Island of Hawaii wants to cut 3,000 short-term rentals

As Hawaii’s high housing costs and rising property taxes continue to cost struggling residents looking to find and keep their homes, Maui is examining how to create long-term housing opportunities to ensure that local residents remain local. However, some solutions remain complicated.

As visitor numbers peaked last year, so did house prices. According to the Maui Real Estate Association, in September, the 12-month average house price in Maui rose to $ 965,000, a 26.7% increase from the previous year. This is in part due to the low housing stock, as well as demand from wealthy property investors outside the island.

In one of many efforts to alleviate over-tourism issues and help address the county’s vast housing crisis, Maui County Council is considering legislation to phase out much of the short-term rentals in the apartment districts of the island of the valley. The divide measure would affect around 3,000 units, Maui board member Tamara Paltrin confirmed to SFGATE.

It generated considerable backlash, but also considerable support.

“Maui has been seen as a great investment opportunity by foreigners,” said community member Jordan Hocker, who spoke in favor of the bill in a recent public hearing. “And what I see being done with a legislature like this, and the other item on the agenda is a clear message that our local residents need to be taken care of. And when I say “local residents”, you know, I’m referring to people who grew up here, whose families are at risk of moving or have already had to. “

Research from the University of Hawaii showed that 67,293 residents of Hawaii moved to the continental United States in 2018; which represents more than 4.5% of the total population of the state. And the continental United States saw a 31.6% increase in the native Hawaiian and Pacific Islander population from 2010 to 2020, the Honolulu Star-Advertiser reported. Many had been driven from their ancestral lands.

Tamara Paltin, the West Maui councilor who drafted the bill, has seen her immediate family leave the islands due to affordability, along with friends who are currently struggling in poor living conditions.

“We have far too many tourists for our infrastructure to handle and we are trying to stabilize the situation,” she told Hawaii News Now, adding that she hopes this will open up more long-term opportunities for them. residents.

But other short-term rental owners say this is an example of government overshoot.

“It will pull the rug out from under us,” an anonymous condo owner Luana Kai wrote in a public testimony explaining that when she and her husband recently purchased the condo, they had to take out a large home equity loan on their primary residence in Seattle with the hope that their short-term rental income would offset Seattle’s high monthly expenses.

Many off-island owners who provided feedback failed to acknowledge the impact it had on local residents. Others who have, such as witness Kimberly Lee, who owns a condo in Kihei, said the problems brought on by short-term rentals can be felt across the United States.

Lee said she hoped that no one group of people suffered more than another, but that she could work together to find solutions. However, others said phasing out these rentals could have unintended financial consequences for other affordable housing solutions in the county.

In May, council voted to increase property taxes on short-term housing, which is expected to bring in an additional $ 7.8 million for the county’s affordable housing fund. This happened just months before the introduction of the Comprehensive Affordable Housing Plan, which includes an investment of $ 789 million to provide 5,000 affordable housing units over the next five years.

“Finally, the council has developed a tax structure, maximizing income, and they are really focused on the significant impact on housing. Why would you want to reduce your income stream? Said Jason Economou, director of government affairs at the Maui Association of Realtors.

According to Economou, Maui County has approximately 13,466 short-term rental properties. Each pays an average of $ 10,241 per property in taxes. Multiply that by the 3,000 rentals affected by this new legislation, and it will take about $ 30 million in revenue.

It is a significant portion of the county’s total operating budget. Currently, 44.8% of Maui’s operating budget comes from property taxes. In 2020, the county’s short-term rentals generated about $ 101 million in property tax revenue, more than three times as much as its hotels.

Economou also added that the rental properties would likely sell for market value. The properties would also likely go to investors off the island, rather than residents who need them the most.

These issues appear to highlight the deep complexities and systemic failures inherent in attempting to execute solutions for Hawaii’s complex real estate system.

“Policymakers are going to have to make tough decisions, the mayor is going to have to make tough decisions, developers are going to be uncomfortable with some of the answers,” said Todd Apo, vice president of partnerships and public affairs for Hawaii. Community Foundation, a nonprofit organization that recently established the House Maui initiative to address the crisis on the island by empowering local residents through education and opportunity.

