SB704 SD2.DOC

SECTION 1. The legislature finds that the increase in popularity of online vacation rental platforms means that some visitors to Hawaii are turning to alternative lodging options, such as short-term vacation rentals, as part of their accommodations to the State. As a result, online vacation rental platforms are disrupting the State's tourism industry and economy, as the owners and operators of some of these short-term vacation rentals are not paying transient accommodations taxes or general excise taxes, resulting in a loss of state revenue. Counties are also losing revenue when an owner of a vacation rental receives "home owners" discounts on property taxes paid for a residential home that is used for commercial purposes without a commercial property rate. Furthermore, some properties that are being leased out as vacation rentals are properties that could have been added to the stock of affordable housing available for lease or sale to Hawaii's residents, thereby ameliorating the State's affordable housing crisis. From a consumer protection perspective, visitors who stay in vacation rentals may not be getting what is advertised, as some vacation rentals are falsely advertised and even unsafe for group occupancy. Unsafe stays and unfavorable reviews or references of such stays can be detrimental to Hawaii's reputation as an elite tourist destination.

The legislature further finds that the regulation of short-term vacation rentals has been contentious not only in Hawaii, but other places as well. For example, the city of San Francisco recently passed legislation that subjects hosting platforms, including online vacation rental platforms, to criminal penalties and fines if they provide a booking service for residential units to be used for tourist or transient use without registering with the appropriate government entity. As a result, there is currently pending litigation between online vacation rental platforms and the city of San Francisco in federal court.

Because online vacation rental platforms affect state and county interests in many ways, it is critical that data collection on this industry be accurate, timely, and informative. The collection of the transient accommodations tax and general excise tax is the responsibility of the State, but the counties receive a large portion of the transient accommodations tax and the city and county of Honolulu additionally receives most of the surcharge on the general excise tax for a rail transit system. The State has a vested interest in effectively and independently monitoring whether persons engaging in online short-term vacation rentals are paying taxes owed. Additionally, the State and counties share an interest in identifying and tracking the number of housing units that are dedicated to short-term vacation rentals and calculating the projected short- and long-term impacts that these rentals have on existing housing for Hawaii residents. Lastly, better data collection on online short-term vacation rentals will better ensure adherence to laws and codes that protect the safety of occupants and help perpetuate Hawaii's brand as a high-quality and safe vacation destination.

The legislature also finds that short-term vacation rentals present a complex issue that also involves enforcement challenges, including those relating to real estate licensing laws and the residential landlord-tenant code.

The purpose of this Act is to establish an online vacation rental working group to:

(1) Develop effective data collection methods that can assist state and county governments in monitoring the impact that short-term vacation rentals have on tax collections, housing stock, and the State's brand as a vacation destination; and

(2) Address compliance and enforcement challenges, including those relating to real estate licensing laws and the residential landlord-tenant code;

(3) Create effective proposals in which government-subsidized rental housing and long-term leasehold housing can be assured to remain in long-term rental or eligible rental use for a mandatory time period.

SECTION 2. (a) There is established an online vacation rental working group that shall be administratively attached to the department of business, economic development, and tourism.

(b) The online vacation rental working group shall consist of the following members:

(1) The director of taxation, or the director's designee;

(2) The director of commerce and consumer affairs, or the director's designee;

(3) The attorney general, or the attorney general's designee;

(4) The president and chief executive officer of the Hawaii tourism authority, or the president and chief executive officer's designee;

(5) A representative of the Hawaii hotel and lodging industry to be selected by the Hawaii Lodging and Tourism Association;

(6) A representative of the Hawaii Association of REALTORS;

(7) A representative of Unite Here, Local 5;

(8) Two representatives from businesses that operate short-term rental internet platforms, to be selected by the governor;

(9) Two individuals who operate currently licensed short-term vacation rentals in good standing in residential communities in the State, to be selected by the governor;

(10) Two members of publicly elected community organizations, such as neighborhood boards, who are from communities with a higher-than-average number of vacation rentals listed online, to be selected by the governor;

(11) One representative from each respective county, to be appointed by its respective county mayor;

(12) One individual to be appointed by the senate president; and

(13) One individual to be appointed by the speaker of the house of representatives.

(c) The members of the online vacation rental working group shall select the chairperson of the working group from among themselves. Members of the online vacation rental working group shall serve without compensation for their service on the working group but may be reimbursed for reasonable expenses, including travel expenses, incurred for serving on the working group.

(d) The online vacation rental working group shall:

(1) Develop effective data collection, including:

(A) Establishing a means by which counties and state government can monitor the number of units being offered as part-time and full-time vacation rentals and the number of multi-unit operators versus in-home operators;

(B) Projecting growth and locations of vacation rental markets by region; and

(C) Identifying impacts, if any, on local and regional real estate markets, long-term rental housing availability and rate of rents, and property tax rates;

(2) Address compliance and enforcement challenges, including those relating to real estate licensing laws and the residential landlord-tenant code; and

(e) The online vacation rental working group shall submit a report of its findings, recommendations, and proposed legislation to the legislature no later than twenty days prior to the convening of the regular session of 2018, and shall be dissolved on June 30, 2018.

(f) The online vacation rental working group may call upon various state and county government entities to assist with gathering information and drafting of its report, including the department of business, economic development, and tourism's research and economic analysis division; housing officers at state and county levels; and planning officials at state and county levels.

SECTION 3. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2017-2018 for the online vacation rental working group to perform its duties pursuant to this Act.

The sum appropriated shall be expended by the department of business, economic development, and tourism for the purposes of this Act.

SECTION 4. This Act shall take effect on July 1, 2050.

THE SENATE	S.B. NO.	704
TWENTY-NINTH LEGISLATURE, 2017		S.D. 2
STATE OF HAWAII