Phasing Out Vacation Rentals in the Apartment District

The proposed Phasing Out of Transient Accommodations in the Apartment District is on the agenda in the Planning and Sustainable Land Use Committee meeting this Wednesday, November 3rd at 9am. This proposal will affect all of us, and we recommend giving oral testimony or submitting testimony for this meeting.

Some of the issues with this proposal:

This proposal suggests a sunset date whereby any sale or transfer of title on properties after that date will no longer be able to do transient vacation rental use. This use has been explicitly legal in our county code, and many of these buildings in the apartment districts have been engaged in this legal use for many years. These properties have made the largest contributions to affordable housing, and the county’s budget. Since 2018, Maui’s vacation rentals have contributed $18.9 million towards affordable housing, more than all the hotels, all the homeowners and all other businesses COMBINED! This year the legal short term rentals generated $8.5M for the affordable housing fund.

This bill could potentially defund affordable housing for Maui County at a time when we need it most. The intent of this proposed phase out bill is to create affordable housing, however, most of these properties would not be affordable to rent. Many of these properties do not have storage and parking that is appropriate for affordable housing.

This bill could result in a potential loss of $74M in Real Property Tax revenue for the county of Maui, and a loss of $69M in TAT Revenue for the State. The result will be an increase in taxes for Maui residents. 

Please take a moment to tell your story, how this proposal affects you, and the network of small businesses that you support.

What can you do?

If you have a vacation rental operation in the apartment district or this concerns you, please reach out to your council members, send testimony, or better yet give oral testimony at this week’s County Council meeting. 

Item you are testifying on is PSLU-34

To testify: Meeting of November 3, 2021 9:00 AM will be held virtual online here: BlueJeans link https://bluejeans.com/149341846

To phone in testimony:To join the meeting by phone, call 1-408-915-6290, and enter meeting code 149 341 846

To submit written testimony:

Go to https://mauicounty.granicusideas.com/meetings/1438-planning-and-sustainable-land-use-committee-2021-on-2021-11-03-9-00-am/agenda_items/617b54d0f2b67075970158b3-pslu-34-cc-21-422-phasing-out-transient-accommodat

View the agenda here: https://mauicounty.legistar.com/View.ashx?M=A&ID=901831&GUID=D7AA512E-D668-48C6-85F9-6C1FBB940823

To view the proposed bill and committee report: https://mauicounty.legistar.com/View.ashx?M=F&ID=9924078&GUID=03DC0520-4C86-4EAB-8543-97F2AB200AE5

Finally, feel free to reach out to your County Council representatives via email or phone: 

Alice Lee, Council Chair: Alice.Lee@mauicounty.us, Phone: (808) 270-7760; 

Keani Rawlins-Fernandez, Council Vice Chair: Keani.Rawlins@mauicounty.us, Phone: (808) 270-7678;

Tasha Kama, Presiding Officer Pro Tempore of the Maui County Council: Tasha.Kama@mauicounty.us, Phone: (808) 270-5501; 

Gabe Johnson, Councilmember: Gabe.Johnson@mauicounty.us, Phone: (808) 270-7768; 

Kelly King, Councilmember: Kelly.King@mauicounty.us, Phone: (808) 270-7108;

Mike Molina, Councilmember: Mike.Molina@mauicounty.us, Phone: (808) 270-5507;

Tamara Paltin, Councilmember, Chair of Planning and Sustainable Land Use Committee: Tamara.Paltin@mauicounty.us, Phone: (808) 270-5504;

Shane Sinenci, Councilmember: Shane.Sinenci@mauicounty.us, Phone: (808) 270-7246;

Yuki Lei Sugimura, Councilmember: Yukilei.Sugimura@mauicounty.us, Phone: (808) 270-7939

Some talking points for this discussion:

• If you own property, how much would you have to charge for a monthly rent in order to cover costs? Is it affordable?
• How will this affect decisions like hiring contractors, renovations and maintenance? An unintended consequence is a decline in the construction industry.
• Are there other small businesses that you work with that will be affected?
• If this legislation is passed, we estimate that the County stands to lose as much as $74 million in property tax revenue annually, or 8.77% of the total operating budget
• This loss in revenue would make it difficult for the County to maintain the services it currently provides, and it would make it impossible to increase funding to the Affordable Housing Fund.
• Without the revenue, there is no investment in Affordable Housing, and there will be property tax increases for everyone else.
• Many of these buildings and units are built along the shoreline, or are 30+ years old. These kinds of buildings tend to have special assessments and additional expenses and would not be suitable for affordable housing.

