Can The County Ban Short Term Rentals on Maui?

A Ban on Short Term Rentals on Maui Won’t Solve The Affordable Housing Crisis

The Proposed STR Ban is the Real Land Grab

After the Lahaina Fire, one of the main concerns of Maui residents was that we would see disaster capitalism from the ‘mainland’ investors. Many were concerned that there would be a ‘land grab’ by ‘mainland’ investors looking to capitalize on the depressed property values of fire-affected properties. Fortunately, that never happened, but, unfortunately, in a surprising twist to the story, the real land grab just began and it isn’t real estate investors behind the grab.

It’s the County of Maui attempting to take away vested property use rights from existing owners.

In partnership with the hotel conglomerate, Maui County is attempting to repeal the Minatoya Decision that was a judge approved list of properties passed into law in 2018 giving rights to specific apartment-zoned condo complexes and a few single family residences to allow short-term rentals. If this legislation to repeal the Minatoya Decision passes the Council vote and survives the inevitable class action lawsuit, not only does this create real economic harm to the owners of these units, it will cause a very long list of serious problems for all Maui residents who rely directly and indirectly on the dollars spent by the owners and renters of those units. 

A recent economic impact study on the removal of these 7,000 units from the island wide nightly rental inventory, performed as recently as 2022 by Paul Brewbaker, the Senior VP and Chief Economist at Bank of Hawaii, shows that Maui County economic output would decrease 2.74 billion and the impact on the outer-islands would total 508 million. The loss of these units would destroy 14,000 jobs on an island of 165,000 people, of which approximately 130,000 are working age. State tax revenue for Maui would decline by 137 million while earnings islandwide would decline 747 million. 

At the moment, the Maui County Council and Mayor Bissen don’t seem concerned that they will be torpedoing Maui’s only industry to support its population and igniting an islandwide economic depression. They aren’t worried about where they will make up the hundreds of millions of dollars of annual tax revenue losses and income generated by residents. These units under fire generate significant tax revenue that is itself the solution to build the necessary affordable housing. 

Failed Enforcement of Illegally Operating STRs on Maui

The County of Maui has proven incapable or even lazy with the the enforcement of current illegal STRs, even publicly announcing their failed efforts. Bissen, in the same speech announcing the efforts to steal vested property rights, basically said they have given up on going after illegal STRs and said that they trust Airbnb, which makes money off the bookings, to enforce the rules for the county. 

Maui County has also struggled mightily at collecting the Maui County Transient Accommodations Tax (MCTAT), a 3% surcharge on all nightly rentals. A recent audit demonstrated that the County failed to properly collect 16.7 million dollars! They even abandoned attempts to reconcile the records.

Why can’t we just fund these efforts with our existing property tax revenue? Can't we just get better at the day to day work of running the government with existing laws rather than waste more time entrenched in this?

If the County succeeds in banning 7,000 short-term rental units, how do they expect to enforce the ban if they can’t enforce the laws on the current illegal units? How will they impose the fines?

How Did We Get To The Point Where The Maui Mayor and Council Want to Ban These Short Term Rentals?

Tragically, upwards of 13,000 people lost their homes in the devastating Lahaina fires of August 8, 2023. In the months following the fire, the top priority for the early stages of recovery would be seeking housing for those who had just lost their home. Many of these apartment-zoned condo owners on the Minatoya List, the same ones facing the threat of losing their rights, opened their condos to displaced victims to stay indefinitely.

Around December of 2023, FEMA and Governor Josh Green announced they would be seeking approximately 3,000 rentals for the displaced for a period of two years. He then also threatened to ban all STRS’s on Maui (not legally of course) if he didn’t hit his numbers. 

The 3,000 units needed were obtained through the generous rent amounts offered by FEMA and the generosity of owners to open up their homes and condos. Governor Green barely mentioned anything about this amazing success, but he did see his opportunity to pay back the hotels for lining his pockets during his campaign.

Hotels Stand To Gain The Most From This

So, knowing that he couldn’t go it alone to help the hotels, the Governor passed a bill to give individual counties more latitude in setting their own STR policies. Essentially, this took the onus off of himself by passing the buck, so to speak, to the County Mayors and County Councils to work on it on their own.

