HONOLULUโIn a groundbreaking move, the mayor of Maui proposed phasing out vacation rentals as a strategy to ease the islandโs housing crisis, exacerbated by the devastating 2023 wildfires. University of Hawaii economists weighed in on the plan in a report released Monday, noting that while the policy could alleviate housing shortages, it might also harm Mauiโs economy.
Mayor Richard Bissen initially suggested this policy to address the scarcity of long-term housing, following the loss of over 3,000 housing units in Lahaina due to the fires. Study author Trey Gordner from the University of Hawaii Economic Research Organization highlighted the inevitable trade-offs that accompany such policies.
The report suggests that while the proposal could make housing more affordable, it could also result in reduced employment, income, and tax revenue. A decline in visitor spending is anticipated as a consequence, according to the report.
Mayor Bissen emphasized the importance of the report in gauging the economic impact but also pointed out that economic models might not capture the lived experiences of residents who cope with overcrowded homes, long commutes, or are forced to leave Maui due to unaffordable housing costs.
โThe cultural impact is profound when residents, carriers of generations of tradition and aloha, leave the communities that shaped them,โ Bissen stated.
Maui County Councilโs Housing and Land Use Committee could potentially review a bill containing the mayorโs proposal within 60 days, depending on the deliberation schedule, according to Council Chair Alice Lee.
Lee noted that the study did not address legal implications and related costs of the policy, expressing concerns about owners opting to keep their vacation homes rather than renting them long-term. โWe aim to develop a fair solution benefiting everyone,โ she said.
Currently, vacation rentals account for about one-third of accommodation for visitors to Maui, offering a cheaper alternative to hotels through platforms like Airbnb and Vrbo. These rentals provide amenities that allow for remote work and self-catering, enhancing their appeal.
The tension surrounding vacation rentals has intensified post-wildfire, as housing has become even scarcer. According to the report, the proposed policy is especially notable for its scaleโimpacting 21% of Maui Countyโs housing, unlike smaller-scale examples seen in cities such as Los Angeles and Barcelona.
The initiative could convert up to 6,127 vacation rentals into long-term housing, boosting the supply by 13%. Given that the county constructs about 600 new housing units annually, this shift would equate to a decadeโs worth of development. Consequently, condo prices might drop by 20-40%.
With 85% of Mauiโs vacation rental owners residing out of state, particularly from California, Washington, and Canada, Maui residents might not directly feel this policyโs initial impact.
Additionally, changing these units to long-term housing could result in significant savings for the county, which otherwise would have had to develop new water resourcesโa limited commodity on the island.
On the downside, the policy could lead to a 15% reduction in visitor spending, with a corresponding loss of 1,900 jobs, or 3% of the overall payroll. It might also shrink the countyโs GDP by 4%, coupled with a potential $60 million annual drop in property taxes.
The report advises that less disruptive economic effects could be achieved through alternative measures. Suggestions include raising taxes on vacation rentals, taxing vacant homes, and reforming zoning and permitting.
Another potential strategy is to limit vacation rental licenses and auction them, an idea, co-author Steven Bond-Smith noted, is commonly used for taxi medallions and fisheries management. This approach could eliminate less profitable vacation rentals by making them financially unviable.
This study was conducted by the University of Hawaii at the request of the Hawaii Community Foundation, aiming to provide comprehensive research and recommendations on the subject.