gary and Cyndie Quinn named their B&B after a Christmas craft fair they used to host. They’re the only legal North Shore B&B. Photo: Olivier Koning

Nevertheless, they say that resident complaints often fall on deaf ears. “There’s a general unhappiness with the DPP,” says Bartley. He says residents usually have to make several calls to the department, repeating their complaints each time, though repeated complaints seldom result in the termination of the illegal rentals. The department is also ill equipped to receive “evidence” of illegal vacation use, such as photographs and rental-car license-plate numbers, in order to issue civil fines.

How is the law enforced?

If an inspector catches the renters at home, he or she then can send a violation notice to the owner, giving them 15 days to stop operating, says Mike Friedel of the DPP. But if the owner doesn’t comply, inspectors have to start the catching-vacationers-red-handed process all over again. Only then can the DPP issue fines—up to $1,000—and if the owner doesn’t shut it down, an additional $1,000 per day of violation. Friedel says the department receives about 20 to 30 complaints each month, the majority of them for illegal vacation rentals, particularly those in Kailua.

The City’s Side of the Story

Issuing fines is a time-consuming, bureaucratic process, yielding few results. One major problem is the shortage of DPP inspectors—there are only 13—to make sure owners are following the law. Scoping out illegal vacation rentals isn’t even their main duty. These same inspectors are also responsible for investigating various types of city-code violations, such as sidewalk or street obstructions, hedge overgrowth, housing additions and termite damage, to name a few. They are then given 72 hours to follow up on a complaint, hardly a quick turnaround. With only 13 people on the job, islandwide, working Monday through Friday from 8 a.m. to 5 p.m. (when they’re not furloughed), it’s clear why there are so many illegal vacation rentals.

“We’re trying,” says Mike Friedel, the DPP chief of code compliance. “Vacation rentals are one of the most difficult. The complaints are that our teeth don’t bite deep enough.”

Friedel says that’s why the city is hoping to push an enforcement bill through the City Council this fall. If it passes, it will force vacation-rental owners not living on O‘ahu to have an on-island manager visiting the property. The bill will also let the DPP issue fines up to $2,000 per day if an illegal operator is merely advertising, whether on craigslist or in a classified. “If they’re listing it, it demonstrates the use or intent to use,” explains Friedel. He says that B&B and vacation-rental owners will now have to list their certificate numbers and addresses on all advertisements. A quick online search shows that legal B&Bs do just that, but many unauthorized rental owners don’t list their names and use a 1-800 number and a P.O. box. Right now, in order for the city to issue citations and fines to the owner, a DPP inspector has to catch vacationers in the house they’re illegally renting. “It’s not uncommon that our inspectors will go back to a site multiple times and never catch the people,” says Friedel. “If you came here on vacation, you’re not going to spend the whole time in the apartment.”

Friedel says the proposed bill will hopefully boost compliance, but the bill doesn’t include adding more inspectors, a major shortfall in the department’s enforcement, which means it’s unlikely the new policies will make a huge difference.

Bartley says neighborhood advocates are eager to look over the new bill, which they hope will “remove [the DPP’s] last excuse for not enforcing,” he says. He adds that he’s asked the city to form a task force comprising DPP officials and community members to address the current law’s shortcomings, but he’s been turned down because “they don’t want anybody’s opinion,” he says.

It all comes down to funding and resources, says Friedel, of which there aren’t enough to form a task force, or do sting operations, another one of Bartley’s suggestions. Friedel says the DPP has reached out to the Honolulu Police for help in the past, but “it wasn’t well received,” he says. “They don’t have [additional] resources either.”

O‘ahu is not alone in dealing with this issue. B&Bs and vacation rentals also exist on the Neighbor Islands. Former Maui Mayor Charmaine Tavares took a controversial stance in 2009 when she signed a law allowing more B&B permits. But it placed a cap on the number of B&Bs in the various districts. For example, 100 B&Bs can operate in the Kihei-Makena district (there are currently 14), and 88 are allowed in the Paia-Haiku district (there are currently 19). Tavares went further and had authorities shut down illegal B&Bs and vacation rentals—a move that residents applauded but some local businesses and owners deplored. A lawyer who formerly represented the Maui Vacation Rental Association even tried to have Tavares impeached via petitions (the court sided with Tavares’ administration).

“I think at the end of the day … it was the right thing to do, because they could start with a clean slate,” says Pahinui. “No one wants to cause trouble, but, at the same time, it was getting completely out of hand. That’s what we should do [here on O‘ahu].”

Caught in the Fray

The city’s inability to enforce the laws for B&Bs and TVUs also harms those who pay taxes and abide by the law; legal B&B owners such as Price and the Quinns. Ironically, the DPP might not know if licensed operators are still following the law, such as only renting out two bedrooms to fewer than five guests for less than 30 days, and not making structural changes to the rooms they rent. Price says an inspector has never come to her property. Gary says an inspector came to Santa’s once, looked at the kitchen, then left. As long as they pay their taxes and turn in renewal papers, officials don’t ask questions they say. Owners can still face skepticism, though, and some legal B&B operators make a point of keeping off the radar, just to avoid being involved in this contentious issue. Some legal B&B owners declined to speak with us. Calls to illegal operations also weren’t returned—go figure.

However, honesty and respect has worked for the Quinns. “Our neighbors know we run a bed and breakfast and they’ve all been extremely accommodating and considerate,” says Gary. “On the other hand, we are also extremely conscious that we live in a neighborhood.”

It feels like an opportunity for everyone, if only the city would enforce it’s current law, if only the Carlisle administration would take action on the neighborhood controversy that’s been festering for decades, if only the illegal operations would go away, if only the NIMBY’s would cut the legit operations some slack. Hawai‘i still subsists off of tourism, and B&Bs offer an alternative to hotels and support local businesses.

“Let’s get it all cleaned up, then we can maybe have the conversation about where and when,” says Pahinui. “It’s not like we hate tourism, it’s not like we hate tourists, that’s not the point. The point is that everything has a proper place and everything has to be in balance.”