Since the rise of Airbnb and VRBO, hotels have lobbied to limit and ban STRs because they create competition. Without STRs as competition, the hotels’ occupancy rates would be higher and they could raise prices further. However, more STR owner profits and more STR guest profits stay in Hawaii while the majority of hotel profits go back to the mainland. 

The Lahaina Strong Group's Influence And Ka'anapali Beach Occupation

According to their website, the Lahaina Strong group’s mission statement is:

Maui and all of Hawai‘i’s pae ‘āina are binding together to provide immediate relief to those most impacted by the devastating Maui Fires. But as impacted families rise to their feet, we must also begin the process of recovery and empowering our ‘ohana to reconstruct their communities for the future. 

This includes advocating for accountable FEMA, federal, and state support, actively opposing disaster capitalists who may seek to exploit the situation, building back more robust and equitable institutions, and working to ensure that we have elected officials who will be accountable to local people, not opportunistic special interests.

Maui and its people were in environmental, economic, and political crisis before these fires and will continue to be long after the ash settles and the cameras disappear — unless we organize to change it.

A fight over the future of Maui is coming. Opportunists are already seeking to capitalize on Lāhainā and Maui’s crisis to profit as Maui rebuilds. The Big Money special interests who have held back progress in our islands for too long and helped create the conditions for our current mess can not be the ones to profit or lead us on the way out.

Lahaina Strong, a lobbying group for Our Hawaii Action, through petitioning and occupying Ka’anapali Beach for 175 days, is also partially responsible for the Mayor and County Council attempting to take away vested property rights and to give the hotels on Maui everything they have ever hoped for.

If Lahaina Strong stands against Big Money (the hotels) and opportunists seeking to capitalize on the crisis ( the government) they could also work to expose the government’s role in the devastating fire through years of neglecting recommendations and proposals for fire prevention, along with the government's role in favoring corporate hotels and the utility monopoly that is Hawaii Electric over local businesses. 

Keeping The Main Thing, The Main Thing

The main thing here is affordable housing for all Maui residents with an emphasis on the displaced first. Some in the state and on the county council are seeking to take advantage of this situation and use it try an get their years long wish of letting the hotels have a monopoly on our tourism. While I wholeheartedly agree that we need to ensure our displaced fire victims have dignified housing until Lahaina is rebuilt and that we need more affordable housing for all hard-working Maui residents, trying to overturn the Minatoya List is simply not going to produce the desired results, its only going to help the hotels and hurt the people. 

Even if these 7,000 units were for sale at half their current price, they are still not affordable for the average resident, they carry expensive maintenance and ownership costs. Losing these transient accommodations will certainly lead to economic disaster for everyone on the island by suddenly gutting our largest industry, tourism.

Without jobs, housing becomes even less affordable. This is the chicken or the egg argument, what comes first, the paycheck or the rent money? With unemployment already higher than the national average, how much higher would unemployment be if our only job-producing industry were cut in half? It would be great to have another industry to fall back on, but the truth is that we just don't have that luxury. 

Full Alphabetical List of Apartment Zoned STRs on Maui's Minatoya List

Hotel Zone Short Term Rentals on Maui

The Armageddon Effect A Repeal of Minatoya Would Have on our Tourism Economy

Banning 7,000 short-term rental properties on Maui would send socioeconomic shockwaves through the island and state. Putting aside the fact that the property tax, general excise tax, and transient accommodation tax collected from short-term rental properties on Maui generates roughly 250M a year in much-needed revenue to fund schools, roads, housing, social projects, beach park maintenance, etc., let’s focus first on the impact on affiliated businesses in the tourism economy. 

If these apartment-zoned short-term rental units are eliminated from the available nightly rental inventory, this would reduce our total available rental inventory by almost half. The number of businesses that would have to be shuttered would exceed that of the COVID-19 lockdown and there would be no relief to help them survive. 

These short-term rental affiliated businesses that support local families include property management companies that employ maintenance workers, cleaners, accountants, administrative staff, and other positions. They include our restaurants that would have to cut hours and lay off their employees. Many activity companies would be forced out of business and any businesses relying on tourism would be seriously pressed to stay above water.

