Controversy Over B&B Regulation on Kauai

Jim Karlovsky, RB | (808) 282-7981 Education , Government , Kauai Information , Local Kauai News , Real Estate Leave a Comment

B&B Crackdown

kauai b&bA very hot topic among real estate owners here on Kauai recently relates to the Kauai County Planning Department’s current regulation of “homestays,” or as they are much more commonly referred to, Bed & Breakfasts (B&B’s). For those not yet familiar with the issue, the current “B&B Crackdown,” as it was termed in an article in the Garden Island Newspaper back in March, is a component of the Planning Department’s recent broad actions to increase the regulation of various types of visitor accommodation providers on Kauai, including Transient Vacation Rentals (TVR’s) and B&B’s.

After identifying a significant amount of visitor accommodation providers operating their businesses without the requisite permits, earlier this year the County of Kauai issued hundreds of cease-and-desist letters to property owners, demanding that they shut down their visitor accommodation business operations within two weeks or face fines of up to $10,000 per day, and mandating that the owners obtain the necessary permits before opening their doors for business again.

Aside from the understandable initial outrage from property owners being forced to stop utilizing their properties for financial profit, the bigger problem that has come to light is that, while the definition and terms of regulation of TVR’s are very clearly outlined, the definition and terms of regulation of B&B’s are much less sufficiently defined. As a result of this, many B&B operators who rent out portions of the primary homes that they live in (a true homestay) argue that they are wrongly being included in the scope of the crackdown, and that, although they are willing to secure the necessary permits to operate legally, there is currently no plan or system in place to allow them to do so.

How We Got Here

In response to ongoing pressure for the County of Kauai to increase enforcement efforts on non-permitted violators of the visitor accommodation laws, last year the county utilized tourism websites such as Airbnb and VRBO, among others, to identify more than 300 offenders, and then commenced the unprecedented enforcement act of mailing out cease-and-desist letters without issuing any other prior notice. Although the vast majority of the letters were sent out to non-permitted, single-family TVR’s that were in clear violation of the existing laws, many letters went to couples or families who have been operating B&B’s out of the primary homes that they, themselves, live in, who pay state general excise taxes and transient accommodation taxes on the income they receive, and have otherwise demonstrated their desire to operate as a legal business. The problem, they argue, is that the law does not sufficiently define what constitutes a B&B, so all those who currently operate a B&B are being lumped into the same “offender” pool, with no consideration given to whether they are local property owners welcoming guests into the primary home they live in, or whether they are out-of-state owners utilizing their second home more like a TVR.

Up until now, the definition of a “homestay” (or B&B) has been defined as “an owner-occupied dwelling unit in which overnight accommodations are provided to transient guests for compensation, for 180 days or less, within the same dwelling unit in which the owner or lessee resides, or in a guest house.” Recognizing that this relatively lax definition has been creating a loophole for illegal TVR owners to qualify as a B&B even if they don’t actually live full-time onsite, the County Council is now considering Bill #2578, aimed at tightening the definition of a homestay to require that the guest accommodations be within the property owner’s primary residence, and that the owner currently qualifies for a homeowner’s exemption. Additionally the Council is considering a cap that would limit the number of B&B permit applications that can be reviewed to no more than 10 per year.

The Council held a public hearing this past Tuesday, May 19, to allow the public to voice their thoughts and opinions regarding proposed Bill #2578.

The Results of This Week’s Hearing

The Garden Island Newspaper reported on Wednesday that the opinions of the public were diverse, and that there was no real consensus among those who turned out for the 3-hour hearing. It was noted that almost no voice was given to concerns about noise or increased car traffic stemming from the operation B&B’s in residential neighborhoods, which could be an indication of the public’s agreement that the presence of the property owner at the site would act as a self-regulating mechanism to help keep offensive activities to a minimum.

Some of the discussion at the hearing seemed to focus on B&B’s located in specific geographic areas. It was noted by several local residents that Hanalei may already be overloaded with both legal and illegal TVR’s, as well as unpermitted B&B’s, and it was requested that no further B&B’s be permitted in the Hanalei area.

Also, much of the discussion at the hearing focused on B&B’s located on land zoned for agricultural use, which requires an additional use permit on top of the B&B permit that would be mandated by the county. Although no transient visitor accommodation businesses (TVR’s or B&B’s) are inherently allowed in agricultural zones (a Conditional Use Permit, or CUP, is required in all cases), some argued that the steady income generated from the operation of a B&B would help make agriculture more viable, and allow farmers the ability to keep producing quality foods for Kauai and to help protect them from climate and market fluctuations. Others voiced their concerns that this type of allowance would be a slippery slope.

The Council has now accepted all public opinions on the changes proposed in Bill #2587, and they will discuss on their own before making a final decision in the future.

Clarification Regarding TVR’s

Let it be understood that the entire discussion above pertains only to how homestays, or B&B’s, will be defined and permitted by the County of Kauai in the future. TVR’s, however, are deemed to be very clearly defined, and the process for having them permitted is deemed to be very straightforward. As the County of Kauai continues to increase enforcement efforts on non-permitted violators of the visitor accommodation laws, it is fair to assume that owners operating illegal TVR’s will continue to be targeted at random, without any prior notice being given before cease-and-desist letters are issued. For more information about TVR’s, read the article: “Transient Vacation Rentals (TVR’s): What You Need to Know.

For more information regarding the current B&B regulation controversy on Kauai, read the following original news articles published in The Garden Island newspaper:
B&B Crackdown – March 28, 2015
B&B Blowback – April 15, 2015
B&B Hearing Today – May 19, 2015
B&B Back and Forth – May 20, 2015
About the Author

Jim Karlovsky, RB | (808) 282-7981

Facebook Twitter Google+

Having worked as a licensed Real Estate Broker in 3 states (HI, CA & IL), with $6.7 Billion in real estate sold, leased, advised upon and/or formally valued for clients, and with the experience of more than 150 completed transactions involving luxury residential, vacant land, retail, office and industrial property types, I bring a wealth of knowledge and experience to the real estate advisory and sales services I provide to my clients here on Kauai. I hold myself to the highest ethical standards and always place my clients’ interests above my own. With an unwavering and unsurpassed work ethic, I work to advance the objectives of my clients with integrity and in a manner that fosters a sense of trust and respect.