As Hawaii’s high housing costs and rising property taxes continue to price out struggling residents seeking to find and keep their homes, Maui is examining how to create long-term housing opportunities to make sure local residents remain local. However, some of the solutions remain complicated.
This past year, as visitor numbers reached their peak, housing prices did as well. According to the Realtors Association of Maui, in September, the 12-month average price for a home on Maui rose to $965,000, an increase of 26.7% from the previous year. This is partly due to low inventory of housing, as well as demand from wealthy off-island real estate investors.
In one of several efforts to both mitigate overtourism issues and help solve the county’s vast housing crisis, Maui’s County Council is considering legislation to phase out a large portion of short-term rentals in apartment-zoned districts across the Valley Isle. The divisive measure would affect roughly 3000 units, Maui Council Member Tamara Paltrin confirmed to SFGATE.
It’s garnered considerable backlash — but also considerable support.
“Maui has been seen as a great investment opportunity by outsiders,” said community member Jordan Hocker, who spoke out in support of the bill at a recent public hearing. “And what I see being done with legislature like this, and the other agenda item 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 in danger of moving away or already have had to.”
Research from the University of Hawaii showed that 67,293 Hawaii residents moved to the continental U.S. in 2018; that represents more than 4.5% of the state’s total population. And the continental U.S. saw a 31.6% increase in the Native Hawaiian and Pacific Islander population from 2010-2020, the Honolulu Star-Advertiser reported. Many had been priced out of their ancestral homelands.
Tamara Paltin, the West Maui councilwoman who authored the bill, has experienced firsthand immediate family leaving the islands because of affordability, as well as friends who are currently struggling in subpar living conditions.
“We have way too many tourists for our infrastructure to handle and we’re trying to stabilize the situation,” she told Hawaii News Now, adding that she hopes this will unlock more long-term opportunities for residents.
But other short-term rental owners say this is an example of government overreach.
“It will pull the rug out from under us,” an anonymous Luana Kai condo owner wrote in public testimony explaining that when she and her husband recently purchased the condo they had to take 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 property owners who provided feedback did not acknowledge the impact they had on local residents. Others who did, such as testifier Kimberly Lee, who owns a condo in Kihei, said that the issues brought about by short-term rentals can be felt across the United States.
Lee said that she hoped that not one group of people would suffer over another, but could work together in terms of finding solutions. However, others have said that phasing out these rentals could have unintended financial consequences on the county’s other affordable housing solutions.
Back in May, the council voted to raise property taxes on short-term accommodations, which is projected to bring in an additional $7.8 million intended to go to the county’s affordable housing fund. This happened just months before the introduction of the Comprehensive Affordable Housing Plan, which calls for a $789 million investment to provide 5,000 affordable housing accommodations in the next five years.
“Finally, the council has figured out a tax structure, maximizing the revenue, and they’re really focused on making a meaningful impact in housing. Why would you cut your revenue stream?” said Jason Economou, government affairs director at the Realtors Association of Maui.
According to Economou, Maui County has about 13,466 short-term rental properties. Each pays an average of $10,241 per property in taxes. Multiply that by the 3,000 rentals impacted by this new legislation, and it cuts out about $30 million in revenue.
That’s a significant chunk of the county’s entire operating budget. Currently, 44.8% of Maui’s operating budget comes from real property taxes. In 2020, the county’s short-term rentals produced about $101 million in property tax revenue, more than three times more than its hotels.
Economou also added that rental properties would likely sell at market value. The properties would likely go to off-island investors as well, rather than to residents who need it most.
These issues seem to highlight the deep complexities and systemic failures inherent in trying to execute solutions for Hawaii’s complicated real estate system.
“Policymakers are going to have to make some tough decisions, the mayor is going to have to make some tough decisions, the 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 that has recently created the House Maui initiative to address the crisis on the island by empowering local residents through education and opportunity.
Otherwise, he believes the Maui County Council will repeat past patterns in other failed legislative measures.
