Council’s $300,000 vacation rental phase-out study strays off course

A Maui County Council plan to contract its own study of the economic impacts of Mayor Richard Bissen’s proposed phase-out of Maui County vacation rentals has fallen to the wayside, and Council legislative analysts will conduct research in-house instead.

An Aug. 23 request for proposals drew only one bidder who was unwilling ultimately to sign a contract under the county’s terms and conditions, “while simultaneously asking for time extensions,” Council Chair Alice Lee said in an email Friday afternoon.

Without an independent contracted study, which had been budgeted for as much as $300,000, legislative analysts are doing their own research on the vacation rental phase-out bill and awaiting a study from the University of Hawaiʻi Economic Research Organization, also known as UHERO, Lee said.

A study by Hawaiʻi economic consultant Kloninger & Sims, conducted last summer at the behest of the Travel Technology Association, forecast that prohibiting vacation rentals would cost Maui County from $53.3 million to $91.8 million annually in real property, transient accommodations and general excise taxes. At the time, Bissen disputed the study’s main underlying premise — that all economic activity generated by visitors who stay at affected vacation rentals would end — calling it “simply not true.”

The Council has a June 18 deadline to take action on the phase-out bill. If it’s enacted and survives expected legal challenges, the legislation would disallow approximately 7,000 units from continuing as short-term rentals in apartment-zoned districts. That would dramatically reduce Maui County’s current visitor accommodations inventory, but also give owners the option to rent out their units as apartments to long-term residents.

Lee said she had hoped the Council’s study of the vacation rental bill would be completed by December. However, the County Clerk received the administration’s final bill on Dec. 20, and that was after Council committee meetings had ended last year, and the 2023-24 term was coming to a close, she said.

The bill will be heard by the Housing and Land Use Committee chaired by Council Member Tasha Kama. And, the bill will be scheduled for a hearing “when we have all the necessary facts and other pertinent information available for a comprehensive discussion with the community and all concerned parties who wish to participate,” Lee said.

“The committee chair is prepared to schedule as many meetings as needed to ensure complete transparency and the fullest participation possible,” she said.

The $300,000 in funding for the economic impact study came during budget deliberations last year. Council members cut $300,000 from the fiscal year 2025 appropriation for the Maui Food Bank, leaving the agency $100,000, which was the amount it needed at that time. Then, they added $300,000 to the Office of Council Services budget for the study.

On July 24, 2024, council members discussed the study’s scope of work during a meeting of the Housing and Land Use Committee. Minutes of that meeting show committee members thought at the time that a thorough study should be done for their future deliberations; and some had a sense of urgency to do it quickly.

The minutes can be found here, with a lively discussion by committee members beginning on Page 54. Reading their remarks provides some hints about how council members might line up — for or against — when the bill finally comes before them.

The committee meeting minutes show council members didn’t have much time to discuss the vacation rental impact study on July 24.

As committee chair leading discussion, Kama told members she had “11 minutes left,” after public testimony had been concluded. She had another appointment. And, she said, “I know Chair Lee is pressed for time because she really wants to get started on the RFP.”

Committee Vice Chair Tom Cook said the study’s goals and objectives should be clear.

“My understanding is to free up as much housing for our local residents that they can afford, and that also is suitable,” he said. “I think, you know, saddling local residents with a 30- or 40-year-old building that needs a lot of maintenance isn’t a good idea.”

Lee told committee members her main objective was to learn what they wanted the request for proposals to include.

“But I have to tell you that, to me, it’s nonsensical for someone to propose sweeping legislation like this phase-out, and then go get the facts as an afterthought,” she said. “So, now that the mayor is relying on some kind of a study by UHERO, you have to wonder. I mean, that’s suspect to me, to propose something, and then rely on a study afterwards. So, he must be thinking this study is going to support his point of view. See? So, that doesn’t make sense. I think what we need to do is come up with a good study, all-inclusive, comprehensive, that is impartial and fair and reasonable, reasonably priced. That’s my main concern.”

