Buying Airbnb in Hawaii
Buying an Airbnb in Hawaii can be a rewarding experience that allows you to generate additional income through rentals and enjoy the beauty of the islands. However, it is important to carefully consider all of the challenges and considerations involved and to work with a reputable real estate agent or property manager to ensure that you are making a smart investment.
One of the first things you will need to consider when buying a vacation rental in Hawaii is the location of the property. Hawaii is made up of eight main islands, each with its own unique character and attractions. Some popular destinations for vacation rentals include Oahu, Maui, and the Big Island, all of which offer a wide range of activities and amenities for visitors. It's also important not to neglect what you would want in a Hawaii home, especially if you plan to visit or live part of the year here.
Consider factors like proximity to popular attractions, access to public transportation, and the overall appeal of the area to potential renters. You should also consider the local zoning laws and regulations, as there may be restrictions on the types of properties that can be used as vacation rentals in certain areas. We'll cover all of this below.
This guide aims to bring clarity to the Hawaii Vacation Rental Laws on each island and to help you discern between what's legal and what's not as you explore Hawaii vacation homes and if hosting an Airbnb in Hawaii is right for you. If it is, we'll continue the discussion with insights on how to obtain a Hawaii Vacation Rental permit, Taxes, Rental Rules, and which neighborhoods to focus on when searching Hawaii short term vacation rental condos.
By visiting one of our Short Term Rental Condo Guides below! We've got every Oahu vacation rental condo dialed in at the moment but will be updating all other islands soon.
For interest in Big Island, Maui, or Kauai Short Term Rental Condos please Inquire with us and one of our team members will curate an island specific list of Short Term Rental Condos that fit your criteria.
If you're a Hawaii resident or vacation rental owner, you know that the past 5 years have been turbulent in establishing new Hawaii Short Term Rental Laws. Numerous pieces of legislation have either changed or tightened the state's rental restrictions leaving a trail confusion and frustration in an industry still reeling from the COVID lockdowns that shuttered Hawaii's tourism industry for 2020-2021 but the good news is that it looks like we have finally found resolution with the state, and clear definitions of how and where legal Airbnb's can be operated in Hawaii.
Oahu island, "The Gathering Isle," sees the most controversy surrounding Hawaii Short Term Rentals, by far. In 2021, the Oahu Short Term Rental law saw massive disuption through the passing of Bill 41. The new law prevented homeowners from renting their homes, guest homes, or rooms in their homes for less than 90 days -- a dramatic shift from the previous 30 day minimum.
However, on October 13th 2022, Federal Judge Derrick Watson issued a preliminary injuction in favor of the Hawaii Legal Short Term Rental Alliance (HILSTRA); plaintiffs in a lawsuit against the City and County of Honolulu for property rights. The ruling now prohibits the city from enforcing the 90 day minimum rule on property owners, reestablishing the 30 day minimum rule.
Any homes renting for less than 30 days periods are still considered illegal vacation rentals unless they have obtained a Non-Conforming Use certifcate or they're located in one of the below designated Resort Zones or Apartment Precincts in:
- Turtle Bay Vacation Rentals- North Shore Oahu - Kahuku, HI
- Ko Olina Vacation Rentals - West Oahu - Kapolei, HI
- Condotels in Waikiki - Honolulu, HI
>> Visit the Oahu Short Term Rental Investor's Guide to learn more about Rental Rules, Permitting, and every legal Short Term Rental and Condotel on Oahu.
The Maui Short Term Rental Laws define vacation rentals as any home or condo accommodation with rental periods of less than 180 days. If you're interested in a Maui Vacation Home and/or hosting your home as a Maui Airbnb while you're away, then you should focus your home search to Resort Zoned areas of Maui County. Any vacation rental on Maui outside of Resort Zones will be required to apply for one two permit types:
- Short Term Rental Home Permit. Operating under a STRH permit would allow you to operate an Airbnb in Maui without requiring the owner living on the same homesite of the rental. **As of January 7, 2022 Maui County has issued a 2-yr moratorium on any new short term rental home permits. This moratorium does not include applications for Bed and Breakfast permits, nor does it phohibit operation of previously approved Vacation Rental Homes on Maui.
