Honolulu mayor signs bill to create hospitality tax category

HONOLULU — Honolulu’s mayor signed a bill creating a new tax classification for owners of Oahu properties where bed-and-breakfast establishments are operated.

Mayor Kirk Caldwell signed into law the measure for what is known as hosted vacation rentals, The Honolulu Star-Advertiser reported.

The properties are defined as rentals of less than 30 days where an owner or operator is present.

“This bill carries out the next phase of the city’s ordinance that is successfully clamping down on illegal short-term vacation rentals,” Caldwell said in a statement. “This next phase allows 1,700 hosted short-term vacation rental units to be registered and permitted starting in October 2020.”

The bill also places transient vacation units into the existing hotel-resort category. The transient units are also known as unhosted or whole home vacation rentals, which are defined as rentals of less than 30 days where an owner or operator is not present.

Vacation rentals are not allowed on properties zoned for residential use unless specifically permitted by the city.

Thousands of illegal vacation rentals have opened on Oahu and earlier this year the city council passed a new, comprehensive ordinance allowing new rentals but punishing illegal operations.

Tax rates are determined annually by the city council and the effect of the new law is expected to be a bed-and-breakfast tax rate higher than the $3.50 per $1,000 of assessed value owners in the residential zone now pay.

“It’s only fair that owners who operate their homes as short-term vacation rentals pay a higher real property tax rate than the residential category of $3.50 for every $1,000 of value,” Caldwell said.

He added: “We must not forget that those who are offering their homes as short-term vacation rentals are operating a business in our residential neighborhoods.”