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The North Shore is known worldwide for its laid-back country ambience, big-wave surfing, white sandy beaches, and its far-away but close-enough location from the hustle and bustle of Honolulu — making it one of the most desirable holiday destinations for visitors and locals.

A disorganized effort by the Honolulu City Council and hotel industry leaders to eliminate the short-term rental market is nearing a disastrous turn for Oahu’s North Shore businesses. Under the proposed Honolulu City Council Bill 85 and Bill 89, the STR rental units from Mokuleia to Velzyland will drop from approximately 1,200 to the currently permitted 38.

North Shore Rental Market

The North Shore has always been a second-home destination — first, for the growing middle management of Honolulu, then in the 1960s the North Shore became a “destination” for mainland visitors, especially sports visitors from California and the start of second-home purchases by off-shore wealthy owners.

As surfing expanded, these homes were rented to surfers during the winter months and typically left empty for the remaining months or used by local families. By 2005, the emergence of internet home rentals and B&Bs changed the landscape of the North Shore with visitors year-round.

Recent Developments

Over the past decade, the City Council has attempted to bring some order to the unregulated STR market. But there are conflicting interests.

Local families and mainland owners who own second homes use them for only a few months and prefer to rent them out the rest of the time. Local business especially the restaurant and house cleaning businesses have flourished. It is estimated that over 300-plus jobs locally can now be tried to this visitor market.

Meanwhile, the American Hotel and Lodging Association, Hawaii Lodging and Tourism Association, and Unite Here Local 5 have mounted an extensive public relations campaign erroneously linking the local shortage of affordable rental housing with the growth of STRs. City officials have been agreeing, believing it will help the housing crisis.

But STRs are not entirely to blame for the affordable house shortage. The hotel and union lobbying efforts to stop STRs outside resort areas is about retaining control of increased demand of hotel occupancy and a steady stream of income and methodical room rate increases for its huge publicly owned mainland and worldwide hotel chain owners.

Assessment Of Arguments

Contrary to popular belief, Hawaii hotels have enjoyed nearly a sold out occupancy for a decade, and during the same time when STRʻs have grown exponentially. Drops in hotel occupancy is not unexpected, but rather forecasted by University of Hawaii and industry economists which represents a natural ebb and flow of tourism arrivals, not because of increased STRs.

Additionally, linking the shortage of affordable rental housing to the STR market is a good emotional hook to achieve popular public support for their cause. Hotel executives like it because it deflects our attention from the fact that they do not provide affordable housing for their employees, and politicians like it since it deflects attention away from their continued inability to promote the building of affordable rentals.

Another deception by the hotel-union alliance is the claim that eliminating STRs will suddenly create an affordable renters’ market. If STRs are eliminated, those homes will be sold at market rates to someone who can afford them to use for only six weeks a year, leaving the home empty for the balance of the year. The fact is, many STRʻs generate income for North Shore businesses throughout the critical off-season months when tourism would typically be slow.

The STR market is by far the largest business on the North Shore in terms of employment and overall local economy. Based on my own research, the annual visitor spend on rent and discretionary spending is at least $161 million.

Unlike hotel spending, much of the STR spend is on local small businesses whose income generates general excise tax revenue, and where monies are recirculated on more local goods and services.

Banning STRs in non-resort districts such as the North Shore will cripple the local economy and produce a long-term economic backlash. The world’s travelers have changed and Hawaii must create a STR regulatory and enforcement framework that will benefit all parties and encourages growth and vitality for small business to survive and prosper.