- Bed & Breakfast Permit. This permit type allows you to operate your Airbnb or VRBO in Maui so long as the home and owner is deemed eligible under the Maui Vacation Rental rules. The most notable difference between the Maui B&B permit and the STRH permit is that B&B operators are required to be Maui residents and must live on the same home-site as the vacation rental unit.
To apply or renew Maui Short Term Rental permit, visit the Maui's Automated Planning & Permitting System.
It's estimated that the Garden Isle is home to as many 4,000 vacation rentals in Kauai. Similar to Oahu and Maui counties, the Kauai short term rental law limits rentals to designated resort zoned areas, called Visitor Designation Areas (VDA's), unless the home has one of very few NUC permits issued before March 2008. These are the only homes outside of resort areas that are allowed to operate VRBO or Airbnb in Kauai.
Kauai differientiates short term rentals between Homestays & TVR's:
- Homestay pemits will require that the vacation rental is hosted within the applicant's primary resident. Homestays are synonymous with the Bed & Breakfasts; as they're defined as on Oahu and Maui.
- TVR permits would allow for non-owner occupied rentals on Kauai.
- Both of types of permits require the owners and homes to meet a number of eligibility requirements under Kauai Vacation Rental Rules. To apply, visit the Kauai Permit & Planning Department site.
Airbnb Big Island
Similar to the other islands, Big Island Vacation Rentals are limited to Permitted Zoning Districts consisting of Hotel, Resort Commercial, and Multi-family commercial zones. This means that Hawaii island short term rentals are for more limited as roughly 95% of the Big Island is zoned Agricultural or Conservation.
All rules and regulations surrounding vacation rentals on the Big Island are defined under Bill 108 -- Ordinance 2018-114, and newly adopted Rule 23. Here's the highlights:
- All Pre-existing Big Island Short Term Rentals that were established before 4/1/19 and operating in compliance with zoning laws, building code, and taxes may continue normal operation after submission and approval of a STVR Registration Form before 9/28/18. If prexisting STVR falls outside of the Permitted Zoning District then a new NUC Application must also be provided and approved.
- Homeowners wishing to propose their home as a NEW Big Island STVR must submit and receive approval on the NUC Application
- "Short-Term Vacation Rental" (STVR) shall be homes or dwelling units rented for periods of less than 30 days, of which the owner or operator does live on site, and has no more than 4 bedrooms of which the owner or operator does not reside on the building site, that has no more than five bedrooms for rent on the building site.
- Any print or digital advertising on homesharing platforms like Airbnb, VRBO, etc must display their STVR Registration Number and the Non Conforming Use Certificate number, if applicable.
- Homeowner must live in Hawaii County and all STVR operators must sign the STVR Statement of Compliance
Full guidance to Big Island Vacation Rental Law can be found at the Hawaii County Department of Permits and Planning.
There are 3 options available to you when choose how to manage your vacation rental. Each come with their unique upsides and downsides. Which one you choose should ultimately depend on the cost benefit analysis of your time, enjoyment, and income goals:
- Self Manage and control all operations of the vacation rental including but not limited to bookings, furnishing, repairs, cleaning, etc. This is the most economical option since no property manager fees are due. Not every condo building will allow you to self manage though as some require you to use their in-house hotel pool management.
- Hotel Pool Management is a service offered and sometimes required by certain buildings. All bookings, furnishing, cleaning, accounting, and guest services are handled by the Hotel Management but for a substantial fee. It's not uncommon to see Hotel Management costing you 50% of your gross rental returns so beware. This is the most hands-off approach to owning an Airbnb in Hawaii but also offers you the least return on your money.
- 3rd Party Vacation Rental Management is offered by a handful of companies or sole proprieters on island and is the safe go-between if you're not quite ready to manage the unit on your own, but you're also opposed to paying Hotel Management fees. Plan on paying 30% to a vacation property manager in Hawaii.
