Haw. Legal Short-Term Rental All. v. City of Honolulu

• Decision Date: 13 October 2022
• Docket Number: 22-cv-247-DKW-RT
• Parties: HAWAI'I LEGAL SHORT-TERM RENTAL ALLIANCE, a Hawaii[1] nonprofit corporation, Plaintiff, v. CITY AND COUNTY OF HONOLULU, a municipal corporation; DEPARTMENT OF PLANNING AND PERMITTTING OF THE CITY AND COUNTY OF HONOLULU “DPP”; DAWN APUNA, in her official capacity as Acting Director of the DPP,1 et al., Defendants.
• Court: U.S. District Court — District of Hawaii

HAWAI'I LEGAL SHORT-TERM RENTAL ALLIANCE, a Hawaii^[1] nonprofit corporation, Plaintiff,
v.
CITY AND COUNTY OF HONOLULU, a municipal corporation; DEPARTMENT OF PLANNING AND PERMITTTING OF THE CITY AND COUNTY OF HONOLULU “DPP”; DAWN APUNA, in her official capacity as Acting Director of the DPP,1 et al., Defendants.

No. 22-cv-247-DKW-RT

United States District Court, D. Hawaii

October 13, 2022

ORDER GRANTING PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION

Derrick K. Watson, United States District Judge

Residential property owners on O‘ahu have long been able to lawfully rent their properties to tenants for a minimum of 30 days. That much is undisputed. Honolulu's Ordinance 22-7 (the “Ordinance” or “22-7”)-currently set to take effect on October 23, 2022-would increase that minimum permissible rental

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period from 30 to 90 days, with no provision, beyond a six-month phase out period, to accommodate those owners with existing 30-89-day tenancies.

The State statute that authorizes the City to enact zoning ordinances such as 22-7 plainly bars this. See HRS § 46-4(a) (“[No] ordinance enacted pursuant to this section shall prohibit the continued lawful use of any building or premises for any . . . purpose for which the building or premises is used at the time . . . the ordinance takes effect ....”). Further, constitutional takings principles protect a person's right to continue a vested land use despite a subsequent governmental regulation restricting that use.

Accordingly, Plaintiff Hawai‘i Legal Short-Term Rental Alliance, on behalf of itself and its members,^[2] seeks to enjoin the implementation and enforcement of Ordinance 22-7.^[3] Motion for Preliminary Injunction (“MPI”), Dkt. No. 13. Finding that Plaintiff has established the elements for the requested injunction, the Court GRANTS the MPI, as more fully explained below.

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LEGAL STANDARD

“A plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest.” Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 20 (2008).

RELEVANT FACTUAL BACKGROUND

I. 1957-1980: The City receives zoning authority from the State and begins enacting zoning ordinances.

The City derives its authority to enact zoning ordinances from the Zoning Enabling Act, HRS § 46-4(a), passed in 1957. This statute provides, in relevant part:

Zoning in all counties shall be accomplished within the framework of a long-range, comprehensive general plan prepared . . . to guide the overall future development of the county. Zoning shall be one of the tools available to the county to put the general plan into effect in an orderly manner.... The zoning power granted herein shall be exercised by ordinance which may relate to

(1) The areas within which agriculture, forestry, industry trade, and business may be conducted;

(2) The areas in which residential uses may be regulated or prohibited;

...

(12) Other regulations the boards or city council find necessary and proper to permit and encourage the orderly development of land resources within their jurisdictions....

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The powers granted herein shall be liberally construed in favor of the county exercising them, and in such a manner as to promote the orderly development of each county or city and county . . . to ensure the greatest benefit for the State as a whole....

Neither this section nor any ordinance enacted pursuant to this section shall prohibit the continued lawful use of any building or premises for any trade, industrial, residential, agricultural, or other purpose for which the building or premises is used at the time this section or the ordinance takes effect; provided that a zoning ordinance may provide for elimination of nonconforming uses as the uses are discontinued, or for the amortization or phasing out of nonconforming uses or signs over a reasonable period of time in commercial, industrial, resort, and apartment zoned areas only. In no event shall such amortization or phasing out of nonconforming uses apply to any existing building or premises used for residential (single-family or duplex) or agricultural uses.

HRS § 46-4(a) (emphasis added).^[4]

On January 2, 1969, pursuant to HRS § 46-4, the City divided O‘ahu into several zoning districts-among them apartment, agricultural, business, industrial, preservation, residential, and resort-with the adoption of its first Comprehensive Zoning Code (“CZC”). See Defendants' Opposition (“Opp.”) Exh. B, Dkt. No. 24 4. The CZC was designed to:

implement the purpose and intent of the General Plan of the City by encouraging the most desirable use of land for residential, recreational, agricultural, commercial, industrial, and other purposes,

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and the most desirable density of population in the several parts of the City, and by encouraging the most appropriate use and occupancy of buildings, and by promoting good civic design and arrangement....

