Mayor Richard Bissen’s proposed elimination of transient vacation rentals in Maui County’s apartment-zoned districts is expected to lead to more available long-term rental and for-sale housing, although the high dollar value of apartments in coastal resort areas mean there “may be issues” about their affordability.

That’s according to a Maui County Department of Planning memorandum to Maui, Molokaʻi and Lānaʻi planning commission members as they prepare to consider the mayor’s proposed bill to prohibit an estimated 7,000 transient vacation rentals from apartment districts.

Under the bill, housing units still used as vacation rentals in apartment-zoned districts will no longer be permitted as short-term visitor accommodations — as of July 1, 2025, for West Maui, and Jan. 1, 2026, for the rest of Maui County. The Bissen administration’s move to launch the bill follows a new state law that clarifies transient vacation rentals are not considered residential uses and may be phased out. Currently, apartments that have been used as vacation rentals since before April 20, 1989, have been grandfathered to continue as transient accommodations even though a Maui County ordinance in 1989 removed transient vacation rentals as permitted uses in apartment-zoned areas.

The Planning Department’s memorandum will frame public debate beginning at 9 a.m. today during a Maui Planning Commission meeting in the Maui County Council Chambers. The meeting also will be available for viewing online via Webex Videoconferencing: Meeting ID: 2661 310 6605 Password: MPC1

The memo says the Planning Department believes the intent of the mayor’s bill is “sound — namely an attempt to address the long-term housing needs of those most recently affected by the August wildfires and the county’s residents as a whole.” Maui County’s housing demand shortfall is estimated at more than 10,000 units through 2025.

The memorandum also asks planning commissioners to consider issues raised by “numerous correspondence.” That is: the many dozens of written testimonies, the vast majority of which overwhelmingly oppose the proposed short-term rental phase-out. (See, bottom attachments, here and correspondence submitted after the Maui Planning Commission’s agenda posting, here.)

Detailed in the department’s memorandum, those issues are:

Will the proposed bill yield more residential housing, and address Maui County’s housing shortage?

“The department believes that the ordinance will result in an increase in available long-term rental and for-sale units in the County,” the memo says. “However, there may be issues related to the availability of those units to existing County residents due to their affordability.”

The Department of Finance reports that 46% of the 7,000 affected vacation rental units are oceanfront and have an average assessed value of $937,300. The remaining 54% are not oceanfront but are “very near” the ocean and have an average assessed value of $1,074,200.

The Finance Department’s Real Property Assessments Division told county planners that they could not predict how changing use from vacation rental to long-term residential housing would affect property values.

“In the long term, the influx of available units on the market may eventually result in lower rental and for-sale rates if the units cannot be sold and/or rented at current value in the short term,” the Planning Department memorandum says. “Due to the increase in supply there may also be an indirect decrease in long-term rental and for-sale market rates for dwelling units elsewhere in the county.”

“However, it is still unclear if that future reduction will be enough to address the affordability issues that county residents currently face,” the memo says.

It also notes that the County is working with the University of Hawaiʻi Economic Research Organization on an economic analysis “to determine the feasibility of these units being made available and affordable for current county residents.”

Will there be a loss of employment for those that directly and indirectly support existing transient vacation rental units?

The Planning Department’s memorandum foresees some loss of employment for workers providing direct services to TVR units. These workers include housekeeping and maintenance staff, real estate and accommodations booking professionals and concierge services. “There may also be a loss of employment to those that indirectly serve the tourist industry, such as owners, servers and retail sales associates at restaurants, bars, grocery stores, and souvenir shops,” the memo says.

What is the expected economic loss of revenue to Maui County?

Some economic impact is expected, the memo says. For real property tax revenue, based on 2024-25 tax rates, the Finance Department estimates a loss of nearly $38.4 million. This assumes a change of real property tax classification for 6,208 units (other units have different classifications) from the current transient vacation rental/short-term rental housing classification to the non-owner occupied classification, at a lower tax rate. The revenue loss could be greater if the units change to owner-occupied or long-term rental classifications because these are taxed at even lower rates than the non-owner occupied classification.

“The County may choose to increase taxes in other classifications to off-set the anticipated revenue loss,” the memorandum says.

Another revenue loss would be transient accommodations tax income, but the specific amount cannot be determined because the Finance Department does not have the ability to cross-check the state’s TAT database with specific addresses in the county’s apartment district.

Why not build more housing by spending the anticipated loss of revenue on developing more affordable workforce housing?

“The County will not be able to build our way out of our housing crisis,” the department memo says. “The demand for housing in Hawaii is insatiable and infrastructure capacity and resources are finite. Both South and West Maui (regions) have water resource availability issues that have plagued housing production for decades. As such, it is logical to explore methods to shift existing units in apartment districts that could be used for local residents away from transient use.”

Are the vacation rental units appropriate for long-term rentals?

The Planning Department reported that it has not analyzed each of the existing buildings used for vacation rentals in apartment-zoned districts, but it has become aware of information received from public correspondence.

According to that information, most vacation rental units are “relatively small” — 432 studios, with no bedrooms; 3,147 with one bedroom; 2,420 with two bedrooms; and 144 with three bedrooms.”

The number of bedrooms alone doesn’t indicate whether the units were intended for residential or transient accommodation use. Nevertheless, “there are plenty of individuals and small families that could benefit from a smaller unit,” the department memo says.

Other issues related to “suitability” include most units having access to only one parking space and limited off-property parking in resort and near-ocean areas. “The amount of parking allocated per unit does not determine if a property is suitable for residential use,” the memo says. “Depending on the location of the building, parking may not be necessary if residents are located within walking distance to their work and services, or if the building is on a bus line.”

Written testimony also reports that some buildings do not allow pets or smoking; and some buildings do not have storage facilities other than bedroom closets.

Is the proposal legal?

Under state law, the County may prohibit a previously lawful use in an apartment zone, if the County provides a reasonable period to amortize, or phase-out, the use, according to the department’s memo.

“The draft ordinance and its amortization period are in compliance with state law,” it says. “It should still be anticipated, however, that the property owners who currently operate TVR in Apartment Districts will submit a legal challenge to an adopted ordinance. It is unclear as to the estimated litigation costs to the County and subsequent delay.”

Also, some property owners may decide to apply for a change of zoning and a community plan amendment from Apartment to Hotel. Each application would be evaluated by the county’s planning commissions and the Maui County Council.

“These efforts may also delay implementation,” the memo says.

The Planning Department’s memo opens the door to a range of options for action by commissioners. Those include recommending that the Maui County Council approve or reject Mayor Richard Bissen’s proposed bill to phase out transient vacation rentals in the county’s apartment-zoned districts. Or, they could call for a middle-of-the-road approach, such as more studies or an amended bill.