City cuts fines in effort to halt illegal rentals

Homeowners must agree to stop vacation lodging immediately or pay the full fine

The city is drastically lowering fines for homeowners running illegal vacation rentals if they agree to immediately shut down or pay the full penalty if operations continue.

The compromise is aimed at those who have been ignoring thousands of dollars in citations and contesting the charges in court.

In an effort to stop the rentals, the city raised daily fines from $50 to $1,000 in 2005. But collecting the money hasn't been easy.

Of 40 fines worth about $200,000 issued since January 2006, the city collected just $30,000, said Michael Friedel, the city's code compliance chief.

"If you are going to assess some guy $100,000-plus in fines, collecting on that would be very difficult," he said. "The person whom we will try to collect from would have no choice but get an attorney and take it to court to fight it."

The new tactic, which drops fines by as much as 75 percent, seems to be working, Friedel said. Four people have signed an affidavit agreeing to stop renting their homes, including one operator owing more than $100,000, he added.

"If someone gets relieved of $75,000 in fines, it is going to hang over his head that, 'If I do this again, it's going to be right back on my lap,' " he said.

About 1,000 homeowners on Oahu have a certificate to rent rooms for less than 30 days. The city stopped issuing new permits in 1989, but a state study found more than 2,000 online advertisements for short-term rentals on the island.

Tourism officials suspect the illegal rentals are popular with repeat visitors who are looking to stay somewhere other than in Waikiki.

More than 6,900 vacation rentals and 1,452 bed-and-breakfasts have been identified online by the Hawaii Department of Business, Economic Development and Tourism. The state Tax Department has been auditing rentals flagged for not having filed a required 7.25 percent tourist accommodation tax and a 4 percent general excise tax, said Titin Liem, special assistant to department director Kurt Kawafuchi.

Josh Wisch, a member of the Kailua Neighborhood Board, said residents initially worried the city had softened its enforcement when they learned about the affidavit agreements.

But after meeting with city officials, Wisch said he explained the tactic to the full board and heard no complaints.

"We support anything that would bring these operators to conform with the law," said Wisch, whose neighborhood has complained the rentals bring noise and traffic. "We ... are pleased with that procedure."