Owning a high foot-traffic vacation rental is a charm, owning a vacation rental in the Big Island of Hawaii is double the charm! The County of Hawai’i with great support of the island residents made significant changes to vacation rental ownership in Hawaii County beginning the process in 2018. Now forward to 2022 and understanding what is what with Vacation Rentals on the Big Island of Hawaii. Let this be of some help in providing guidance with the new County of Hawaii rules imposed. These are stricter guidelines which now limit the availability of many of these lucrative investment opportunities. The best time to get into Vacation Rentals on the Big Island is yesterday!
First – it’s important to understand the history of short-term vacation rental (STVR) legislation and how this has impacted the market over the last few years. As of November 2018, Ordinance 2018-114 was passed to regulate STVRs on Hawaii Island. According to the County of Hawaii Planning Department, “The new law: 1) defines where the use will be allowed; 2) establishes provisions and standards to regulate this use; and 3) provides an avenue for an existing STVR to apply for a Nonconforming Use Certificate that would allow continued operation outside of a permitted zoning district.
In this blog post, we’ll walk you through how to navigate which real estate opportunity may be best for your needs:
Understanding Hosted Rentals
A hosted rental on Hawaii island simply means that the owners or manager lives on the property full time. Unlike short-term vacation rentals, these for the most part, were free from the regulations put into play by Ordinance 2018-114. Hosted vacation rentals are some of the most favored by transients looking for to invest on the Big Island as they are able to be maintained as a rental property without outside supervision or law enforcement. Though it is expected that the owner will still submit both General Excise Tax and Transient Accommodations Tax on the revenue brought in from renting. The period of time the State considers short term is a rental in a period of 180 days or less. A rental 30 days or less requires Hawaii County STVR compliance and permitting unless the property is hosted.
However, this looks a bit different if you’re looking into a bed and breakfast on the Big Island. Under Section 25-4-7, this is defined as a single-family dwellings and/or guest houses which have been permitted on a building site, in which overnight accommodations and only breakfast meals are provided to a maximum of ten guests, for compensation, for periods of less than thirty days.These type of rental opportunities require much more in terms of licensing, correct zoning and following a unique set of guidelines to remain compliant.
Understanding Short Term Vacation Rentals (STVR)
The short-term vacation rental on the Big Island is a sought-after investment opportunity for many. While it can be a lucrative investment many vacation rental operators if not on island hire a local property manager to oversee the daily business operation. An STVR is also considered a non-hosted rental on Hawaii Island.
Under Bill 108, short-term vacation rentals on the Big Island or County of Hawaii are now defined as dwelling units with no more than five bedrooms for rent, rented for 30 consecutive days or less, where the owner does not live on site. New short-term vacation rentals are not allowed in single-family residential and agricultural zones and are only allowed in hotel, resort, commercial and multi-family commercial zones.
Bill 108 also known as Ordinance 2018-114 also made a way for existing short term vacation rentals to apply for Nonconforming Use Certificate to allow them to be able to continue to operate in a normally unpermitted area. The Planning Department on the County of Hawaii is tasked with administering and monitoring Airbnb’s on the Big Island.
Hawaii State enforces a current 10.25% transient accommodation tax and in addition implemented effective 1/1/2022 a HCTAT of 3% is added for Hawaii County. The overall tax of 17.75% includes the Hawaii State General Excise Tax. These fees typically are passed on to the booking of any vacation rental property.
Some Quick Links on STVRs on Hawaii Island:
- Ordinance 2018-114
- Planning Department Rule 23
- Rental Application Packet for STVRs
- Nonconforming Use Certificate Renewal Application Form
- STVR Change of Information Application Form
- STVR Affidavit of Compliance Form
- Tax Map Key
Application and Transfer Process of your Big Island Investment Property
It is very clearly laid out as to what needs to be done for proper application and successful transfer of the property. There is an extensive form that needs to be filled out which includes the STVR registration along with the non-conforming use application. It is always advisable to seek help in delegating tasks like these to a trustworthy realtor who will be able to seamlessly close the deal for you. As the property is going to be used as a vacation rental, the change of information form needs to be filled as well when the owner or the reachable person for the property changes. There is a lot more paperwork to carry on with your rental property to successfully leverage it.
As an investor, it is important to know that there are limitations when it comes to finalizing your short-term vacation rental. The property has to be in the zoned for resort, hotel, or multi-family zone eligible for commercial use. You can narrow down your research on the two most popular areas that are known for island living, North Kona and South Kohala. The North Kona district or ‘Moku’ spans from the north at Puu Lani Ranch, Hualalai Resort and Kukio to Kailua-Kona and ending in Keauhou. The South Kohala district encompasses three major resorts Mauna Kea Resort, Mauna Lani Resort, Waikoloa Beach Resort, Waimea also known as Kamuela, and Waikoloa Village.