Aloha, Property Rights

by Christina Sandefur
September 4, 2018

A growing number of cities nationwide are taking steps to discriminate against, overregulate, or completely ban homeowners from choosing to allow people to stay in their homes on a short-term basis. Honolulu’s latest proposal to crack down on home-sharing would inflict untold costs on communities and destroy opportunities for families to make extra money to pay their bills, keep up with their mortgages, maintain their houses, and improve their local economies by renting out their homes to people who patronize local businesses.

The proposal places a strict cap on the number of homes that can be offered as short-term rentals and threatens home-sharers with fines of $25,000 to $100,000 per day (along with attachment to one’s driver’s license application or renewal and/or real property tax). Such measures are not only extremely harsh—they may be unconstitutional.

Art. I, Sec. 12 of the Hawai‘i Constitution protects people from excessive fines. It’s difficult to characterize these fines as anything other than “excessive,” especially for Honolulu’s many homeowners who have rented responsibly for years, and for whom these fines make up a large percentage of their home’s entire worth. In fact, Honolulu Mayor Kirk Caldwell admitted that the fines are “heavy” and “draconian.” But that didn’t stop him from submitting the bill.

Unfortunately, more and more cities are punishing homeowners with astronomical fines just for exercising their property rights. The Goldwater Institute is defending longtime Florida homeowner Natalie Nichols, whose home was designed for short-term rentals and who has been renting responsibly for years, against the city of Miami Beach, which has imposed similarly extreme fines on people who offer their homes to short-term overnight guests. The Florida Constitution protects people from excessive fines that are “grossly disproportional” to the person’s action. Allowing someone to spend the night in your home without bothering anyone shouldn’t result in hundreds of thousands of dollars in fines.

Yet Honolulu Mayor Caldwell believes harsh restrictions on property rights are necessary to ensure more housing will be used for “locals” rather than renters. But as Hawai‘i real estate broker Choon James warns, outlawing short-term rentals doesn’t mean a home will be occupied by local residents. Without short-term rental income to help pay the bills, some locals might be left unable to afford a home. And homeowners who do not occupy their houses year-round may simply let their home remain vacant when they’re off-island.

As we’ve pointed out on this blog, the blame for “unaffordable housing” belongs with city officials whose regulations make it prohibitively expensive to build, improve, or own housing, not with homeowners who decide what to do with their property. And deciding who should and should not be allowed to live in a neighborhood is a dangerous power to hand over to the government.

Often, restrictions on home-sharing are designed to shield existing businesses from the competition. Indeed, Mayor Caldwell’s proclamation that the island of Oahu’s “entire North Shore will have no vacation rentals” will certainly serve as a boon to the powerful hotel lobby, which would hold a virtual monopoly on short-term lodging on that popular part of the island.

Last year, the New York Times reported that competition from home-sharing has brought hotel pricing down, making it easier and more affordable for people to travel. Stifling competition in lodging not only makes housing unaffordable; it makes travel unaffordable too. And that hurts everyone: homeowners, travelers, and locals, who rely on tourism dollars to make a living.

Honolulu, like all cities, has a legitimate interest in restricting nuisances, noise, and crime. But existing ordinances already do that by targeting specific wrongful behavior, instead of punishing people from using their own property in responsible ways. Rather than adopting draconian penalties, Honolulu should regulate rental properties the same way it does all other residential properties: by focusing on protecting public health and safety.

Christina Sandefur is the executive vice president of the Goldwater Institute.