Once you have identified a potential property for your vacation rental, you will need to determine the financing for the purchase. This may involve working with a mortgage lender to secure a loan or using your own savings or other forms of financing. If you're not making a cash purchase, you should expect your mortgage lender to require at least 25% down payment. When getting a mortgage in Hawaii, banks will look to the "Condo Docs" to determine if the building allows legal vacation rentals. If it does, it may be tough to obtain traditional low down payment financing and may require a special program or Portfolio Loan in order to consummate the purchase.
In addition to paying Hawaii General Excise Tax (GET), vacation rental owners must also pay a 10% Transient Accommodation Tax (TAT) on all rental income for rental periods of less than 180 days.
Is Airbnb Legal in Hawaii?
Yes, but it's complicated as each county (Island) will have it's own set of regulations in place as well as varying terminology to identify different types of short term rentals like TVU's, TVR's, B&B's, VDA's, Condotels, etc. Don't let the acronyms confuse you! Simply navigate between the islands below to read up on the county specific requirements for legal short term rentals and comprehensive Condo Guides to help you easily search all short term rentals and Condotels for sale in Hawaii.
What is Condotel in Hawaii?
Condotels or Condo Hotels in Hawaii are a type building that allows for condo ownership in a Hotel-Managed building. You have full rights to use and enjoy the condo as you please with the unique option of being able to offset your ownership costs through legal vacation renting of the unit while you're away. Owner's may opt to host their condotel unit in the Hotel Rental Pool where all bookings, check-in, housekeeping, and concierge services are managed by the hotel for a fee.
Is it smart to invest in a condotel?
This really boils down to your unique investment philosophy. Do you have cashflow priorities or are you looking for Hawaii Vacation Home that provides you hands-free coverage of some of your ownership costs? It's important to note that most condotels charge a fee of roughly 50% of your gross rental income to host your home in the hotel pool. This is before GET & TAT taxes are taken out; taking a significant bite out of your cashflow.
If cashflow is the priority, look for condotels that allow you to self-manage, or hire a third party property manager whose fees are likely 20-30%. Not every condotel allows for third party management.
Do I have to buy a Condo Hotel to legally host a short term rental in Hawaii?
No, condotels are just the easiest types of short term rentals to identify as legal since they're functionally Hotels. You should also focus your search to the "Designated Areas" on each island, properties with NUC's. Designated Areas are regions appointed by each county to allow legal short term rentals. These are typically the Resort Zones, but not every condo project within Designated Areas allow for legal short term rentals as the project may have an overlaying AOAO rule that establishes they're own minimum rental rules that are more restrictive than county rules.
What is a Non-conforming Use Certificate (NUC)?
An NUC is a "Non-confomring Use Certificate" that allows specific homes or condo buildings to be operated as legal vacation rentals for periods of less than 30 days. Hawaii homes with NUCs may be located in or outside of the Designated Areas. Each Hawaii island has or is working towards an application process for homeowners to obtain new NUCs that will allow them to propose their a home as a new short term rental.
There are 793 Oahu properties with active NUCs. You'll see most of them in Waikiki Condotels but a few dozen other scattered in various other Oahu condos and single family homes island wide.
Once upon a time, Bed & Breakfasts in Hawaii flew quietly under the radar and were allowed to peacefully coexist with the residental community and Hotel industry. Decades ago, the state issued only a few hundred Nonconforming Use Certificates (NUC's) to homeowners that wished to share their homes with visitors in return for compensation, similar to a hotel's operation.
These were the last NUC permits ever issued which made them a rare commmodity; one that allowed only a few lucky homeowners to rent their homes at a nightly rate, for periods of less than 30 days. Prior to the inception of the Airbnb Hawaii (the platform), this type of operation was often called a Bed & Breakfast, Vacation Rental, or Short Term Rental. All other homes without an NUC permit were restricted to normal rental terms of no less than 30 days, which we commonly refer to as Long Term Rentals.
Despite owners being allowed to rent their homes for 30, 60, 90 day periods under normal rental rules, you rarely see it. This left a sizable delta between the types of and terms of Hawaii homes for rent as the vast majority of rentals are only offered as short term rentals (less than 30 days) or long term rentals consisting of minimum 1-yr leases. Read More...
