’Proper management,’ not banishment urged 
 By HARRY EAGAR, Staff Writer
THE MAUI NEWS: January 16, 2008 

MVRA President David Dantes of Haiku is flanked by board members Beverly Livingstone (left) and Sharyn Stone as he answers questions during a press conference held Tuesday in front of the Kalana O Maui Building in Wailuku. Stone is also secretary for the association, which says it will appeal a federal court decision in its effort to prevent Maui County from enforcing laws restricting short-term rentals.
The Maui News / MATTHEW THAYER photo


Planning Director Jeff Hunt walks across the Kalana O Maui courtyard on Tuesday after listening to the end of a press conference called by the Maui Vacation Rental Association protesting a county crackdown on unpermitted rental operations.
The Maui News / MATTHEW THAYER photo

He reviewed the history of short-term rentals in homes, and repeated the assertion that the county had not only allowed unpermitted businesses to operate, but had spent public money promoting them through its Office of Economic Development and, indirectly, through the Maui Visitors Bureau.

The expectation, he said, was that the council would create a zoning ordinance to manage this novel component of the lodging business.

When the County Council scrapped the bill last year, the administration announced it was abandoning the policies of the previous two administrations to allow the vacation rentals to continue without permits.

It also presented a package of five bills intended to establish county policies on permitting short-term rentals outside of hotel districts.

However, Dantes said, the bills would apply to only a small proportion of the estimated 1,000 existing vacation rentals.

He said the gaps between the proposed bills and an ordinance that would suit the operators are small. Perhaps half a dozen changes would do the trick.

For example, he said, the minimum $35,000 annual farm receipts for a TVR in the ag zone is unrealistic for most lots and could be lowered.

“Enforcement is the greatest immediate challenge,” he said, while crafting a workable ordinance is the long-range goal.

 

The Realtors association study confirmed that very few complaints (under a dozen) have been filed against existing operations. Dantes said that he hoped the community would support the idea that a transition from unpermitted to regulated business could be treated as something less than an emergency that requires almost all existing operations to be shut down.

MVRA, which represents only a fraction of the existing operations, sought relief in U.S. District Court last year. It lost but continues to plan to appeal to the 9th Circuit Court of Appeals.

However, even if that were eventually successful, it failed to rein in county suppression of businesses as of Jan. 1.

Now, Dantes said, operators are told to shut down and invited to apply for a permit – if ever the county makes that possible.

In the meantime, he said some owners have had to sell their houses, workers are being laid off and other businesses are feeling the fallout.

The Realtors association study quantifies those assertions. It was done by Thomas Loudat, president of TAL Associates in Honolulu , and professor Prahlad Kasturi, an economist at Radford University in Virginia .

It updates and expands a study that the Realtors had earlier commissioned from the Kauaian Institute.

“Elimination of the TVR industry could result in the full loss of the TVR industry’s economic value,” the report says.

“The extent of the loss of the TVR industry due to government regulations depends to what extent TVR visitors substitute an alternative Maui County accommodation type to TVRs if they are not available or not sufficiently available.”

Dantes noted that recently TVRs have been the only sector of the lodging business that is expanding. The MVRA contends this is because of a demand from visitors for that sort of lower key (and often but not always lower cost) room.  

He noted that at the MVRA Web site, www.mvra.com, more than 3,000 off-island visitors have signed a petition asking for clemency for the operators.

Many add comments, he said, and some say they won’t visit Maui if TVRs are not an option.

The Realtors’ study acknowledges that there can be negative effects of transient rentals, but says regulations can address those impacts.

“There exist policy means whereby the negative perceptions of TVRs leading to their current regulatory scrutiny can be addressed such that the negative economic consequences can be mitigated,” it said. For example, TVR businesses could pay real property tax at a high rate.  
 

At public hearings at the Maui Planning Commission on the package of bills, several operators volunteered that they were ready to pay a higher tax.

The study also says TVRs have positive “externalities” beyond economic factors.

“They are generally associated with ADUs (accessory dwelling units) . . . (that) could also be used for housing local residents if need be. The character of ohanas and local lifestyles need to be preserved as learning local customs and being exposed to native culture is one of the reasons why visitors choose to come to Hawaii .”

The study disputes the argument that conversions to TVRs eliminate long-term rentals for residents.   

Even after a decade of explosive expansion, the study says TVRs account for only 1.7 percent of all county dwellings and 2.28 percent of all occupied dwellings. 

The study warns, “Since TVRs are essentially small businesses, it is important to recognize the potential adverse effects and unintended consequences of regulation.”

 

Most vacation rental owners are anxiously waiting for the Court's decision which was initially scheduled for December 10th.  The good news is that the Court declined the County's request to dismiss the case.  Further information was submitted by both legal teams, and a decision is now expected on December 19 or 20th.  If MVRA is successful in obtaining an injunction against enforcement, this will give homeowners an opportunity to remain open while the County processes permit applications.