Maui Vacation Rental Showdown at Crossroads As Occupancy Plummets

Maui Vacation Rental Showdown at Crossroads As Occupancy Plummets

As emotions soar higher than a jetliner, the ongoing controversy over Maui vacation rentals achieved a fever pitch yesterday at the Maui County Planning Commission meeting. The superheated session featured over eight hours of passionate testimony from residents, each voicing their personal picture of the island’s deep divide over Mayor Richard Bissen’s proposal to phase out more than 7,000 vacation rentals, representing about half of the entire island inventory.

This comes concurrent with May 2024 data from the state that shows, among other things, that the demand for Maui vacation rentals has dropped by 40.3% since 2019, and that the May 2024 occupancy rate was just 49.5%. The average nightly rate, including 18% tax in May was $425.

Maui vacation rental resort controversy as statewide housing crisis intensifies.

The Maui County Planning Commission meeting marked a significant moment in the ongoing debate over short-term Maui vacation rentals. With day-long testimony, the community demonstrated its own deep divide over Mayor Richard Bissen’s proposal to eliminate half of its vacation rentals in an attempt to address the island’s severe housing crisis.

The plan includes resort units initially developed for vacation use, including luxury condos and apartment hotels, largely in West Maui and South Maui.

Proponents of the plan argue that reclaiming these units for long-term rentals is essential for residents struggling with housing availability and affordability. This theme reverberates throughout Hawaii at a new heightened level. The devastating Maui wildfires have only exacerbated this crisis, displacing thousands and highlighting the urgent need for more residential units.

Opponents fear severe economic fallout. That includes job losses in property management, cleaning services, and many other sectors dependent on the vacation rental market. Many local businesses and workers rely heavily on the income generated from these rentals. In addition, there is widespread concern that the absence of Maui vacation rentals will drive visitors away from the island and towards other vacation destinations. Maui vacation rentals are already suffering from record-low occupancy, with concerns that the trend will only worsen.

New unproven economic projections from UHERO.

According to the University of Hawaii Economic Research Organization (UHERO), converting these vacation rentals into long-term housing has the potential to increase Maui’s housing stock by 13%. If that were to happen, which is entirely unclear, it could be a crucial step in easing housing prices and improving affordability. However, significant economic risks are involved, including reduced property tax and other revenue streams and potential impact on the Maui tourism sector. Even UHERO said, “It is not clear what the market price of these units would be under a policy that bans TVR as a use.”

UHERO believes that shifting these units into long-term rentals would, however, put downward pressure on rents and improve supply to residents. It does point out, however, that “An unfortunate outcome for housing supply would be if existing or new owners simply retain their properties for occasional personal use despite not being able to operate a vacation rental.” Many of you have pointed out in comments that it is highly unlikely that many or most of these units would ever become affordable housing.

UHERO’s analysis of the Minatoya List of impacted properties.

The “Minatoya List,” a collection of properties legally granted exemptions to operate as short-term rentals, is at the heart of this current debate. When the list was established in 2001, these units were legally permitted to continue operating as vacation rentals based on criteria set by a legal memo authored by Richard Minatoya. Mayor Bissen’s proposal targets these properties and aims to transition them “back” to the long-term housing market.

The individual units in the affected properties on the list are primarily small to mid-sized condominiums, with 72% of them being under 1,000 square feet. The majority are located in West Maui, Kihei, and Wailea. If these properties were shifted to long-term rentals, the theory is that it could significantly lower housing prices, given the expected influx of units into the real estate and rental markets.

UHERO’s data indicates that an increase in the Maui housing supply could significantly reduce condominium prices. This would, in theory, make homeownership more accessible for residents. However, this shift might also have multiple unintended consequences.

Other solutions for Maui?

Some suggest that increasing the property tax rate for Maui vacation rentals might yield a better result than an outright ban on these 7,000 units. That approach could provide owners with a greater incentive to sell or convert their units to long-term rentals while simultaneously maintaining some level of tax revenue for the county. Such a policy might also face fewer legal challenges than a ban, while providing a more balanced solution.

The next word on Maui vacation rentals is due on July 9.