In 2006, Maui adopted a workforce housing policy requiring new residential developments to designate 50% of their units as affordable housing. Developers were concerned that reduced revenues from the policy requirements made it financially unfeasible. The unintended consequence: Development largely halted for years.
In the meantime, short-term rentals on the island grew exponentially, more properties were being purchased mainly by wealthy out-of-state buyers, while new luxury developments were being erected all over the island. This has not only raised rent to astronomical prices, but in some cases resulted in local residents being evicted so owners could sell their property at top dollar.
It has also caused property taxes to skyrocket for those who already own homes.
This has been an issue for Native Hawaiians, who have been struggling to keep their ancestral lands that have been passed down through generations. Many have been forced to sell or foreclose.
Eighty-nine-year-old Edward Chang’s grandfather was a Chinese merchant who married a Native Hawaiian woman with lineage dating back to the reign of King Kamehameha I. His family has owned property in Makena even before the overthrow in 1893. Chang has retained some of this land, where he hoped to retire quietly. Instead, he has been fighting exorbitant tax increases for years.
Chang’s annual land tax was $2,600 in 2000, Ka Wai Ola News reported. It rose to $9,800 in 2017, then jumped to more than $20,000 in 2018. He appealed and managed to have it reduced to $10,000. Still, the following year, his land tax went back up to $22,000. Chang recently testified in late September, before Maui County Council’s Budget, Finance and Economic Development Committee, that he needs to ask his children for help with tax payments.
On Nov. 6, legislation introduced by Maui Councilwoman Keani Rawlins-Fernandez called the "aina kupuna" bill, which would protect longtime locals families like Chang’s by having them only pay the minimum tax of $350 a year, unanimously passed its first reading.
Still, more than 50% of Maui’s residents are housing-cost burdened, paying more than 30% of their income on housing and unable to afford basic necessities.
That is, if they are able to have housing at all. In 2020, Maui’s homeless population, both sheltered and unsheltered, reached 789 people in a population of 164,754. And across Hawaii, Native Hawaiians are disproportionately represented as part of the homeless population.
With so much need for affordable housing, many have been struggling to agree on how to take the next steps. Over the summer, the Comprehensive Affordable Housing Plan — the culmination of an eight-month-long effort by representatives from Hawaiian Community Assets, Hawaii Appleseed Center for Law and Economic Justice, the Rural Community Assistance Corporation among others — was meant to create an in-depth roadmap with solutions moving forward.
The day it was presented to the Maui County Council, activists, residents, and the housing insecure rallied to raise awareness. But some took issue with the plan not prioritizing long-term residents. To qualify for housing, residents needed to show they had lived in Maui for a minimum of two years.
“Twenty seems like the minimum — not two years,” said Maile Magalianes, a Kahului resident. “We were born here. We do not deserve to be driven out.”
Earlier this month, another bill was passed to prioritize longer term residents on the wait list for affordable housing. The bill also stops mortgage steering by developers and prevents affordable housing units from flipping to market rates and then being sold to off-island buyers.
As far as the short-term rental phase out, officials have paused on voting for further review, but community member Zhantell Lindo who testified at the council and committee meeting, said “I, as a native, fifth-generation Hawaiian, want to say that we've been devastated for a lot of years, supporting industry and working because we have to. If we didn't have this kind of economy, we’d have figured out a way to thrive from the land and from the ocean. But that's not the world we live in right now. So instead of making it worse, we need to take a step back, take a breather.”
“We can’t really build our way out of this crisis,” Paltin said. Especially when it comes at the costs of depleting more reserves. Even Economou, to a certain point, agrees.
“We don’t want every square inch of this island to be covered in housing,” he explained. “It’s not good for the island. And it’s not good for the culture. We need to respect that, and some of these lands are really important and sacred. [They] should be preserved. So, I don’t want to say that building is the answer. But smart building, smart development with higher density and lower footprint in areas that can support more.”
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