In addition please see the testimony from former President of Maui Vacation Rental Association, Tom Croly. It is a great overall history of the industry and has a lot of points that you may be interested in and can utilize.
Public comments on Phase out of the Short Term Rental Home permit process
By Thomas Croly
The short term rental home (STRH) ordinance was established into Maui County code in May 2012. It was the second piece of legislation, after the B&B ordinance, that was designed to help regulate an already well established part of the visitor industry consisting of various forms of short term rental uses taking place in single family homes in Maui County. The need for this regulation was recognized in the late 1990’s when operations making these uses began applying for Conditional use permits and the planning department found themselves overwhelmed with the processing of individual Conditional use permit, each that would need to go before planning commission and full Council for approval.
In 2005 the Realtors association of Maui commissioned the Kauaian Institute to do a comprehensive study of the existing short term rental industry in Maui County. This study revealed that at that time there were 816 single-family home properties that were making short term rental uses. And these 816 properties were operating a total of 1095 rental units. The study did not attempt to differentiate between properties where the owner lived and properties that were strictly rentals where the owner did not reside.
When the B&B ordinance was crafted in 2007 and 2008, a cap of 400 permits was established. That cap was expected to make enough B&B permits available to meet the existing demand for this use by the traveling public that was being met by the existing owner occupied B&B operations. Since there was an understanding that owner occupied B&Bs were only one segment of these operations, the cap of 400 permits island wide, and the distribution of these permits established in each community plan area was calculated by the proportions that had been identified in the Kauaian Institute report. This number of permits represented approximately half of the properties that had been identified by the report.
After the B&B ordinance had been established and the planning department and Council began their work on the Short Term Rental home ordinance, a cap was established for STRH permits at 400, that along with the 400 B&B permits would provide enough permits to fill the total market demand that had been identified by the Kauaian institute report. Later the cap for STRH permits in Hana was reduced from 48 to 30 and in 2019 the cap for STRH permits in Paia-Haiku was reduced from 88 to 55. Leaving a current cap of 349 STRH permits for Maui Island.
During the promulgation of both the B&B and STRH ordinances several community members expressed opinions that if these uses were allowed, everyone on the island would choose to make these uses because they were so profitable. Twelve years later it is very clear that such fears were completely unfounded, as today there are currently only 152 Bed and Breakfast permits and 226 Short term rental home permits. The planning department estimates that there are still 100-200 unpermitted operations, but this total of 478 to 578 is well short of the 800 properties that were identified in 2005 and well below the inflammatory estimates of thousand and thousands from those opposed to this use based on unfounded hyperbole.
It is true that Maui County has between 4000 to 8000 off-island owned second homes that are neither permitted short term rentals nor long term rentals, whose owner’s have shown no interest in obtaining an STRH permit that comes with lots of regulations and doubles owners the property tax bill. These second homes are often erroneously identified by neighbors as short term rentals because when their part time owners use them or when they allow their friends and families to use them, they may look like short term rentals. But these second homes are not subject to quiet hours, occupancy limits and parking restrictions. And these second homes are not managed by nearby professional property mangers as Permitted STRHs are.
Uniformed individuals have made the assertion that the availability of STRH permits has driven up the costs of housing on Maui. Such assertions have no basis in fact. When the fact is that of the 10,104 single-family homes that have been sold since 2010, only approximately 50 of them have been granted a short term rental home permit. (Less than 1/2 of 1 percent) These 50 home purchases that later were granted STRH permits most certainly did not set the market value for the other 10,054 homes sold during that period. STRH permits have never been transferable. And in March of 2018 the STRH ordinance was amended to require an applicant for a STRH permit have owned the property for at least 5 years before becoming eligible to make application for a permit. Therefore any future STRH permits could never have any influence on market prices at all.
Additional unfounded assertions have been made that permitted STRHs are causing assessed values to increase and therefore placing a greater tax burden on residents, when the total opposite is the truth. When a property sells that had an STRH or B&B permit associated with it, the real property tax department flags that sale and does not use it for a comparison for assessed values of non permitted homes in the area.
However, properties where an STRH permit has been granted pay property tax at a rate that is approximately double the rate that they would be subject to without such a permit and four times the rate that a resident homeowner of the same property would pay. So STRHs actually bring down the tax burden to residents. As point of fact, last year all properties classified as short term rental, including the 11,450 condos in apartment and hotel zoning and the 229 short term rental homes, paid a total of $101 million in property tax. Compared that to the $34 million paid by all 26,000 Maui county homeowner’s. Yes, 11,679 short term rentals paid three times the total property tax paid by all 26,120 Maui resident homeowners. STRHs actually lower the tax burden to Maui resident homeowners.
Finally, assertions have been made that permitted STRHs have negatively impacted neighborhoods. However a review of the Requests for Service (RFS) filed on the 229 permitted STRHs does not support such an assertion. While some members of the community have regularly come forward to oppose any and all short term rental and bed and breakfast permits with assertions of change in neighborhood or fears of who might be staying in a particular home. None have ever substantiated those assertions with any evidence. And while it is true that some neighborhoods in Maui are made up primarily of off island owned properties, there is no evidence that the availability of a permit created any change of the property uses or demographics of ownership of those properties. For example many oceanfront properties have been owned by off island owners for many years and while some of those owners have come forward to apply for, and be granted STRH permits, the majority of oceanfront properties have been owned and continue to be owned by off island owners, used strictly as second homes and the availability of an STRH permit has not changed that situation.
It is a short sighted and unsubstantiated idea that elimination of the Short term rental ordinance and non renewal of current short term rental permits would lead to any better regulation of this use or availability and lower price of residential housing on Maui. While it is well documented that elimination of the permits for this use would result in less real property tax revenues, less State General excise tax and Transient accommodation tax revenue, less oversight of rentals, and would leave the market demand for such accommodations solely to the underground unregulated segment of the market.
The Short term rental home ordinance is serving its intended purpose of regulating this use in Maui County. It is not perfect and requires considerable effort both on behalf of the permit applicants and the County. But overall it has much higher compliance rate than that of building permits for home and condo renovations. Yet, no one is proposing abandoning building permits, although some have called for moratoriums on issuing some types of building permits. As was demonstrated in the 2005 Kauaian Institute study, Short term rentals will exist with or without a permitting process to regulate them. But without such a process, they will all be unregulated and perhaps less safe for visitors and the State and county will lose out of hundreds of millions of dollars in tax revenues.
