’Disastrous’ bill
Bill 108 is a disastrous and ill-advised bill that is being considered by the County Council, and backed by the mayor, ostensibly for the purpose being to free up housing for local renters. But without taking the law of supply and demand into account, the exact opposite of the desired effect will take place. The end result will be a real estate crash that will be far worse than the crash of 2006 when property values went down by about 50 percent.
The intent of the bill is to limit the number of private vacation rentals and B&B homes in residential neighborhoods and agriculturally zoned homes so that these homes will be made available to local renters at lower than current rates. The idea is, that with more homes being offered for long-term rentals, the cost of renting will go down, and the children of local families can thereby afford to remain on the island rather than move to the mainland.
What the framers of this bill are not taking into consideration is that the resulting crash in real estate and the resulting drop in visitor numbers will put the businesses where these local families work out of business. With no jobs, their children will have to move to the mainland anyway.
Literally thousands of people have purchased homes now, prior to retiring in five to 10 years, to beat the future increase in interest rates. They can’t afford to keep them vacant, so they have enlisted the assistance of vacation rental management companies to keep the properties rented until they are ready to move over.
In many cases, the amount of rent they would get from long-term renters would not cover their mortgages. So they would either have to sell or go into foreclosure. The resulting glut of homes on the market will drive prices into the basement. Future retirees will get the news that vacation rental is no longer allowed on the Big Island so they will search for other retirement destinations. This will lower the demand for homes even further causing a double whammy on home prices; high supply and low demand equals lower prices.
Hotel occupancy is as high as it’s ever been. If thousands of vacation rentals are forced to close, there won’t be enough hotel rooms for the number of vacationers who want to come to the Big Island. No doubt this will also force up the cost of a hotel rooms causing many visitors will go elsewhere.
Many of the people who stay in vacation rentals come as groups. Six to 10 people rent a house and share the cost. Often they can get an entire house for the cost of one hotel room instead of renting three to five hotel rooms; plus they have a kitchen where they can prepare their own meals.
If the cost of a vacation is forced over what these people can afford they just won’t come. This will virtually kill tourism on the Big Island.
Many of these homes were investments for retirees. Without the rental income, they will have to let the banks take the homes back, resulting in a wave of foreclosures. But with tourism dead, who’s going to come in to buy these foreclosures?
So property values for ALL the local people and permanent residents will plummet. Empty homes will dot every neighborhood on the island, resulting in the further deterioration of property values. Empty store fronts will be prevalent in every town.
It will be a total disaster.
There are probably about 1,000 vacation rental units not in the resort zone that have been conducting vacation rentals from as early as 1972. It will be an extreme hardship on the owners of these units to wade through the nonconforming use permit process and possibly have to write letters to the other 200 or 300 owners in the complex. Each owner will get 200 or 300 letters from all the other owners. This is not to mention the stress it will put on the county to process all these applications.
And then, if each owner is required to bring his or her unit up to ADA standards, it will wreak havoc on the associations’ ability to deal with all the repairs, not to mention the inspections required by the Building Division. At the very least, if the council is hell-bent on passing a bill, condos should be exempt for the bill’s requirements.
Harry M. Pritikin
Kailua-Kona