Our colleagues at the Realtor Association of Maui also summarized nicely:

The top 5 reasons why we oppose this legislation:

1. Basic Economics: The Director of the Department of Finance has already warned the County Council that this move “would possibly lead to a negative revenue change at about $23 MILLION per year.” Overall, RAM has determined that these impacted properties represent upwards of $74 Million in property tax revenue per year (that is about 8.7% of the entire budget!). Eliminating this much revenue would make it hard for the county to maintain current services, and it would jeopardize the county’s bond rating.
2. It Will Defund the Comprehensive Affordable Housing Plan: The 2021 Comprehensive Affordable Housing Plan calls for the county to: (1)“Increase funding into the Affordable Housing Fund to $58 million annually;” and (2) For the County to use its bond rating to borrow against the increased Affordable Housing Fund as a means to fund infrastructure updates to support affordable housing development.The TVR Phase Out Bill would make both of these goals virtually impossible! Hawaiian Community Assets, the authors of the plan, agree with this assessment.
3. The Bill Does Not Create Long-Term Affordable Housing Opportunities for Residents: TVR use in the subject condominiums is an incentive for investment purchasers to seek out and purchase these aging condominiums instead of other residential properties on the island. If there is no difference between the permitted uses allowed in an aging 1 bedroom condominium in Kihei or a 3 bedroom home in Waihee or Makawao, but the prices are comparable, an investment purchaser might as well buy the 3 bedroom home that would have been more suitable for one of our residents. Also, even if these properties lose TVR use, they are generally not the type of housing our residents need, and they will likely not sell at rates many of our residents can afford. The subject properties are all 30+ years old, primarily built and designed as TVRs, largely located in the sea level rise exposure area, and have aged infrastructure that has been used hard for many years. That means they have minimal parking, minimal storage, high maintenance fees, high special assessments, high tax assessments, and are in the areas most susceptible to climate change. Given the current prices of comparable non-TVR units and the average monthly maintenance fees of these units, few (if any) can be expected to sell at “affordable” or even “workforce” rates.
4. This Bill is a Huge Gift to the Hotel Industry: Eliminating TVR use in the subject condominiums only benefits the hotel industry, as it will be eliminating their only real competition while negatively impacting county revenue and affordable housing development. With no competition, the hotels will maximize their capacity and realize huge gains in revenue. Naturally, much of this revenue will go back into advertising Maui as a destination, thereby increasing the numbers of tourists visiting the islands. Throughout the pandemic period, the County of Maui already demonstrated great preference for the hotels and resorts, and this further gift of eliminating their competition almost entirely is alarming and arguably inappropriate.
5. Legal Challenges: Many property owners have already contacted RAM and expressed their intent to take legal action against the County of Maui if their property rights are abridged. Though HRS Section 46-4 ostensibly provides the counties authority to phase out “nonconforming” uses in the Apartment zoning districts, it is difficult to classify TVR use as “nonconforming” for these subject properties. TVR use is expressly permitted in the language of the comprehensive zoning ordinance, and has been stated as expressly permitted in several pieces of legislation over the past 7 years. TVR use has been conducted in the A-1 and A-2 districts by thousands of property owners, throughout hundreds of buildings, over the course of decades. It is unclear if impacted property owners would win a legal challenge against the County of Maui, but it may cost our county a lot of money and time to find out.

Put your testimony into your own words, and add your own personal experience. Mahalo!