Our Homes Should Not Become Corporate Assets

Subject: An ordinance to prohibit platform-based fractional investment of dwelling units in Residential and Agricultural districts; confine any timeshare-like use to resort areas under existing law; and add transparency/enforcement tools.

Why action is warranted (Findings)

Platforms financialize homes and scale nonresident demand. Arrived-style models package individual houses into Regulation A “series LLCs” and sell small shares—often starting at $100—to thousands of investors; in 2022 some platforms added a vacation-rental asset class. In practice, that mobilizes many non-occupant buyers to compete for the same single-family stock local families need. ¹ ² ³ ⁴

Hawaiʻi’s housing market is acutely sensitive to this. A 2025 statewide housing factbook reports short-term rentals ≈ 6% of all housing and out-of-state buyers ≈ 20% of single-family and 31% of condo purchases (with some Neighbor Island ZIP codes near 60% out-of-state). Allowing fractional platforms would further divert housing from residents. ⁵ ⁶

Investor competition is structurally elevated. Nationally, investors bought ≈19% of homes in Q1 2025; fractional platforms expand that investor pool by lowering the buy-in to $100, intensifying competition for entry-level homes. ⁷ ³

State law already limits timeshare-like uses to resort areas. HRS § 514E-5 prohibits time share plans and transient vacation rentals except in hotel/resort/transient areas designated by the counties (or where explicitly approved as nonconforming). If a platform’s rotating, sub-60-day use looks like a timeshare by function, it belongs in resort zones—or not at all. ⁸ ⁹

County policy trend is to return units to residents. After Lahaina, Maui Bill 9 (2025) advanced to phase out thousands of STRs in apartment districts (West Maui by 2028; rest of county by 2030) to restore long-term housing. Hawaiʻi County should stay aligned with that direction. ¹⁰ ¹¹ ¹²

What the ordinance should do (Summary)

1. Prohibit “platform fractional investment homes” (PFIH) in Residential and Agricultural districts countywide.
2. Clarify that rotating, app-scheduled, sub-60-day multi-owner use constitutes a regulated “time share plan” for zoning purposes and is only permissible in Resort/Hotel districts consistent with HRS § 514E-5 and county code. ⁸ ⁹
3. Require registration & disclosure (beneficial ownership, platform operator, use pattern) for any dwelling held in a multi-investor series/LLC, even when marketed as “long-term rental only,” to support enforcement of use restrictions and tax compliance. ¹³ ¹⁴
4. Apply amortization for any existing, nonconforming PFIH use that allows transient accommodations, under the same HRS § 46-4(a) authority used for STR phase-outs (recognizing residential/agricultural limitations). ¹⁵ ¹⁶ ¹¹
5. Coordinate tax administration: Direct Finance to reclassify any dwelling functioning as a timeshare to the appropriate property-tax class, consistent with the Hawaiʻi Supreme Court’s 2024 decision upholding a separate Time Share classification. ¹⁷

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Draft ordinance framework (for Corporation Counsel to adapt)

Section 1. Purpose & Intent.
To protect housing affordability and neighborhood stability by preventing the financialization of dwelling units through platform-based fractional investment structures; to confine timeshare-like uses to lawful resort areas; and to ensure transparency and enforceability.

Section 2. Definitions.
“Platform fractional investment home (PFIH)” means a dwelling unit held by a series LLC, trust or similar vehiclethat (a) offers or sells passive equity shares to multiple non-resident investors under federal or state securities exemptions; and (b) is operated or scheduled via a platform or manager for investor return, including any program that allocates owner/investor use in blocks under 60 days or expressly prohibits full-time owner occupancy. (If usage rotates in sub-60-day increments among multiple owners, it shall be deemed a “time share plan” for zoning purposes.) ¹ ² ³ ⁸ ¹³

“Platform operator” means any person or entity that markets, sells, or manages PFIH interests or use.

Exclusions. Family trusts without public solicitation; owner-occupied co-ownership limited to ≤ 2 unrelated natural persons; CPRs with exclusive possession of a separate dwelling unit and no rotating sub-60-day use, and not marketed or managed via an investor platform.

Section 3. Prohibited Uses.
(A) Residential & Agricultural Districts. It shall be unlawful to establish, operate, market, or manage a PFIH in any Residential or Agricultural district. (This does not prohibit standard long-term rentals or lawful CPR units with exclusive possession and no rotating, app-scheduled occupancy.)
(B) Countywide. Any dwelling functioning as a time share plan by virtue of rotating, sub-60-day multi-owner occupancy is prohibited outside Resort/Hotel districts designated by the County pursuant to HRS § 514E-5. ⁸ ⁹

Section 4. Registration & Disclosure.
Platform operators and title-holding entities for dwellings in Hawaiʻi County shall, before acquisition and annually thereafter, file with Planning & Finance: (i) parcel/TMK; (ii) entity structure; (iii) number and residency of beneficial owners; (iv) marketing/use program (including any booking app); and (v) statement of compliance with County zoning and HRS § 514E/HAR ch. 16-106 if applicable. Non-filing constitutes a violation. ¹³ ¹⁴