The Planning Commission has deferred further action until the next meeting on the Mayor’s plan July 9. That is to allow for more testimony adding to the community engagement. This pause will hopefully also allow for evaluating the broader economic impacts of the plan and finding a balanced approach to address Maui’s housing crisis without compromising its economic stability, including tourism, which is the all-important financial driver.

Beat of Hawaii is committed to providing in-depth, firsthand reporting on this critical issue. Our team will be on the ground on Maui, bringing you the updates. Stay tuned as we continue to explore the complex dynamics of this debate and its implications for Maui’s future.

We welcome your input!

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52 thoughts on “Maui Vacation Rental Showdown at Crossroads As Occupancy Plummets”

  1. I love the Islands but no longer return to my childhood home since it’s become a Disneyland version of itself, a place for visitors where the locals can’t afford to live bcuz their government allowed residential units to convert to short-term rentals. Government has to restore a balance so that tourism is a healthier part of local life before the locals leave for Vegas.

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  2. We’ve been visiting Hawaii for 50 years. Obviously it’s our happy place. We’ve visited each island, but normally return to Maui. Early on the only option was hotels, we made it work. But the STR is certainly more affordable & allowed more & longer trips. As we aged this was certainly an advantage. Not all STR’s are owned by big corporations (many the hotels themselves) many are “normal” people. We’re not rich but over the years we contemplated buying, basically funding our trips. I hate to think what the financial implications would have been. Forced to rent long term would mean selling, and who wants to pay top $$ for a condo they can now only get about a week’s normal revenue for the whole month, & no place for me to stay. So glad we didn’t buy. I understand this isn’t unique to Hawaii, every vacation destination is facing challenges, but most locations don’t rely solely on tourism. With rates double our last trip not sure we’ll be back. So sad. Good luck

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  3. I am gobsmacked.

    Here is an amazing reaction from our very own council member, Tamara Paltin.

    facebook.com/share/p/8s6g1gDLmA7EwJS2/?mibextid=WC7FNe

    A 4-1 opposition to the bill must have gotten the council’s attention!

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    1. Yet Tom Cook, who represents more than half the Minatoya List owners in South Maui, was too timid to state an opinion at his Town Hall. Maybe he will watch this and have an epiphany.

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  4. Us/Them. That’s what I’m reading in these comments.

    Maui and the Hawaiian Islands are simply a mirror image of what’s happening on the mainland. On the mainland mostly older, mostly white individuals see the end of a majority white population, and they are drawn to the promises of a sociopath. Native and long-term residents see the same invasion of the monied class and, much like the southern border immigrants, are leaving because they have no choice.

    If you want to place the mainland-centric blame on politicians, look no further than the decisions that are imminent in November.

    For me, I am one that looks at Hawaii as perhaps one of the last places in the U.S. where one can escape the coming insanity. Let Hawaii make its own decisions, not simply paint the picture of native Hawaiians wanting to take over.

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      1. Just pointing out the reality that nobody wants to talk about. Folks gotta have a place to live even if it isn’t what they want to call home.

        I do agree that it’s all how you look at the world and one’s place in it.

        1. What does this even mean? Are you saying the world owes you housing? Sure, if you’re 18 and under or disabled, or over 65. Otherwise, you’re probably bunking at a shelter.

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          1. I believe this is what it means. An entire town and part of its outlying area was cleared by a fire. Through no fault of their own, many of these dwellings and their inhabitants were very old, no insurance because it was free and clear. The previous land is now a bed of toxic waste. The infrastructure is non-existent.

            Just put yourself in those shoes. Now imagine that these people are your Tutu, your aging mom and dad, or your child living each day not knowing where or when home will be again.

            There are many thoughtful responses by people suggesting solutions. I wish I were that smart to know all the answers, but I certainly know more than a glib response like, …”the world owes you housing?”.

            That’s what the first post was about. The world has become: “It ain’t affecting me so what do I care?”

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  5. I understand eliminating zoning that allows STR’s in the middle of neighborhoods built to be single family residences. That makes sense and should be done, if only because they disrupt the neighborhood. Same thing with apartment blocks that have imbedded STR’s. Would help a bit, and actually makes sense to return residential to residential.

    But as others have noted, many to most of the buildings being talked about for rezoning would be older purpose-build beachfront or near beachfront buildings of substantial size. Simply never intended or designed for a family to live in.

