Jul 25, 2010

CASE STUDY: Epidemic of Hidden Rental Units (analysis of MLS data)

Based on MLS data, we conducted a study to see how many properties are being used as illegal rentals.

Study results show that in the Honolulu Metro area in June 2010, 32% of all active listings were highly suspicious for illegal rental activity.

MLS Search criteria:
  1. Single Family category
  2. Status: Active
  3. Status Date: 6/1/10 thru 6/30/10
  4. Region: Metro* (Honolulu TMK Area 111 thru 129)
Total # of Properties: 136
Based on Relator's own description of their property, cross-checked against Dept of Planning & Permitting records of Building Permits and zone, the following descriptions are highly suspicious for being illegal rental units contained within single-family homes.

The point is not to criticize Realtors or to single-out any specific homeowner. We want to highlight the common practice of illegal rental unit conversions. The market demand is so high, that properties that have the potential to be converted are actively marketed as such. I believe there is a tremendous public benefit to amending the Zoning Code to allow the already common practice of Accessory Dwelling Units (ADU's).

32% of homes in the Honolulu Metro* area are highly suspicious for illegal rental conversions. When should we consider this an epidemic and actively take steps to ease government regulation?

Realtors' descriptions of homes taken verbatim from MLS. These homes are listed under the Single-Family category [bracketed text is my comments]:
  • 2BR 1BA bottom flr w/separate entry
  • Tax record shows 3/1 but, it's a 2/1 house, with a seperate entry studio w/full bath. Living sq ft. larger than what the tax record shows.
  • current duplex single family living.... Home is in good condition with some nonconforming structures but being sold 'As-Is.'
  • Great deal for 2 house with 4 parking, 3 electrical meter. [1978 permit characterizes house as a single-family dwelling]
  • Very good home to own in Kalihi with 1 bedroom and 1 bath downstairs 
  • Live in one and rent the others for extra income....Square footage does not match tax records.
  • Corner LEGAL OHANA Home. 5-bdrm/3-bath upstairs, 3-bdrm/1-bath and 2-bdrm/1-bath downstairs. Separate entrances, kitchens, and upstairs/downstairs metered separately. Live in one, rent the others. Great investment with Lots of possibilities! [3 separate units not allowed]
  • Brand new four-bedroom, two-bath home with den & wet-bar. Building Style: Duplex. [permitted as a single-family home]
  • multi-family home along Kalihi St with 4bedrooms/2bath downstairs; 3bedrooms/2bath upstairs. [1980: permit issued for Alterations to a Single-Family dwelling]
  • Ideal for two family. Front house is 3 bedroom, 1.5 bath and Rear house has 3 bedroom 1 bath.... Houses are connected and raised on post and pier. [2008: permit issued for addition/alterations to a single-family dwelling]
  • L-SHAPED LEGAL DUPLEX offers spacious living room with 3 bedrooms and 1.5 bath one side and 2 bedrooms 1 bath on the other side for rental income or for extended family living. [1987: permitted issued for Alterations to a single-family dwelling]
  • A large downstairs bar area
  • Back home built in 2004-1/1 down and 3/1 up. Front home-living, kitchen & 1/2 bathroom on 1st floor, 4 bed with den and bathroom on 2nd floor. Sq footage may not match tax records. Buyer to do own due deligence. Sold 'as-is'. [2003: permitted as a single0family dwelling; 2004: permit for Rec Rm on lower floor]
  • 4 bdrm, 2 bath upstairs; 3 bedrm, 2 bath downstairs. Ideal for multi-family or nursing home. [2004: permitted as a single-family dwelling]
  • 4 BEDROOM, 2 BATH, LANAI-UPSTAIRS & 4 BEDROOM, 2 BATH-DOWNSTAIRS [2007: Elec meter upgrade for a single-family dwelling]