Airlines will be forced to reduce routes, car rental companies will once again have thousands of cars sitting in the empty fields near the airport. With such a dramatic decrease in available jobs and the spike in unemployment, would it matter that a short-term rental unit was available as long-term rental if no one needed it or could afford it?

Use The Proceeds From Short Term Rental Taxes For Affordable Housing

The best way to not only ensure that the victims of the fire are properly housed and also ensure that all residents of Maui have access to housing is most definitely not to cripple Maui’s economy by ‘banning’ or ‘rezoning’ short-term rental properties.

The solution, just like with the principles of real estate investing, is to leverage our assets. Which in this case is a very robust and profitable short-term rental industry that generates an enormous amount of tax revenue from tourists that can directly support the development of affordable housing for locals. This could happen as long as the county and state can work with the developers to create a win/win.

I'm an advocate for affordable housing and believe we have a unique opportunity on Maui to create real change in this department. But, it will take money and that money will have to come from somewhere. 

Inventory of Housing For Sale on Maui Isn’t The Problem

Across all property types, we are at 4.8 months supply. Meaning that if no new homes or condos came on the market in the next 5 months, the supply would be gone. However, there are currently 826 homes or condos for sale and 226 new listings were added last month. There are 108 condos currently for sale on the market that are not short-term rentable with average days on the market of 70 days. We are not experiencing a shortage of inventory in the housing market, we are experiencing the same affordability issues that exist across the United States. Affordability is connected to interest rates, local job opportunities and their wages, as well as home pricing of course. 

The main reason that buying a home has become unaffordable for the average person on Maui and in elsewhere in the North America and Europe is that home price appreciation has outpaced wage growth, couple that with higher interest rates and monthly payments become increasingly harder to make. Associated costs of ownership have outpaced inflation of retail goods and everyone is in the same situation. Since the pandemic boom in the real estate market, things have cooled off quite a bit in the last 2 years.  

A Surplus of FEMA Housing?

The Civil Beat reported on May 9th that nearly 500 condos that were enrolled in the FEMA program are still sitting vacant. If there are 500 free condos still out there, why would anyone want 7,000 that are not free? These 500 condos are sitting empty at an average monthly cost of $12,000 each to FEMA. 

Fundamental Misunderstandings At The Highest Levels

The Governor and the Maui Mayor have demonstrated that they don't really care about the actual number of existing short-term rentals in the state or on Maui or the math involved. You would think they could at least have their assistants provide them with important data on such an important topic rather than grabbing numbers from thin air.

Green, Bissen, and some members from the County Council also won’t willingly acknowledge that according to the University of Hawaii Economic Research Organization, the total number of short-term rentals in the state is only 5.5% of its total housing inventory or 30,000 out of Hawaii’s 557,000 housing units. 52% of these 30,000 units are owned by out-of-state residents leaving 48% ownership by state residents. Only half of Hawaii's STRs are owner by non-Hawaii residents according to the study. 

There is a common misconception that these apartment-zoned short-term rental units on the Minatoya List are only owned by greedy, fat-cat mainland investors and hedge funds. Councilmember Keani Rawlins Fernandez, notorious for being combative at council meetings, loves to villainize this fictitious group with an Us vs. Them mentality. 

Most of our STR owners only own one unit, have owned it for more than 5 years, and have to work very hard to make them run properly. Keli'i Akina wrote an apt article on the Hawaii Free Press back during the STR battle on Oahu in 2022 titled, Short Term Rentals a Convenient Scapegoat?, its worth a read.

To only associate these investment properties with the mainland investor type is inaccurate, Hawaii has a lot of residents who see the value of owning and managing these as a way to grow their wealth which in turn helps the local economy. 

Functional Obsolescence in the Condos They Want to Ban

Embattled Mayor Bissen misspoke several times during the May 2nd announcement that he would seek to steal vested property rights, but the biggest lie was that these apartment-zoned short-term rental units were built as workforce housing. 

So, he’s telling us that Kamaole Sands, Kapalua Golf Villas, Kapalua Bay Villas, Maui Sunset, and the rest of these similar complexes were built for people to live in full-time? That’s simply not the case. If you want to see a complex designed for affordable long-term living look at Kihei Villages or Keonekai Villages. 

