Phase Out of Vacation Rentals
This summation is an update on my previous blogs regarding the hot topic Minatoya List and Mayor Bissen’s proposed ban on short term rentals made on May 2.
A Hawai’i firm SMS Research conducted a survey of more than 500 registered voters statewide from May 23-26, 2024.
Poll results show that the vast majority of voters do not support proposals like Mayor Bissen’s with just 10 percent of voters in support of banning all short-term rentals. In spite of the numbers against the ban and the ensuing two meetings with over 18 hours of testimony, the Maui Planning Commission voted in favor of phasing out approximately 7000 short term rentals in Maui. See the findings of that survey posted here, https://mvra.net/Poll-Results/13387918
Mayor Bissen’s proposed bill was intended to alleviate the housing crisis on Maui heads to the Maui County Council for a vote to see it pass into law.
Reportedly, the proposed STR ban could increase housing supply in Maui by as much as 13%. However, realistically, a significant number of these units have limitations. Restrictions on parking, pets, storage, and small square footage are indicative. These units were never intended for long term housing usage.
Mayor Bissen concedes that even just 6% of this stock would be helpful to address the crisis.
In Barcelona, a city with over 5 million residents, around 10,000 of its apartments will be banned from short term rental usage by 2028. By contrast, Maui County has a population of nearly 165,000 (2020 census) with approximately 13,700 transient vacation rentals. Unlike the multi-faceted industries of a thriving European hub city of Barcelona, Maui’s economy is pretty much solely tourism based.
If approved, the phase out of short term rentals in apartment zoning on Maui’s west side will see the law take effect on July 1, 2025 (not January 2025 as initially reported.). The date for the phase out on the south side would be January 2026.
The months ahead spell a crucial time for the legislation as the bill proceeds to the Maui County Council for study and review augmented by hours of public testimony and written accounts.
Transient Vacation Rentals Bill, “Likely Unlawful”
Former Hawaii Attorney General David Louie was one of the voices testifying on behalf of an Airbnb client in opposition to the phase out bill. In written testimony Louie stated that statutory protections for vacation rental owners derive from constitutional law.
He stated, “The TVR bill is likely unlawful, violating well-established rights under the United States and State of Hawai’i constitutions, and would invite years of lawsuits.”
“Both the State of Hawaiʻi and federal courts of Hawaiʻi have explicitly recognized the vested rights of apartment owners to use their homes for short-term rentals. As such, there is a likelihood that the TVR bill [will be] ultimately deemed unconstitutional.” – David Louie
Nonetheless, there lies a long road ahead.
Today we see 644 condos in west and south Maui on the market today. Of these, 432 are short term vacation rentals. This translates to a buyers market. By comparison, as of May 1, just 296 units in total were on the market, 222 of these were short term vacation rentals for sale.
As a result, coupled with a slow down in the overall sales of property nationally, variety and choice present with a slew of new listings. What’s more we are seeing price reductions from this market segment, in wait for buyers.
Opportunity Lies in Challenge
What’s worth bearing in mind is that like all things, this too shall pass. With a dip in prices one might wonder, how deep will things go? It remains to be seen. But we can be confident that once this shakes out, and if history is to be trusted, we will see a renewal of value.
In all likelihood, we might find some apartment zoning convert to hotel zoning. This would lift the overhanging threat on Minatoya List units going forward. The balance of units may see the grandfathered in “Minatoya Opinion” waived and those units would be required to convert to long term versus short term accommodation.
In the interim, this is a lot of loud chatter and distraction. At the end of the day, if you want to own in Maui, now is a good time to buy.
Patience, Grasshopper!
We lean in to what we know. The age old secret to success in real estate lies in just two words. Long hold.
What doesn’t change is people’s love of Maui. Borrowing this phrase from the eloquent Matt Beall, CEO of Hawaii Life, “Maui is the biggest brand in the state.”
The dream of owning in Hawaii does not go away.
In many ways, in times like these, it becomes a possibility.
Watch this space for further updates. If you would like to sign up for my monthly newsletter, please send me your email address.
As always, with aloha!
Katy
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