The ordinance that made levies heavy fines on short-term rentals in Honolulu remains in effect, however, for any new rentals beginning operations after the ordinance was put in place.

by Candace Cheung, Court House News, December 21, 2023

HONOLULU — Despite a 2022 ordinance that made short-term rentals illegal, a federal judge ruled Thursday that members of a group of property owners running these rentals can continue renting as they have done for years.

U.S. District Judge Derrick K. Watson sided with a group of short-term rental owners in his ruling, granting summary judgment to them and allowing existing short-term rentals to continue operations and advertisement.

The Hawaii Legal Short-term Rental Alliance first contested the April 2022 passing of Ordinance 22-7 as it would redefine “short-term” from a minimum of 30 days to 90 days for residential properties — a change that meant any rental period from 30 to 89 days would be prohibited and subject to thousands of dollars in fines.

Watson had granted the group a temporary injunction allowing for them to operate under the 30 day minimum just before the ordinance was set to go into effect on October 2022, but his new ruling grants them a permanent injunction, though it doesn’t apply to any short-term rentals that didn’t exist before the ordinance was put in place.

The alliance — made up of existing property owners and managers, some of whom had been operating these short-term rentals since the establishment of the city’s first rental restrictions in the 1980s — said in their June 2022 complaint that this new ordinance would violate their grandfathered rights. They also said it would result in significant financial losses and that eliminating their rentals meant eliminating necessary visitors like traveling contractors and health care workers.

The alliance had argued that the ordinance violates a state zoning law restricting counties from passing zoning ordinances that conflict with usages prior to the ordinance.

Watson emphasized that the law is “plain and unambiguous” as to new ordinances.

“There is nothing to suggest that HRS § 46-4(a) does not mean exactly what it says — that a county is barred from passing any law that would eliminate existing lawful residential uses,” he wrote.

Though the city had argued that the ordinance should be considered a rent control regulation rather than a zoning regulation, Watson dismisses the idea, writing that “the city drafted and passed Ordinance 22-7 as part of the Land Use Ordinance of the City and County of Honolulu. Though the placement of the ordinance is not, by itself, determinative, its location and characterization belie the city’s current attempts to call it something it is not and never was—even according to the city.”

Watson did refuse, however, to do away with the ordinance completely, keeping it in place for short-term rentals outside of the scope of the alliance.

Honolulu City Council originally passed the ordinance to address the proliferation of these short-term rentals— often owned and operated by out-of-state landlords — that detractors say drive up housing costs for already struggling residents and disrupt local way of life.

Short-term rentals have received renewed attention as thousands displaced by the Maui wildfires face possible housing insecurity again as the short-term market has refused to become long-term housing, prompting Governor Josh Green to threaten the “nuclear option” on short-term rentals, the Honolulu Civil Beat reported.