Id. § 21-102.^[5]

II. 1980-2022: The City outlaws home rentals of less than 30 days in non Resort zoning districts.

In 1980, the State legislature passed HRS § 514E, directing the counties to “amend[] their zoning ordinances [to] limit the location of . . . transient vacation rentals, within such areas as are deemed appropriate,” in order to protect the lifestyles of Hawai‘i's permanent residents. HRS § 514E-4; Reefshare, Ltd. v. Nagata, 762 P.2d 169, 174 (1988) (quoting Conf. Comm. Rep. No. 8-80 at 942 in 1980 Senate Journal) (HRS § 514E legislative history providing that “transient vacation rentals should not be permitted where the lifestyles of the permanent residents will be disrupted in an unreasonable manner”). HRS § 514E-1 defined

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“transient vacation rental” as a “rental in a multi-unit building to visitors . . . with the duration of occupancy less than thirty days for the transient occupant.”

In response to HRS § 514E, the City adopted a series of land use ordinances (“LUO”) in 1980, 1986, and 1989 that limited home rentals of less than 30 days to Resort zoning districts and certain Apartment zoning districts located in close proximity to a Resort district.^[6] See, e.g., Opp. Exh. C (“Ord. 80-106”) at 3, Dkt. No. 24-5; MPI Exh. 2 (“Ord. 86-96”), Dkt. No. 13-5. Alongside these LUOs, the City implemented a program under which property owners who had previously been renting out their homes for less than 30 days could be grandfathered in and allowed to continue doing so if they obtained a nonconforming use certificate (“NCUC”).^[7] See MPI at 6; LUO § 21-4.110.1-2 (describing the NCUC process).

Because the 1980s LUOs only restricted home rentals of less than 30 days, it has since been legal in any Honolulu zoning district to rent homes for periods of 30 days or longer. The City has repeatedly acknowledged such legality. For example, in 2016, in Kokua Coal. v. Dep't of Planning & Permitting, Civil No. 1:16-cv-00387-DKW-RLP (“Kokua I”), the City signed an agreement providing, in part:

8. As currently worded, the [LUO] prohibits providing all or a portion of a residential dwelling unit to a transient occupant for less than

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thirty consecutive calendar days for compensation. Thus, the LUO allows a property owner to rent its property to transient guests in blocks of thirty days or more, up to twelve times per year.

Kokua I Stipulation & Order, MPI Exh. 4 at 4, Dkt. No. 13-7 (emphasis added). Similarly, in 2019, in Kokua Coal. v. Dep't of Planning & Permitting, Civil No. 19-00414-DKW-RT (“Kokua II”), the City signed another agreement that distinguished between “illegal short-term rentals,” which it defined as home rentals of less than 30 days, and “legal long-term rentals,” which it defined as “rental[s] of at least 30 consecutive days.” Kokua II Stipulation & Order, MPI Exh. 6 at 4-5, Dkt. No. 13-9. The Kokua II agreement also “affirmed and incorporated” the Kokua I agreement. Id. at 5.

III. 2022: The City adopts Ordinance 22-7, which outlaws home rentals of less than 90 days in non-Resort zoning districts.

On October 19, 2021, Bill 41 was introduced before the Honolulu City Council and Honolulu Planning Commission.^[8] After public hearings and testimony, Bill 41 was passed on April 13, 2022 and signed into law on April 26, 2022 as Ordinance 22-7. Ordinance 22-7's findings and purpose are as follows:

Short-term rentals are disruptive to the character and fabric of our residential neighborhoods; they are inconsistent with the land uses that are intended for our residential zoned areas and increase the price of housing for O‘ahu's resident population by removing housing stock from the for-sale and long-term rental markets. The City Council finds that any economic benefits of opening up our residential areas to

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tourism are far outweighed by the negative impacts to our neighborhoods and local residents....

The purpose of this ordinance is to better protect the City's residential neighborhoods and housing stock from the negative impacts of shortterm rentals by providing a more comprehensive approach to the regulation of transient accommodations within the City.

MPI Exh. 1 (“Ord. 22-7”) at 1, Dkt. No. 13-4.

To this effect and as relevant here, Ordinance 22-7 provides that it is no longer lawful to rent a non-Resort district home to tenants for less than 90 days. Ord. 22-7 at 37 (re-defining “transient vacation unit” as a home rental of less than 90 days and defining “transient occupant” as “any person who rents a lodging or dwelling unit, or portion thereof, for less than 90 consecutive days, and whose permanent address for legal purposes is not the lodging or dwelling unit being rented”). The Ordinance provides an exception for any less-than-30-day rentals...