Section 5. Enforcement & Penalties.
(A) Cease-and-desist; civil fines per day of violation; permit revocation where applicable.
(B) Tax coordination. Finance may reclassify property-tax status consistent with actual use; timeshare-functioning dwellings may be placed in the Time Share class, consistent with the Hawaiʻi Supreme Court (2024) ruling. ¹⁷
(C) Private right to complain. Referral to the State for unregistered time-share sales activity under HRS 514E/HAR 16-106. ¹³ ¹⁴

Section 6. Transition (Amortization).
For any dwellings demonstrably operating as PFIH before the effective date, if they allow transient accommodations or interval use, provide an amortization period to cease such use (aligning with HRS § 46-4(a) standards; propose 18–24 months), after which the use is unlawful. ¹¹ ¹⁵ ¹⁶

Section 7. Severability; Effective Date.

How this protects affordability & neighborhoods

• Cuts off a new pipeline of outside capital that would otherwise bid up single-family homes countywide. ⁵ ⁶
• Aligns with state law by treating rotating sub-60-day multi-owner use as a time share plan restricted to resort zones, not residential neighborhoods. ⁸ ⁹
• Reduces enforcement whack-a-mole via upfront registration and beneficial-ownership disclosure, while preserving standard long-term rentals, family trusts, and true exclusive-possession CPRs.
• Supports tax fairness by routing any timeshare-functioning dwelling into appropriate property-tax treatment, consistent with statewide jurisprudence. ¹⁷

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Implementation notes

• Direct Planning to publish administrative guidance clarifying what triggers “time-share-like” use (rotations, booking calendars, < 60-day blocks, exchange networks), cross-walked to HRS 514E/HAR 16-106. ⁸ ¹³ ¹⁴
• Coordinate with the state tax department on TAT (state 10.25% rising to 11.00% on Jan 1, 2026) and county 3% TAT to ensure any resort-zoned timeshare activity is correctly taxed—while keeping such activity out of residential areas. ¹⁸ ¹⁹

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One-paragraph motion language (for agenda)

Move that the Council request Corporation Counsel to draft an ordinance, substantially consistent with this recommendation, to: (1) prohibit platform fractional investment homes in Residential and Agricultural districts; (2) deem rotating, sub-60-day multi-owner occupancy a “time share plan” limited to Resort/Hotel districts under HRS § 514E-5; (3) require registration and beneficial-ownership disclosure for multi-investor entities holding dwellings; (4) authorize enforcement, tax coordination, and amortization of any existing nonconforming uses; and (5) return scarce housing to local families.

1. Arrived, “Circulars,” Arrived.com (accessed Sept. 3, 2025).
2. U.S. Securities and Exchange Commission, “Arrived Homes, LLC — Form 253G1 (Offering Circular),” June 17, 2025 (and prior amendments).
3. “About Us,” Arrived.com (minimum investment and passive structure).
4. Todd Bishop, “Real estate investment startup Arrived Homes adds vacation rental properties to platform,” GeekWire, Sept. 7, 2022.
5. UHERO, Hawaiʻi Housing Factbook 2025, May 14, 2025.
6. University of Hawaiʻi News, “Hawaiʻi Housing Factbook 2025: Modest improvements…,” May 14, 2025.
7. Redfin News, “Investor Purchases of Condos Fall to Lowest Level in 10 Years…,” May 28, 2025.
8. Hawaiʻi Department of Commerce & Consumer Affairs, HRS Chapter 514E – Time Sharing Plans, § 514E-5 “Geographic limitations.”
9. Hawaiʻi Revised Statutes § 514E-5, codified text (e.g., Justia).
10. “Maui Plan To Phase Out Thousands Of Short-Term Rentals Advances,” Honolulu Civil Beat, July 24, 2025.
11. Maui County Council, HLU-4, Bill 9 (2025) — legislation text/committee actions.
12. “Maui panel passes bill to curb vacation rentals and boost housing supply,” Associated Press, Aug. 2025.
13. Hawaiʻi Administrative Rules, HAR ch. 16-106 – Time Sharing, § 16-106-4 “Registration required; developer and agents.”
14. DCCA, HAR 16-106 (compendium).
15. HRS § 46-4(a), County zoning—amortization authority and residential/agricultural exclusions.
16. HRS § 46-4(a), County zoning (parallel codification/summary).
17. West Maui Resort Partners LP v. County of Maui, Hawaiʻi Supreme Court (Apr. 23, 2024) (upholding separate Time Share property-tax class).
18. Hawaiʻi Department of Taxation, Announcement No. 2025-03: “Transient Accommodations Tax Law Changes from 2025 Regular Legislative Session” (Act 96 raises TAT to 11.00% on Jan 1, 2026).
19. Hawaiʻi County Department of Finance, “Transient Accommodations Tax (TAT)” (county 3% TAT).