  • 12 BEDROOMS, 5.5 BATH: (5 UNITS/N0N-C0NFORMING-SEPARATE ENTRY) 3/1 & 2/1-UPSTAIRS * 3/1.5 $ 2/1-DOWNSTAIRS * 2/1 ADDITION [1989: Addition to single-family dwelling]
  • 6 bedrooms, 2 full bathrooms with 2 kitchens [1992: Repairs to single-family dwelling]
  • Upstairs is 3 bedrooms 1 bath, downstairs with a separate entrance are 2 bedrooms, living area and 1 bath.
  • 2 existing dwellings. Bed and bath count may not match tax records. Front home rented as 2/1 up and 2/1 down. Back home rented to one family. Buyer to do own due deligence. Sold 'as-is'.
  • 3/1 with kitchen downstairs, 3/1 with kitchen upstairs, and separate studio with kitchenette make this place ideal for extended family, care home or rental income.
  • Two separate dwellings connected by covered patio. Front house has 3 bdrm 1 bth and back dwelling has 2 bdrm 1 bath. [hallway connection was an old loophole to allow 2 units but it's supposed to be a single-family dwelling]
  • 2/1 upstairs and 3/1 down (2 beds currently used as a rec room) w/separate entrance.
  • Why rent if you buy and rent some portion of the house, 4/2 down 3/1.5 up and poss studio. Number of rooms/bath doesn't match tax records.
  • Live-in the upper floor and rent out the lower level bedroom with separate entry, wet bar, bath and split ac. Existing bldg floor plan does not match tax records.
  • 3 living units: 3bdrm/1.5 bath; 3bdrm/1 bath unit; 1 large studio. Square footage does not match TMK records.
  • 3 comfortable bedrooms and 2 baths + separate 1 bed/1 bath unit downstairs.
  • main home has 3 bedrooms, 2 baths and back lanai which leads to the 1 bedroom, 1 bath apt which can also be entered from the carport area of the home. Great for extended family or a caretaker.
  • 8 bedroom, 3 bath home. Perfect for multi-family living. (Building Style: Multiple Dwellings)
  • Currently configured as 3 units. Upstairs 3/1.5 @ $1695/mo. Downstairs 5/2.5 @ $2100/mo. (3/1.5 + 2/1). Can be configured as one home again - has interior stairway.
  • 3bdrm 2 bath up & 1 bdrm 1 bath down w/ separate entrance. Remodeled in 2005.
  • Single family home or as current 3 units with monthly rent roll of $3300. Great opportunity for investor (cash out =7.5% Cap rate),or live in the front 2/1 and continue to rent the other 2 units for $1700
  • Fully remodeled in 2010, full kitchen and bathroom upstairs and down.
  • multi-family home:upstair-3bed/2bath, downstair-2bed/1bath.[2003: New single-family dwelling]
  • Circular staircase to Master & 2 BDRMS suites. Rec Room,wine cellar & guest rm lower level
  • 4-unit apartment building that can be configured as a duplex with two 3BR/2BA townhouses [1972: New two-family dwelling]
  • Multi-family building contains 7219sf interior. Originaly built as duplex but currently using as 3 units
  • Perfect home for investors or extended family with 3 bedroom, 1.5 bath, full kitchen upstairs and 2  bedroom, 1 bath downstairs (hollow tile) with separate entrance
  • Spacious 2/2.5 main home w/ easy conversion back to original 3/2.5! Sep 1/1 perfect for in-law/guests!
  • one single family property. Unit #1 - 2/2 full kitchen, covered lanai, W/D. Unit #2 - 2/1.5, full kitchen, covered lanai, W/D. Separate studio w/full bath and stack W/D. Ideal multi-family dwelling

 *NOTE: Metro Region of Honolulu, as per MLS search criteria, includes the following neighborhoods: Military, Airport, Mapunapuna, Moanalua Valley, Aliamanu, Moanalua Gardens, Salt Lake, Kapalama, Kalihi-Lower, -Upper, Kalihi-Uka, Sand Island, Kapalama, Liliha, Nuuanu, Palama, Puunui, Alewa Heights, Old Pali, Downtowm, Punchbowl, Kakaako, Papakolea, Pauoa Valley, Pacific Heights, Dowsett, Nuuanu Pali, Ala Moana, Holiday Mart, Pawaa, McCully, Makiki, Makiki Area, Makiki Heights, Punahou, Waikiki, Moiliili, Tantalus, Kapiolani, Kapahulu, Manoa-Area, -Lower, -Upper, -Woodlawn, University.