For many years the short term rental industry flew quietly under the radar. The state's issuance of NUC permits created a win-win-win for the homeowner, the State of Hawaii, and the visitor. Homeowners were provided an opportunity to partake in the lucrative Hawaii tourism industry to create supplemental income through sharing their home with guests. The state could now capitalize on unrealized revenue and "tourist spend" by visitors who would have otherwise vacationed elsewhere due to exhorbinant hotel prices or occupancy constraints. Lastly, the visitor could now explore new and exciting "stays" in neighborhoods outside of the cliche, Waikiki tourism experience.
Aside from the tangible benefits to all parties, there are a number of meaninful intangibles to note. The interaction between host and guest would inevitably create a deeper, more authentic experience as society realized the desire for the B&B stay had less to do with the sticks and bricks of home being shared, and more to do with what it really looked and felt like to really live in a destination.
Thoughtful hosts would soon become concierges of sorts, sharing stories and insights into Hawaii's best attractions, local's favorite beaches, restaurants, points of interest, and insider tips on how to live and enjoy Hawaii like a resident. Visitors could now freely experience the vast beauty and unique climate, topography, and culture of not only each Hawaiian island, but each side of each island without the rigid constraints of a tour bus schedule or time wasted on the road back to their hotel in Waikiki, Kaanapali, or Kona Town.
So where did it all go wrong? Enter Airbnb.
Airbnb in Hawaii
When Airbnb Hawaii burst onto the scene, it quickly changed the conversations around community and sustainable tourism in the Aloha State. The technology of this platform and competing platforms like VRBO Hawaii are arguably some of the most disruptive pieces of technology in the 21st Century, changing the face and culture of travel and homesharing as we know it. The term AirBnb would soon replace all previous iterations of the terminology. Words like homesharing, short term rentals, and transient accommodation units are now simply referred to as "Airbnb's" or "VRBO's" irregardless of the vacation rentals actually being hosted on these platforms.
As they say, the most successful products or technology are those that solve the biggest problems. In the case of Airbnb, the platform consolidated the managerial roles of Advertising, Bookings, Guest Communication, and Receipt of Payment into one easy to use portal that would effectively turn average homeowners into Hoteliers. The impact of the Airbnb platform on the travel industry is to be marveled, but it didn't come without controversy and legislative oversight.
I remember seeing stories nationwide about communities being overrun with Airbnb's, cat and mouse games of City municipalities trying to crack down on illegal Airbnb's, and embroiled lawsuits between cities and the Airbnb platform itself. These stories echoed similar news stories in Hawaii. You would often hear the same headlines citing the same neighborhood culprits, Kailua & North Shore, over and over.
Houses in Kailua and North Shore Oahu were once notorious for Airbnb's. Remember now, only a couple hundred NUC permits were given out decades ago, however, you would find thousands of homes listed on the homesharing platforms advertising short term stays. This mean that 90%+ of what you would find homesharing platform were actually illegal Hawaii vacation rentals. City estimates put them at 8,000 units. Despite the illegality, it came to feel like common practice here; an accepted reality. I liken it to the culture around marijuana. Is weed legal in Hawaii? Nope. But the amount you see and smell being smoked without impunity would make you think so!
As we mentioned earlier, Hawaii vacation rentals have been regulated since 1989 but enforcement was the issue. The manpower and burden of proof needed to identify and enforce penalties on illegal vacation rentals proved to be too tall of a task for the state. This became common knowledge and too agree, airbnb's in Hawaii started to run rampant.
As time went on, the noise around the illegal vacation rental issue would getting louder and louder. You would hear it from a couple directions and perspectives. Community testimony from residents of Airbnb hotbed communities like North Shore and Kailua would often site the erosion of the "social fabric" of the communities via the transient nature of visitors, noise compaints and parties, or just the sheer numbers of tourists running around residential areas.
The narrative would eventually shift to the City of Honolulu highlighting the negative impact of Hawaii Airbnb rentals on rising housing prices; another hot button in the state. Because of the lucrative nature of Airbnb's in North Shore Oahu or Kailua, it became commonplace for investors to purchase houses in North Shore Oahu or Kailua for the purposes of turning profits.
