Category: Kohala Ranch

Hawaii Vacation Rentals Have New Restrictions

Posted on by JUDY HOWARD
Waipio Valley is a popular tourist destination. Photo by Sarah Anderson
Waipio Valley is a popular tourist destination. Photo: Sarah Anderson

The County of Hawaii has passed a new law. It governs some Hawaii vacation rentals. Only homes located in resort, multi-family or commercially-zoned areas may be used as unhosted vacation rentals. (It’s a little more complicated than that, so if you want the details, look here: http://www.hiplanningdept.com/short-term-vacation-rentals/

While at the County Planning Department site, you might want to note the definitions used in their zoning maps, listed here: http://www.hiplanningdept.com/wp-content/uploads/2017/05/Zoning-Definition.pdf

And then take a look at the maps themselves, available on the same site. The County does not provide a map of the entire Island, showing areas eligible to be used as vacation rentals. This overlay, provided by Hawaii Information Service, the local multiple listing service will give you some idea:

The areas in blue are eligible for use as unhosted vacation rentals

Because of the scale of the map, not every area that is zoned for use as vacation rentals is depicted, but the map gives a sense of how restricted the area is. Your realtor can tell you whether a property you are considering is zoned for vacation rentals.

The law applies only to unhosted vacation rentals, referred to in the draft rules as STVRs (Short Term Vacation Rentals). The law defines an STVR as follows:

“Short-term vacation rental” means a dwelling unit of which the owner or operator does not reside on the building site, that has no more than five bedrooms for rent on the building site, and is rented for a period of thirty consecutive days or less. This definition does not include the short-term use of an owner’ s primary residence as defined under section 121 of the Internal Revenue Code.”

“Building site” is not defined in the law or the draft rules.

The intent of the law is to improve the quality of life of people living in the vicinity of a vacation rental. If the host lives on the same property, vacationers are less likely to become obnoxious to their neighbors. Thus the law’s application to unhosted vacation rentals only.

The exception to the rule.

Homes that were legally operated as vacation rentals in residentially-zoned areas before April 1, 2019, may apply for non-conforming use certificates (NUC) annually. They must also apply for a STVR registration. If both are granted, the property may be used as an STVR. If the Planning Department has received unresolved complaints about a vacation rental the STVR registration and NUC may be revoked or may not be renewed. It is not entirely clear what would happen should a NUC be revoked or not renewed, but it may be that once a property has lost it’s NUC, it would not be able to have it restored.

All unhosted vacation rentals are required to have a “reachable person” 24/7.

The draft rules include many requirements, including hours during which noise will be kept to a minimum, and that all cars will be parked on the property, and also that all owners of Hawaii vacation rentals must designate a person who can be reached within an hour, and who will be on-premises to deal with any complaints within three hours, 24/7! If this requirement is not met, the permit (or permits, in the case of homes in residential areas) will not be renewed.

This new law will affect many people who might want to buy a second home, and use it for vacation rentals to help offset the costs.

The safest and easiest way to comply with the new laws for those wishing to offset costs of a second home is to buy in an area that is resort zoned. Not only will the need for a non-conforming use permit be eliminated, but the availability of reachable persons, as well as the many other service providers that are required to run a successful Hawaii vacation rental, will be much greater. http://yrh.ewp.mybluehost.me/2019/05/30/open-house-the-islands-at-mauna-lani/. Here are some current listings in resort-zoned areas: https://judy.hawaii.elitepacific.com/results-gallery/?hood=3374566&sort=listprice_asc&status=A

Of course there are some properties that have been lawfully operated as vacation rentals in residential areas, and that will be offered for sale from time to time. However, since they require annual renewal of a non-conforming use permit, which may be denied if the planning department finds a history of violation of the law or rules, investing in such a property with the assumption that use as an STVR will continue would be risky.

Kohala Ranch Property Taxes

Posted on by JUDY HOWARD

Kohala Ranch has amazing views, a great climate, and wonderful homes.

As a Realtor, I get many inquiries about Kohala Ranch. People fall in love with the expansiveness of the area, the views. and the climate. The lots are large, ranging in size from about 3 acres on up to about 12 acres, and prices tend to be affordable for the area, although complying with the design rules can make building expensive. There are a number of homes for sale, many of which have luxurious amenities, and the prices are, again, relatively affordable. It is fairly close to Waimea, and both prep schools located there, but it is also far enough away, and private and safe enough, to seem like a wonderful retreat from the daily bustle. https://hawaii.elitepacific.com/results-gallery/?hood=3374513

Kohala Ranch no longer has a dedicated agricultural use classification for property tax purposes.

A couple of years ago, the Kohala Ranch HOA board decided to prohibit cattle grazing on the ranch. That decision led to the revocation of the dedicated agriculture classification for property tax purposes. (The Ranch is still zoned for agriculture uses, so all of the uses that were previously permitted are still permitted by the County.) http://livinginwaimea.com/2018/10/12/land-use-in-agriculturally-zoned-areas-on-the-big-island/

The dedicated agriculture designation reduces the assessed value of land to rock bottom. Thus, even though the tax rate remains the same as other agriculturally-zoned land, it is applied to much lower values, resulting in much lower taxes.

