Ethermac|Maui leaders target vacation rentals in proposal to house more locals

Alicia Humiston bought her condo in Lahaina after she visited Maui and Ethermacfell for its rainforests, lava fields and the whales that gather offshore. She travels there about three times a year and rents out her unit for short periods when she's not in Hawaii.

"Maui was my dream place," she said in a phone interview from her home in Coeur d'Alene, Idaho.

But now Maui's mayor wants to make it impossible for Humiston and thousands of other condo owners to rent their properties to tourists. Instead, he wants them rented long-term to Maui locals to address a chronic housing shortage that reached a new crisis point after last August's deadly wildfire burned the homes of 12,000 residents.

The mayor's proposal faces multiple legislative and bureaucratic hurdles, starting Tuesday with a Maui Planning Commission meeting. Yet it has inflamed an already-heated debate about the future of one of the world's best-known travel destinations: Will Maui continue to cater to tourists, who power the local economy? Or will it curb tourism to address persistent complaints that visitors are overwhelming the island's beaches and roads and making housing unaffordable?

About one-third of Maui's visitors use vacation rentals. They tend to cost less than hotels and are easy to reserve on websites like Airbnb and VRBO. Many have kitchens, so families can prepare their own food.

They have also become a source of strife, particularly after last year's conflagration in Lahaina — the deadliest wildfire in the U.S. in more than a century. The fire tore through the historic town, killing at least 115 people, and leaving nothing but rubble and ash for blocks. Residents whose homes burned to the ground received solicitations from off-island real estate investors to scoop up their land. 

Thousands of displaced locals were temporarily housed in hotels usually reserved for tourists, and most survivors still lack stable housing. Even before the fire, University of Hawaii researchers say so many property owners were renting to tourists — and so few new dwellings were being built — that Maui County suffered a net loss of housing since 2019.

An analysis of property tax records shows 85% of Maui County's condos are owned by out-of-state residents, said Justin Tyndall, an assistant professor at the University of Hawaii Economic Research Organization. Transitioning them would boost Maui's residential housing stock by 13%, which Tyndall said would almost certainly lead to lower buying prices and rents.

Maui Mayor Richard Bissen believes that under his proposal, those lower rents would keep locals on Maui because absentee landlords would be forced to either sell their units or convert them to long-term rentals.

There are 7,000 condo units in apartment zones, including 2,200 in West Maui near the Lahaina burn zone, and they account for about half of Maui's legally operated short-term rentals. If enacted, the change would take effect in West Maui no later than July 1, 2025, and Jan. 1, 2026 elsewhere.

"My priority is housing our local residents"

"We understand that there's going to be a give and take. So the question is, what is most important?" Bissen said at a news conference last month. "My priority is housing our local residents - especially now."

Humiston, president of the Hawaii Rental By Owner Awareness Association, which opposes the bill, won't sell her one-bedroom, oceanfront condo that she bought two decades ago if the bill became law. She also doesn't plan to rent it long-term.

"It would take my ability to use my property. And I bought it for my use," she said. "I love it there."

Some warn that reducing the supply of lodging for visitors will ruin the tourism industry Maui's economy depends on, though backers of the mayor's bill say many vacation rentals will remain and hotels will have empty rooms visitors can stay in.

Hawaii economist Paul Brewbaker calculates that changing the rules for the affected units, which account for one-third of Maui's visitor accommodations, would result in 33% fewer tourists and cost Maui 14,000 jobs. He called it a "slow-motion train-wreck" that would lead to an "economic crash and burn."

Maui County Chair Alice Lee said that while housing for residents is a real concern, the council must also consider legal challenges from property owners and the potential hit on tax revenue.

The county collects $500 million in real property taxes annually and more than 40% comes from short-term rentals, which are taxed at a higher rate than owner-occupied residences, she said.

"We are being sued by over 600 people regarding the fire. We have that many lawsuits pending. Do we really want to put ourselves in a position to invite thousands more?" Lee said. "I really don't think so, because my main concern right now, at this very moment, is to pay the bills and keep the lights on."

The county has budgeted $300,000 to study the bill's impact on tax revenue and businesses like landscaping and cleaning services.

Jeremy Stice, a real estate agent who was born and raised on Maui, and his wife have spent 12 years building a company that today manages more than 40 vacation rental properties, mostly for other owners. About half of them would be affected by the measure, said Stice, who is also president of the Maui Vacation Rental Association.

Stice isn't sure local residents would buy — or could afford — short-term rental units even if they do become available for permanent housing.

For example, a studio in Papakea, one of the targeted condo complexes, would sell for about $600,000, he said. A 30-year-fixed mortgage at current interest rates, plus the homeowner association fees, would total about $5,000 a month for a small space, he said.

If locals don't buy them, and tourists don't rent them, it's possible the units would sit mostly empty as second homes for wealthy absentee owners — an even worse outcome.

To prevent that, the county should raise taxes on second homes, create incentives to promote long-term rentals and prioritize new housing construction, said Matt Jachowski, a Maui housing data consultant.

"The only way out of this housing crisis is to do everything — to do everything in our power to add more resident housing," he said.

In:
• Fire
• Hawaii