Maui Council budgets $300,000 to study impacts of eliminating 7,000 vacation rentals

LAHAINA, Hawaii (AP) — Blue Cleaning, a small business in West Maui that spruces up 27 vacation rentals, survived the sharp decline in tourists during the Covid-19 pandemic and after the devastating Aug. 8 wildfire in Lahaina.

But now Leo Szakacs-Kekona, who owns and runs the operation with his wife, is worried about Mayor Richard Bissen’s recent proposal to permanently eliminate 7,000 short-term rental units — more than half of the island’s stock — by Jan. 1, 2026, in an effort to create much-needed long-term housing for the county.

“Is this going to be the blow that knocks us down?” Szakacs-Kekona said. “Other independent contractors also are worried. It’s always the little guy that gets shot down first.”

Even Bissen said there would be “economic fallout” when he announced his proposal in early May. But how much fallout is what Tasha Kama, chair of the County Council’s Housing and Land Use Committee, wants to know before making any decisions.

In a council meeting last week, a Kama-led budget amendment passed that moves $300,000 originally earmarked for the Maui Food Bank to a new short-term rental study. The nonprofit said it doesn’t need the funding due to an influx of fire-related donations.

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“The purpose is to ask all the 1,001 questions,” Kama said Wednesday. “I want them to do a deep dive into exactly who are we impacting and how are we impacting them? And in the end, is this really a good idea to do it in the first place?”

The new study will be conducted by staff of the Office of Council Services who “know what we are looking for,” Kama said.

“There’s a bias against (short-term rental) owners who don’t live on Maui — OK, I get that stuff — but you cannot let those biases deter what’s best for the rest of the county,” she added.

Proponents of the proposal say the crisis-level need for long-term housing on Maui, which was exacerbated by the Aug. 8 fires that displaced about 13,000 people, outweighs the consequences.

But real estate agent Jeremy Stice, president of the Maui Vacation Rental Association, argues the impacts would be disastrous and cripple the economy.

“I think that the overall economic trickle-down effect would essentially bankrupt the county,” he said.

Economist Paul Brewbaker conducted an analysis of such a housing transition even before the fires for the Realtors Association of Maui. He found that the likely loss of thousands of jobs is just one of the negative impacts that would occur if that number of short-term rentals is taken off the market.

In Brewbaker’s white paper, which was revised in November 2022, he concluded that the “hypothetical economic impacts” to Maui County would be the loss of 14,126 jobs, and annual reductions of $1.67 billion in tourism money, $747.7 million in employee earnings and $137.6 million in tax revenue.

This study was done in reaction to a 2021 council proposal to phase out transient accommodations in apartment districts, which was introduced by council member Tamara Paltin, who represents West Maui.

The 7,000-plus condos that fit in this category are known as the Minatoya list, named after the late Richard Minatoya.

In 2001, when he was deputy corporation counsel for the county, he wrote a legal opinion saying that if condos were built before 1992 and were already being utilized for short-term rentals approved by their respective condo associations, they could be grandfathered in and continue to be used for short-term rentals — fewer than 180 days — with a permit from the county or state as long as that type of use was not stopped for more than 12 consecutive months.

After public pushback, the proposal was watered down in 2022 to a voluntary phase-out that appears to have gone nowhere.

Bissen’s proposal will be presented to the county’s three planning commissions, beginning June 25 on Maui, followed by meetings on Molokai and Lanai. The recommendations from these commissions will be consolidated into a bill before going before Kama’s housing committee.

Kama said the new study will not be done until the end of the year, but in time for the information to be used when final decisions on the proposal are expected to be made in January — six months before Bissen wants the elimination of the list’s 2,200 vacation rentals located in West Maui to take effect. The remaining units would be allowed to operate for another six months.

Short-term rentals contribute by far the largest chunk of the county’s property tax revenue at 42%, which is estimated to be $246.3 million for fiscal year 2025, which begins July 1.

“It doesn’t make any sense when the county is essentially facing a multitude of lawsuits for its role in the fires and whatever that sorts out to be — and you want to absolutely deplete the number one revenue source,” Stice said.

The county also would lose millions in funding for the building of affordable housing. Tax revenue from short-term rentals has been the biggest contributor to that fund, at about $33 million over the past five years.

Opponents of the proposal also say that the desired outcome of a large influx of long-term rentals to house displaced fire survivors and others, which people can afford, likely won’t happen.

Stice said the majority of units under the proposal were designed for tourists, not families. Most are studios or one- or two-bedroom condos, with only a small percentage having three bedrooms. He said he doesn’t know of any that are larger.

“You can’t have multigenerational housing when somebody is just living in a studio or two-bedroom apartment in a resort condominium,” he said.

Council member Tom Cook said many of the complexes in his district of South Maui that are on the Minatoya list come with only one parking spot per unit and have other issues that would not make them conducive for long-term rentals. These include limited closet space and no-pet policies.

“I think that information will come out,” Kama said. “I’m not sure if the study will do a deep dive into the units, but I’m sure they will tell us that they’re not appropriate for families or long-term. But I don’t know. The study will give everybody a very clear, clean, honest picture of what this is.”

Stice said these condos also are not affordable from an ownership standpoint.

“These HOA (homeowners association) fees are astronomical,” he said. “They’re only going to continue to go up as infrastructure ages … The only way that these owners can pay for them or have a chance of paying for them is because they can rent them out short term.”

Even without special assessments, many of the condo owners’ break-even point is much more than what most long-term renters can afford.

“I 100% stand with fire survivors in getting everything that they can to assist them to get back on their feet,” said Szakacs-Kekona, whose cleaning company employs four people. “But on the flip side to this, I feel like the powers that be are making a bad decision that’s just going to trickle down to hurt the community in the end.

“If I was to lose my revenue, my business, if they shut these things down, it doesn’t just affect me. It affects my family. It affects the individuals who work for me, which a few of them lost their homes in Lahaina.”

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This story was originally published by Honolulu Civil Beat and distributed through a partnership with The Associated Press.