If the negative economic impact isn’t enough reason to shift the focus to expediting development rather than pursuing banning or rezoning, let's consider something called ‘functional obsolescence’. That’s a fancy real estate term that means these condos won't work for full time housing!

Almost all of the properties that are zoned for short-term rental on Maui were built from 1970 through 2000 with transient accommodation use in mind. Over 95% of these units are either studio, 1bd, or 2bd floorplans with very small square footage relative to complexes built for long-term purposes. These units have small kitchens, small closets, small bedrooms, and basically small everything. Most of the 2bd units come with only 1 parking spot, how does a family of 4 or more make that work? 

Developers Build With a Purpose in Mind + Costs of Ownership

These short-term rentable complexes were built to maximize the number of units in the development and for families to spend a week or two at a time. Even if we’re ok with smaller floorplans and 1 car per family maximums, how do the HOAs become affordable for an average family? Currently, an average 2bd STR unit in Kihei would have a 900-1300/month HOA that does not include electricity. These HOAs are mainly covering the building insurance, but also include groundskeeping, reserves, elevator maintenance, pool maintenance, and much more.

Are we going to retrofit these complexes to exclude the pools and groundskeeping to reduce costs? How is that getting funded? It’s too complicated and it's a waste of time to pursue banning short-term rentals while people are suffering without a place to call home. To help those who are suffering, we need to be pouring foundations and hammering nails. Conscientious development will create jobs, grow the economy, and support our recovery. Maui people deserve better options that will actually work for their lives.

Make it Make Sense

According to a 2019 census by the Hawaii State Data Center, the average household on Maui is 3.01 people and 90% of these households average 1 occupant per room. Meaning that 3bd homes or condos are what we need. We don’t need more studios and 1 bedrooms to house our Maui families. 

A lot of Maui families have multi-generational homes and need a lot of space for parking. They want to have pets and most condo complexes have rules against that.  Many of the families I know who lost their homes in the fire had a quarter acre of land, a 3bd house or more, and a garage. These are things you just can’t get with a short-term condo. To a resident of Maui, space for family and a sense of home is more valuable than an ocean view, pool, or rooftop barbeque area.

New Residential Developments Must Progress Faster

New developments like Hoku’ula, Pulelehua, Wailea 670 aka Honua’ula, and Waikapu Country Town have crawled along at an excruciatingly slow pace getting through their regulatory red tape. I can’t say I would advocate for bypassing all environmental assessments, but I do believe we can make the process 10x more efficient. It can literally take a decade from inception to completion of a housing development if you’re lucky! Honua'ula has been thrown around for about 30 years now. 

Fortunately, there are indications that the state and the county will be addressing ways to expedite the process of development, albeit at their normally slow pace. But, they also need to get involved financially, using the revenues generated from transient accommodation taxes and short-term rental property taxes, to subsidize these developments. While we are privy to all of this federal assistance, we should also be getting any and all guidance we can on how to strengthen our community through affordable developments. 

Our particular type of housing crisis is unique on Maui, but in fact, the entire state and nation is facing a similar crisis going back to 2008. The supply of housing across the country has simply not kept up with the demand over the last 15 years and on Maui the disparity between supply and demand is even larger.

Maui County makes the planning and permitting process unnecessarily delayed. If we were to fund these departments and bring in temporary help from Oahu or the mainland to improve our system, we could see developments being built at a normal pace. This would also create more jobs. 

Same Goals, Different Ways To Get There

I haven't spoken with anyone in the community who doesn't want to see more affordable housing developed on Maui. We all need this to happen for our people. Right now, we are disagreeing about how to get there, so let's remember we are on the same team and differ about our strategy to win the game of getting housing for our displaced as well as our underprivileged. 

With that in mind, please be respectful in all communications to the County. Most of those supporting the ban genuinely want to be a force of good and help people find affordable housing. This short-term rental ban is simply not a viable way to produce affordable housing. We need to build many multi-family housing developments and make sure they always stay that way.

We should be firm in our resolve that the ban is first an injustice/violation of individual liberties and second an economically destructive force that will impact every resident of Maui. Thank you for taking the time to read my thoughts on the issue and I'm always happy to engage in respectful conversations on the topic.

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