The loss of the dedicated agricultural use classification has increased property taxes on some parcels.

Now the agricultural rate is applied to market value, rather than dedicated agriculture value, unless individual owners have applied for and received non-dedicated agriculture status from the County Real Property Tax office. Under this program, owners must show that they are engaged in ranching or farming. If they can demonstrate such activity, they will be entitled to a much lower assessed value, although not as low as lands in the dedicated agriculture program. Also, the lower assessed value will be limited to the land devoted to the agricultural endeavor-so if you have a pool, tennis court, and pasture for cattle, only the pasture will be entitled to the lower assessed value.

If you don’t want to farm or ranch, you may still qualify for lower taxes if you can qualify as a homeowner.

Another option some owners have pursued is to be classed as homeowner, rather than agriculture, because a) the tax rate is lower and b) property tax increases are limited to no more than 3% a year. In order to qualify for this classification, the property must be the owner’s primary residence.http://www.hawaiipropertytax.com/tax_rates.html

If you are considering a second home, and offering it as a vacation rental to offset some of the costs, you should probably look elsewhere.

The County of Hawaii has just passed a stringent vacation rental bill, and unless a property in Kohala Ranch has a history of lawfully operating as a vacation rental, it will not be a permitted use. See my post:
http://livinginwaimea.com/2019/03/30/hawaii-county-restricts-vacation-rentals/

Kohala Ranch has undergone some changes, but it is still a lovely place to live!

I would be delighted to provide you with more information about properties in Kohala Ranch. You can reach me by phone at (808)885-5588, or by email at judy.howard@elitepacific.com. Aloha.

Hawaii County land use restrictions for agriculturally zoned land.

Posted on by JUDY HOWARD

It is beautiful, but it is not for everyone!

Hawaii County is a place of great beauty and vast open spaces.  But it is also a place where the goals of food self-sufficiency and diversified and sustainable economic growth are taken seriously. At the moment, the County is heavily dependent on tourism, which leaves us in a precarious position when visitor numbers drop for any reason.  We also import an appalling percentage of our food, which leaves us vulnerable to vagaries of labor strikes and natural disasters.

Land zoned for agricultural use, Hawaii County.
Hawaii County and the State restrict use of agriculturally zoned lands

Agricultural lands receive favorable tax treatment.

First and foremost, the property taxes on land in agriculture are much lower than those on land used for residential purposes.  The actual rate is higher for some agricultural land than it is for some residential land, but the assessed values to which those rates are applied results in significantly lower taxes.  Grazing land, in particular, is assessed at about $10,000/acre for non-dedicated land, and is currently taxed at $9.35/$1000.  Homeowner rates are currently $6.15/$1000 of assessed value, but the land and improvements are assessed at market value. Also, those low homeowner rates apply only to primary residences, not to second homes or homes held for income or investment.  Rates are available here: http://www.hawaiipropertytax.com/tax_rates.html

So what constitutes an agricultural use, and where is County land use policy headed?

You can access a handy chart showing the permissible uses of land zoned in various ways here: http://www.hiplanningdept.com/wp-content/uploads/2017/09/Permitted-Uses-Table-091917.pdf

Some of the uses listed in the chart don’t do much to increase food production.  There is obvious value in keeping land in agricultural use, in the sense that it is much easier to later convert open land to food production than it is to restore land that has been used for residential, commercial or industrial purposes so that it can be safely used for such production.  But given the growing emphasis the State is placing on a diversified economy and food self-sufficiency, it is reasonable to expect increasing restrictions on use of agriculturally productive land for purposes other than food production and commercial agriculture.  The days during which a developer could easily purchase a pasture, get it rezoned and subdivided, and build and sell houses, are gone.

Current restrictions on use of agriculturally zoned land.

Even now, the number of dwellings, and the type of occupants of dwellings, are restricted on some agricultural lands.  Some lands are governed by the State Land Use Commission, and lands classified as less productive are subject to County regulation.  This is a huge topic, and while I could post links to every source that would need to be consulted in order to make a determination as to the governing body and restrictions on a given parcel, I instead advise anyone considering a purchase of agriculturally zoned land in Hawaii County to consult with the Hawaii County Planning Department.  Have the TMK of the parcel you are considering, and a planner should be able to outline for you all of the permitted and prohibited uses for that land.  See also http://livinginwaimea.com/2019/03/29/kohala-ranch-property-taxes/

Don’t plan on paying for your agricultural land purchase by selling agricultural goods!

If you want to make a profit on agriculture in Hawaii, your options are even more limited.  Some crops do reasonably well in some years, but given the cost of land, it is very difficult to thrive as a farmer or rancher in Hawaii, year in and year out.  Nonetheless, there are quite a few ranchers and farmers here.  Why?  Because even though it is very hard work, it is also endlessly interesting and occasionally very rewarding!