    They come with parking structures designed for the average smallish rental car at one per bedroom. This does not really even still work when you project just a couple with a single child and two cars moving in long-term. When you get into a large or extended family situation packing in, then it all falls apart. Image your last condo parking garage with too many cars and trucks trying to park.

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  6. The longer this idiocy continues, the worse the situation will become for Maui’s displaced residents. Forget about the MInatoya List. Forget about banning any existing short-term rentals. Instead, ban any new short-term or vacation home construction and expedite realistic workforce housing. This new fast-tracked housing should only be made available to existing local families and those displaced or forced to move off the island due to the wildfires. Absolutely no sales to speculators or off-island residents. I freely admit that I’m not sure how this can be achieved legally, but it’s time our politicians started working for All their constituents, not just those with the largest campaign contributions.

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  7. Dear Beat of Hawaii,

    Do you or your readers have a link to watch back the testimony from this June 25th meeting?

    (Must be user-error on my part in not finding a link to watch this public meeting.)

    Thank you!

    2
  8. And as all this BS goes on all of the people that are usually planning their trip to Maui are now looking elsewhere and probably wont look back. Maui was just starting to come back after the scam lockdowns.
    Tourism is a business think of it as all others piss off or leave your customers with doubt they find someone else to do business with and don’t look back. The people of Maui should be looking at the chosen ones that they put into Gov and Mayors house look what they have done lined their pockets. Remember 1 thing those politicians are lying to you they can give a Damn about you not just these corrupt ones in Hawaii all politicians they are in it for themselves. Sad I hope the people wake up. Are you awake yet. This damage will take years to fix.

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    1. Sadly, at election time, there is a dearth of quality candidates. But you are right: Hawaiians (and particularly those of us who live on Maui) better start paying attention to who we elect. We have to find better leaders that are smart and honest.

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  9. Something else to be considered by the Maui Council. If they pass this proposal and succeed in forcing a steep drop in value for these STRs, that also may translate into a steep drop in value for other residential properties as well due to the sheer amount of units added to the supply. This probably won’t make those property owners very happy as they are delighted to have such high real estate values to increase their wealth and use as a piggy bank as needed.
    On Oahu one of the biggest NIMBY reasons cited in fighting pretty much anything is: “It will decrease the property values in the area”. The Maui Council had better consider this possibility or end up on the wrong side of All the Maui County residential property owners…

    Best Regards

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  10. Of the two paths — a) forcing STVRs to convert to LTRs resulting in loss of tax revenue, tourist dollars, and jobs, or b) building the affordable low and middle income homes Maui families need — which results in Maui gaining wealth and stability over the next ten years?

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  11. It was interesting to divide the testimony at the hearing. Proponents focused on emotion- the need to provide housing, while the opponents cited the facts about:
    1. The unsuitability of small apartment condos to permanent housing- HOA fees, high taxes, condition, etc.
    2. The lost tax revenue, negatively affecting schools, roads, and other services.
    3. The massive loss of jobs from decreased tourist revenue (with a multiplier effect upon all businesses in Maui) and lost services/jobs normally provided to these rentals.
    4. The solution is to eliminate the red tape and incessant delay that drive up the cost/availability of affordable housing. Maui needs development of affordable housing, not fewer STRs.

    Bissen and Green are pandering to emotion by advocating a policy that will make things dire for ALL on Maui- while not solving the housing crisis. There is an old adage. When in a hole, stop digging. More taxes, eliminating STRs, is digging Maui into an even deeper crisis.

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  12. We all agree housing prices everywhere are off the hook. The shortage on island is bad. That should not mean we take property use that has been used for STR away from owners. Us say large foreign companies own these properties. That is not true our area which is mostly STR. Most of us only own 1 property where we are here part time. We fully understand full time residents need housing. Most want to stay in the Lahaina area where they have lived for years not in south maui, upcountry etc. Stop the Red tape build affordable house in Lahaina/Maui. Not take our STR’s that have been allowed for years. The income you make from us is a lot. I know I pay it monthly. Use that money to build. Our properties are not set up for families with children, pets etc long term. You can only have one car. Our buildings are old. The assessments right now our so high we need to rent to help pay them. 98% of those needing housing can’t pay that. Others will lose their jobs if you do this making more suffer

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