Known for its tropical and popular getaway, Hawaii offers hosts a variety of opportunities to guests from around the world to earn an extra income. Owning a short-term rental in Hawaii may seem a lot to grasp with different rules, regulations, and taxes for each county but with the right support, understanding, and on-the-ground experts, short-term rentals in Hawaii is a smart move and rewarding option.
This article explores areas like:
What is a Short-Term Rental?
What are the Short-Term Rental Regulations in Hawaii?
Hawaii Tax Laws
In Hawaii, a Short-Term Rental is referred to as the commercial use of a residential dwelling, divided into categories, “Bed & Breakfasts” and “Transient Vacation Units (TVU’s)”, for a stay of fewer than 30 days.
Regulations in Hawaii differ from county to county. They are designed to limit the number of rental properties in residential areas, especially at tourist hot spots like Hawaii County or the Big Island. Below are the said regulations of each county that will help hosts navigate Hawaii’s rental rules more easily:
Hawaii County adopted the new Bill 108 in November 2018. Whereas now, under Rule 23, all Short-term rental owners are obliged to register their property including a non-refundable fee of $500. Although, under a grandfathering clause, short-term rentals previously located in the residential areas are OK.
STRs established before April 1, 2019, are still required to apply for a Nonconforming Use Certificate with an annual renewal fee of $250, per the new rule. Going further ahead, STRs are only allowed in districts:
CG (general commercial)
CV (village commercial)
Additional STR conditions, under the new ordinance 2018-114 includes:
Quiet hours are from 9 pm to 8 am. Quiet hours are vital to be displayed in the property as well as part of the rental agreements.
Registration on Nonconforming Use Certificate number needs to be included in all print and digital Ads.
Guest vehicles are only parked in the designated onsite parking areas.
Even though Hawaii County rules and regulations on STRs are deemed to be stricter, it is still considered to be one of the top spots for investment, especially with budget-conscious future homeowners.
The two types of STRs recognized in Honolulu County are:
Bed & Breakfast - the owner is present during the guest’s stay (Max 4 guests)
Transient Vacation Unit – the host rents the entire home and by means, is not living during a guests’ stay
On June 25, 2019, Honolulu County’s Bill 89 sets the foundation for a stricter implementation on STRs that includes:
TVUs are barred outside the resort districts with the exemption of the Nonconforming Use Certificate
After October 1, 2020, a maximum of 1699 owner-occupied, hosted B&Bs outside the resort zone areas
Advertising an illegal STR will be a fineable offense of up to $10,000
B&Bs owners can rent two bedrooms to guests whereas the property owner is expected to reside with the guests
Furthermore, homeowners can apply for registration with a fee of $1000; annual renewal is $2000. Though, bear in mind, a few new requirements should be included before registering:
Applicants should not be an organization or a company
Quiet hours between 10 pm to 8 am
Within 250 feet, neighbors must have a 24hour phone number to contact in case of any complaints
Rules and permits in Maui County vary for each type of home: B&B’s and short-term rental homes. As of July 2019, more than 16,000 units are legally eligible to operate as a short-term rental for less than six months and without requiring a B&B permit or Conditional permit. However, the Maui Meadows area of Kihei-Makena Community Plan and Paia-Haiku Community Plan Region has reached its cap for short-term rental home permits and Airbnb, as of June 2021.
Furthermore, granted permits for short-term rental homes can be rented without the presence of the owner. To apply to be a Short-Term Rental Home, a complete application through Maui County’s Planning Department is a must that includes a Zoning and Flood Confirmation Form which typically takes several months for the application to process.
Kauai County abides by its own strict regulations which in fact no longer legally allow short-term rentals outside the permitted Visitor Destination Areas (VDA) or districts that are zoned for hotels. Although, if you have obtained a Nonconforming Use Certificate before March 2008 for your short-term rental, then it was grandfathered in.
With that said, short-term rentals with a Nonconforming Use Certificate are required to display in a visible place of the property their registration number and contact number who is available 24/7. In addition, advertisements of your listings must include the registration number.
To simplify, short-term rentals in Kauai are not permitted for less than 180 days of a room within a home, or an entire home or apartment itself. Moreover, to be an Airbnb host in Kauai, there is no application to apply if you do not have a short-term rental in a VDA.
In some parts of Oahu, hosts are obliged to obtain and renew a “nonconforming use certificate” from the City and County of Honolulu. To see if this condition is applicable, please review Sections of the Land Use Ordinance.
Oahu’s Building Code and Housing Code specify minimum requirements for construction, design, maintenance standards for buildings, including regulations on habitability, health, and safety. Regulations applicable differ between residential and non-residential uses may be relevant to your listing.
It is vital to understand and abide by other contracts or rules that affect your potential Airbnb listing, such as leases, HOA rules, co-op or condo board rules established by tenant organizations. Read lease agreements or check with the landlord or appropriate parties if applicable.
By state law, owners and operators must obtain a Certificate of Registration from the Hawaii Department of Taxation. More importantly, hosts are additionally required to have the Tax ID on their listing.
For stays, less than 180 days, the State of Hawaii assesses transient accommodations taxes on the furnishing of a room, apartment, suite, or similar structure. For more information on transient accommodations tax, have a look at the State's tax code. The Transient Accommodations Tax is 10.25% as of January 1, 2018.
For more information and to apply for your TAT number please visit this website.
Per Airbnb’s Memorandum of Understanding (MOU) with the City and County of Honolulu, hosts are also required to input a City-issued TMK number to list on Airbnb. The City and County of Honolulu also refer to the TMK number as the Parcel ID. Need help locating your TMK, you can visit this website.
Note: Registration is required to host in Honolulu. To continue hosting short-term stays, add your TMK and TAT numbers to your listings.
General Excise Tax (GET) is assessed on all business activities, including short-term rentals as Hawaii does not have a sales tax.
Hawaii property taxes differ according to the county as follows:
The Honolulu City and County including the island of Oahu has a new property tax class: B&B home (Class J) which would most likely fall into this class; with the tax of 0.65% of the assessed value as of July 1, 2021. Whereas Transient vacation rentals (TVRs) are taxed in the hotel & resort class at 1.39%. For further understanding, read more on Honolulu property taxes.
As of July 2021, property tax rates including the island of Molokai is $11.08 per $1000 net assessed value for “short-term rental” like Airbnb, and $10.70 per $1000 net assessed value for “hotel and resort” zoned property.
The property tax rates for short-term accommodations are $9.85 per $1000 net assessed valuation for “vacation rental” properties and $10.85 tax rate for “hotel and resort” zoned properties.
As of July 1, 2021, to June 30, 2022, the tax rates that may apply to an Airbnb in Hawaii County are the hotel/resort property tax, which is $6.15 per $1000 net taxable building. In addition, there are no vacation rental tax classes in Hawaii County.