The city loved to scapegoat these two neighborhoods for soaring housing prices by highlighting that Airbnb Investing in Hawaii took much needed housing inventory out of the pool for local residents. It surely played a small role, but in my opinion it was a mere diversion of attention away from the City's role in the housing price issue.
Many would place that issue at the feet of the near paralyzed Honolulu Department of Permit and Planning that hinders homeowners from being to expand their homes, the regulation and bureacracy surrounding the development of Oahu new homes, and the intense cost of living in Hawaii that sees homeowners looking for any means possible to afford to live here.
The elephant in the room is the Hawaii Hotel industry. If there was anyone chomping at the bit to see the Hawaii vacation rental market regulated, it was them. Hotel lobbyist would complain about short term rental hosts paying residential Hawaii Property Tax Rates while Hotels were obligated to much higher Resort Tax Rates. This issue obviously means more to them taxes. The evolution of travel and the visitor experience sees the hotel industry on the wrong side of the coin and unluckily for Hawaii Airbnb hosts, they have the money and influence to bend ears in their direction.
Honolulu Short Term Rental Law
Things seemed to hit a tipping poing in 2019 through the introduction of Bill 89: The Honolulu Vacation Rentals Bill, proposed by Mayor Kirk Caldwell,. The bill would a provide the City new means of identifying illegal vacation rentals by requiring all rental listings on Airbnb or similar platforms to display their NUC permit number or risk severe fines.
The bill also provided language to state that a limited number of new Transient Vacation Unit (TVU's) permits would be made available for qualified homeowners to apply in an effort to not kill the industry altogether. The Mayor teased that new funding would also be allocated to the Department of Permit and Planning to perform "digital stings" on homesharing platforms like Hawaii VRBO and Airbnb.
Needless to say, this saw thousands of illegal Honolulu vacation rentals flee from advertising platforms which delivered a punishing blow to the Hawaii Vacation Rental Property Management industry. Thousands waited for guidance surrounding the state's process to apply for the new TVU permits that were touted in the bill, but the state failed to hold up their end of the bargain. To date, no new TVU permits have been issued.
After the passing of Bill 89 through the legislature, owner/operators of Hawaii vacation homes and illegal Airbnb's started to adapt to a new, more restrictive era of vacation renting. The dust would settle and Airbnb hosts either converted their nightly rentals to 30 day minimums, long term rentals (6+ months), or just said to hell with it and sold their homes.
To some degree it felt like we finally had closure on a long debated issue and that all parties now had solid guidance on what's legal and what's not, how enforcement would be handed down, and how the public could participate in obtaining new short term rental permits for properties that may have not conformed previously.
In hindsight, Bill 89 seemed like a balanced and measured approached by the state to protect residential communities, collect transient taxes, while not crushing the vacation rental market altogether. This would all change through the proposal of Bill 41 that passed through the City Counsel on January 26, 2021; an effective "rug-pull" of all of the aformentioned balance and measure.
Did Hawaii pass a bill to limit Vacation Rentals in Hawaii?
Yes. After a volatile 3 years that saw the coming and going of Bill 89, COVID Lockdowns, and the heated dialogue and Community Testimony around newly proposed Bill 41 (Ordinance 22-7), it is officially the new Hawaii Short Term Rental law of the land. Bill 41 has redefined the minimum rental term from 30 day minimums to 90 day minimum rental periods, unless your unit falls within certain designated areas that permit legal nightly rentals (less than 30 days). This piece of legistlation has leveled privately-run short term AND monthly rentals, forcing consumers with rental needs of of less than 90 days to book a hotel or one of very few legal short term rentals, both of which are experiencing unprecendented demand and prices...how convenient right?
In response to Bill 41, the Hawaii Legal Short Term Rental Alliance (HLSTRA) was born and efforts are being made to push back on the city, advocating on behalf of the numerous <90 day tenancy needs faced by the local and transient community like:
- Travel nurses & doctors to service Hawaii's extreme medical personnel shortage
- Extended stays of Family & friends from the mainland who cannot stay in hotels due to prices or proximity to Waikiki hotels.
- Film crew and contract workers that support the local economy
- Local families displaced by home renovation projects or disasters