Vacation rentals on Maui are fundamental to its economy

The Maui News’ March 27 front-page headline “Report: 1 in 7 homes in county a vacation rental” cites a misleading report that implies that vacation rentals are taking up much of our available residential housing, and concludes that these vacation rentals have adverse consequences that far outweigh the benefits. This headline implies that 1 in 7 homes in residential districts are used as vacation rentals, and that is absolutely false.

The report, by the Hawaii Appleseed center, failed to point out that the 9,000 vacation rentals it cites on Maui are primarily condominium units in hotel and apartment zoning that were built more than 25 years ago, specifically for legal vacation rental use.

These condos, and the legally permitted short-term rentals, actually house the majority of the visitors coming to Maui island. In point of fact, these vacation rentals form the very foundation of Maui’s economy and the sales, maintenance, and marketing of these legal vacation rentals accounts for huge part of Maui’s employment.

It is important to separate Maui’s legal vacation rentals from the illegal vacation rentals before attempting to analyze what effect these rentals are having on Maui housing. To correct this report, according census data, Maui has 72,000 dwelling units, and based on real property tax records and planning department permit records, approximately 12,000 of these dwelling units are legal vacation rentals. Of these, 11,307 are condo units zoned for vacation rental use, 235 are permitted short-term rental homes and 125 are permitted bed-and-breakfast homes offering about 365 rooms for short-term rental use.

Collectively, these 12,000 legal vacation rentals pay $80 million in real property taxes. This amounts to: more property tax than all the commercial business on Maui combined; more than twice the total of the property tax paid by every Maui “homeowner”; and more than three times the total property tax paid by all of Maui’s hotels combined.

Certainly, there are many nonpermitted vacation rental uses taking place throughout Maui in housing intended for residents. But this total is closer to 1 in 100 or 1 in 50, as opposed to what is reported by Appleseed’s report. While off-island owners operate some of these rentals, Maui residents are also making many of these non-permitted uses. Some of these Maui residents are renting out rooms in the homes where they live without a B&B permit. Some are Maui residents renting a home from someone else and then subletting it, or some portion of it, short term.

Then there is the second home market on Maui that is made up of thousands of homes that are never actually rented to third parties but typically sit vacant most of the year. Their owners use them as part-time residences and may allow friends and families to use them, but they are not vacation rentals. The question could be asked as to whether these properties should be used as vacation rentals, rather than sit empty, in order to generate more jobs and greater visitor spending on the islands.

There are three things the report does get correct:

1. That approximately 1 in 24 dwelling units in Hawaii is a vacation rental unit. What it fails to point out is that most of this 4 percent of dwelling units are units that were primarily built to be vacation rental units or second homes.

2. That the shortage of housing in Hawaii is caused primarily because new homes are not being built to keep up with the demand. And this demand is driven by natural growth and the influx of new residents moving to the island.

3. Regulation is the best way to keep vacation rental uses in check, and Maui has led the way in this regard by establishing the Bed and Breakfast and Short Term rental home ordinances to address this.

It is a struggle to ensure full compliance with all of Maui’s many laws regarding land uses. And the county has failed to effectively enforce and shut down nonpermitted short-term rental uses. But let us not confuse legal vacation rentals, which are essential to Maui’s economy, with the 1-2 percent of resident housing that is being used illegally by Maui residents and nonresidents for short-term rental.

* Thomas Croly is a board member with the Maui Vacation Rental Association.

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