Otherwise, he believes Maui County Council will repeat the patterns of the past in other failed legislation.

In 2006, Maui adopted a workforce housing policy requiring new residential developments to designate 50% of their units as affordable housing. The developers feared that the reduction in revenue resulting from the demands of the policy would make it financially unachievable. The unintended consequence: Development largely stalled for years.

During this time, short-term rentals on the island increased exponentially, more properties were bought mainly by wealthy foreign buyers, while new luxury developments were built across the island. This not only raised rents to astronomical prices, but in some cases local residents were evicted so that owners could sell their property for the better price.

It has also skyrocketed property taxes for those who already own a home.

This has been a problem for Native Hawaiians, who struggled to retain their ancestral lands which have been passed down from generation to generation. Many have been forced to sell or seize.

Eighty-nine-year-old Edward Chang’s grandfather was a Chinese merchant who married an indigenous Hawaiian woman whose lineage dates back to the reign of King Kamehameha I. Her family owned property in Makena even before the overthrow of 1893. Chang retained some of this land, where he hoped to retire quietly. Instead, he has fought for years against sky-high tax increases.

Chang’s annual property tax was $ 2,600 in 2000, Ka Wai Ola News reported. It rose to $ 9,800 in 2017, then over $ 20,000 in 2018. He appealed and managed to get it reduced to $ 10,000. Yet the following year, his property tax rose to $ 22,000. Chang recently testified in late September before the Maui County Council’s Budget, Finance and Economic Development Committee that he should seek help from his children with tax payments.

On November 6, a bill introduced by Maui City Councilor Keani Rawlins-Fernandez called the “aina kupuna” bill that would protect long-standing local families like Chang’s by making them pay only the minimum tax of $ 350 per year, was adopted unanimously on first reading.

Yet more than 50% of Maui residents are burdened with housing costs, spending more than 30% of their income on housing and unable to pay for basic necessities.

That is, if they can have housing. In 2020, Maui’s homeless population, both sheltered and unprotected, reached 789 out of a population of 164,754. And across Hawaii, Native Hawaiians are disproportionately represented as part of the population. homeless people.

With such a need for affordable housing, many are struggling to agree on how to take the next steps. Over the summer, the Comprehensive Affordable Housing Plan – the culmination of an eight-month effort by representatives from Hawaiian Community Assets, Hawaii Appleseed Center for Law and Economic Justice, the Rural Community Assistance Corporation, and others – aim to create an in-depth roadmap with solutions for moving forward.

On the day it was presented to Maui County Council, activists, residents and those facing housing insecurity mobilized to raise awareness. But some have disputed that the plan does not prioritize long-term residents. To qualify for housing, residents had to prove that they had lived in Maui for at least two years.

“Twenty seems to be the minimum – not two years,” Kahului resident Maile Magalianes said. “We were born here. We don’t deserve to be kicked out.

Earlier this month, another bill was passed to put long-term residents on the waiting list for affordable housing first. The bill also stops the management of mortgages by developers and prevents affordable housing from swinging to market rates and then being sold to off-island buyers.

On phasing out short-term tenancy, officials have suspended the vote for further consideration, but community member Zhantell Lindo, who testified at the board and committee meeting, said Said: that we have been devastated for many years, supporting the industry and working because we have to. If we hadn’t had this kind of economy, we would have found a way to thrive from land and ocean. But that’s not the world we live in now. So instead of making it worse, we need to take a step back, take a break. “

“We can’t really get out of this crisis,” Paltin said. Especially when it comes to depleting more reserves. Even Economou, to a point, agrees.

“We don’t want every square inch of this island to be covered with housing,” he explained. “It’s not good for the island. And that’s not good for the culture. We have to respect that, and some of this land is really important and sacred. [They] must be preserved. So I don’t mean building is the answer. But a smart building, smart development with higher density and a smaller footprint in areas that can handle more.

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