Investing in a vacation rental on the Big Island can be a very smart move. In fact, they may be a better investment than ever! Now that the county has restricted the areas in which homes may be offered as vacation rentals, homes in the remaining areas may increase in value as a result of their revenue-generating potential. Click here for more information on the new law
So far, there is no evidence of a price jump, and there is widespread confusion about the new vacation rental law. Eventually the dust will settle, and people will begin to understand where vacation rentals are still permitted.
Homes located in resort-zoned areas may be used as a vacation rentals. They must be registered with the County and comply with County and State laws, including the payment of appropriate taxes, but they do not need to apply for a special use permit.
If you’re considering purchasing a second home in Hawaii, purchasing one in the Mauna Kea, Mauna Lani, or Waikoloa Beach resorts that can be used as a vacation rental makes a great deal of sense. Here is a link to current listings in Mauna Lani; and Mauna Kea: These are only some of the current listings, but will give you a taste of what is available.
The Mauna Lani and Mauna Kea resort areas have the advantage of better water rates than the Waikoloa Resort, and many people have a definite preference for one resort of another. Also some homes are likely to yield a better return on investment than others. This is in part due to the wide variation in dues and fees. There is no substitute for careful research.
Investing in a vacation rental on the Big Island can be a very smart move because the number of available units has dropped as a result of the recent law. You know what they say about supply and demand!
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/
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.
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.
