Are Short-Term Rentals Allowed in Kapaa, Hawaii?

Yes, short-term rentals are allowed in Kapaa, Hawaii, but only in designated Visitor Destination Areas (VDA). Kapaa falls under Kauai County jurisdiction, which has implemented strict regulations limiting short-term vacation rentals to specific tourist-designated zones. Properties located within the VDA can legally operate as short-term rentals, while properties outside these areas are generally prohibited from operating as STRs unless they hold grandfathered nonconforming use permits.

The areas highlighted as VDA zones include parts of the eastern Kapaa coastal tourism corridor, Princeville, and Poipu. These regulations have been in place since 2009 when Kauai County passed legislation specifically to protect residential housing while maintaining the tourism industry.

How to Start a Short-Term Rental Business in Kapaa

Step 1: Verify Property Location and Zoning

• Confirm your property is located within a designated Visitor Destination Area (VDA)
• Check zoning compliance through the Kauai County Planning Department
• Review property deed and any homeowner association restrictions

Step 2: Obtain Required State Tax Licenses

• Apply for Transient Accommodations Tax (TAT) license from Hawaii Department of Taxation ($5 for 1-5 units, $15 for 6+ units)
• Obtain General Excise Tax (GET) license from Hawaii Department of Taxation ($15)
• Ensure both licenses are active before applying for county permits

Step 3: Choose STR Type and Apply for County Permits

Determine which type of STR operation you'll establish:

• Homestay: Owner must physically reside on-site and be available to guests
• Single Family Transient Vacation Rental (SFTVR): Owner presence not required

Step 4: Secure Insurance Coverage

• Obtain liability insurance providing minimum $1,000,000 in general liability coverage
• Ensure policy covers short-term rental operations

Step 5: Prepare Safety Equipment

• Install multi-purpose A:B:C fire extinguisher near exits
• Ensure annual inspection of safety equipment
• Create evacuation plan for guests

Required Documents, Permits, and Licenses

State-Level Requirements

• Hawaii TAT License: Required for all transient accommodations
• Hawaii GET License: Required for business operations
• Federal EIN or SSN/ITIN: For tax identification purposes

County-Level Requirements for Kapaa (Kauai County)

• Homestay Zoning Permit (if operating homestay)
• SFTVR Registration (if operating single-family vacation rental)

Application Documentation Required

• Property owner's name, address, phone number, and email
• 24/7 emergency contact information
• Property zoning permit number and address
• Website links advertising the rental
• Proof of primary residence (for homestays)
• Valid TAT and GET licenses
• Fire extinguisher inspection documentation
• Site plan and floor plan of property
• Proof of liability insurance coverage
• Statement of compliance with regulations

Specific Regulations for Short-Term Rentals in Kauai County

Zoning Restrictions

• STRs permitted only within designated Visitor Destination Areas (VDA)
• Properties outside VDA can only operate with grandfathered nonconforming use certificates
• No new permits issued outside VDA since July 31, 2009

Operational Requirements for Homestays

• Owner must physically reside at the property during homestay operations
• Maximum of three guest rooms allowed
• Owner must be physically available within Kauai County to address guest needs
• Rental periods limited to fewer than 29 consecutive days per guest

Operational Requirements for SFTVRs

• No owner occupancy requirement
• Must operate within VDA zones
• Rental periods follow state definition of fewer than 180 consecutive days

Permit Validity and Renewals

• Homestay permits: Must be renewed annually for $750
• Nonconforming use certificates: Must be renewed annually for $750
• Initial application fees: $750 for homestays
• Permits are non-transferable between owners

Compliance Requirements

• Maintain current TAT and GET licenses
• Annual fire extinguisher inspections
• Provide 24/7 emergency contact information
• Display permit numbers in advertising
• Maintain evacuation plans for guests

State-Level Tax Obligations

• Hawaii State TAT: 10.25% of gross rental income
• County TAT: Additional county-specific rates
• Hawaii State GET: 4% of gross income
• County GET surcharge: Variable rates
• Federal and state income taxes on rental income

Contact Information for Local Authorities

Kauai County Planning Department

Address: 4444 Rice Street, Suite A473, Lihue, Hawaii 96766 Phone: Contact main county number for planning department transfers Website: www.kauai.gov/Government/Departments-Agencies/Planning

STR Permit Applications and Renewals

• All renewal packets must be mailed via certified mail, return receipt requested
• Submit renewals at least 2 months prior to expiration date
• No walk-in applications accepted at planning department counter

Hawaii Department of Taxation

For TAT and GET License Applications Website: Available through Hawaii state tax department online services

Violation Reporting

For complaints regarding unpermitted short-term rentals:

• Contact Kauai County Planning Department
• Ask to speak with an inspector
• Provide detailed information including property address, TMK number, and evidence of STR activity

Important Links and Source Pages

1. Kauai County STR Regulations: www.kauai.gov/Government/Departments-Agencies/Planning/Transient-Vacation-Rentals

2. List of Approved STRs by TMK: Available on county website (www.kauai.gov/files/assets/public/v/88/planning-department/documents/tvr/dto_r1_updated.pdf)

3. Ordinance 1002 - Homestays: www.kauai.gov/files/assets/public/v/1/planning-department/documents/ordinance_1002_homestays_06_03_16.pdf

4. Ordinance 904 - TVR: www.kauai.gov/files/assets/public/v/1/planning-department/documents/ordinance_904_tvr.pdf

5. Ordinance 950 - Fees: www.kauai.gov/files/assets/public/v/1/planning-department/documents/ordinance_950_fees.pdf

6. Hawaii Senate Bill 2919: Information about recent state legislation affecting county STR regulation authority

Key Considerations for STR Investors

Market Opportunities

Kapaa's location within the eastern coastal tourism corridor of Kauai provides excellent opportunities for STR investors, particularly in VDA-designated areas. The market benefits from year-round tourism demand and Kauai's reputation as a premier vacation destination.

Regulatory Compliance

Kauai County has maintained strict STR regulations since 2009, making it one of the more restrictive markets in Hawaii. However, this also means the regulatory framework is well-established and stable for properties operating within permitted zones.

Investment Strategy

Properties within VDA zones command premium prices due to their STR income potential. Investors should verify VDA status before purchase and understand that properties outside these zones have limited income potential unless they possess rare grandfathered permits.

Due Diligence Requirements

Before purchasing any property for STR purposes in Kapaa, investors must confirm VDA status through the county planning department and review all applicable zoning restrictions and homeowner association rules that may affect STR operations.