Council Member Gabe Johnson said: “This study might also take up a lot of time, but we really need this study. And I think people speak on how, you know, government slows things down or speeds things up. This one is really important. I would like the time to be taken on this. But the thing to remember is, we have folks leaving daily… there’s no place for them to live. And I think we do need to have a certain amount of urgency when it comes to this.”

Council Member Tamara Paltin said during the meeting that the study should look at job vacancies on Maui for needed professions.

“We got choke vacancies in [the] police [department],” she said. “We got choke vacancies in the County. We got choke vacancies in teachers. I mean, I can’t go into a store in West Maui without seeing a ‘help wanted’ sign, you know?”

Paltin said she also took to heart a request from the Maui Planning Commission to study not only the economic consequences, but also the social and environmental impacts.

“I think they said a lot of these types of Minatoya properties have shoreline hardening on it because, you know, the money. We can’t let this money go,” she said. “And shoreline hardening impacts everybody along the coast, you know. So, I think those things need to be looked into.”

(The “Minatoya List”, named after the late former Deputy Corporation Counsel Richard Minatoya, refers to a list of Maui vacation rentals that have been grandfathered, or allowed to continue, even after Maui County passed an ordinance in 1989 making transient accommodations non-permitted uses in apartment-zoned districts. Most of the affected units are in West and South Maui.)

Also during the July 24 committee meeting, Paltin questioned how much tourism money actually stays on the island.

She said she’s heard claims that $11 billion “stays local,” but “how is that happening, when 80% of the owners are from out of state? So, I mean, hotels, short-term rentals; our goal in the beginning was to go after the high-end visitors. And with short-term rentals, we’re selling out, at a cheap price, our valuable water resources, our valuable beach parking, [and] our valuable quality of life.”

Council Member Keani Rawlins-Fernandez, an early bill proponent who stood by Bissen when he announced the bill on May 2, rapidly added amendments for scope-of-work requirements: beginning with “C” regarding an “ideal rental unit” to “O” for a gross domestic product and economic growth analysis.

Council Member Nohelani Uʻu-Hodgins said: “Well, I don’t know if I can follow what Member Rawlins-Fernandez just said, but I do have a question. If we do all the things… I think we ended at O. Is that? I think we ended at O for Member Rawlins-Fernandez. So, if we do… if we do A to O… How long do we assume the RFP is going to take?”

Uʻu-Hodgins noted that, as the bill’s currently proposing the vacation rental phase-out to begin in 2025 for West Maui, and Jan. 1, 2026, for the rest, “like what timeline do we need after RFP for both UHERO and ours to making the decisions to when this bill is implemented? That’s just the question I have, is like what is the timeline for this? And I have nothing to add, considering we are almost running out of letters of the alphabet.”

Lee emphasized the need for acting quickly.

“The sooner we get to dealing with the STR issue, the better,” she said. “The more information we have to base our decision on is what we want. We want a fair and equitable analysis done so that we can also provide the best decision-making possible.”

Later in the meeting, Lee said: “I think most of us, let’s face it, agree that there should be some kind of phase-out. But what… are we dealing with exactly?”

Uʻu-Hodgins said she wasn’t questioning the need for a study or more information, but rather “I’m just curious about the timing of it all.”

Noting the number of items proposed by Rawlins-Fernandez, Lee said she wasn’t sure the study could cover all of them.

The Council’s June 18 deadline for action stems from Section 8-8.6(4) of the Maui County Charter. It requires the Council to act within 180 days on department-initiated land use legislation. However, the deadline is “toothless” because the Charter is silent on any consequence for failing to complete work within the given time limit.

Nevertheless, “the Council always makes good-faith efforts to comply with charter requirements, even if there are no consequences for failing,” said Council communications specialist Benjamin Silva.

Maui Now reached out to all nine council members Thursday to give them an opportunity to update their remarks from last July’s committee meeting, given that, now, the Council’s planned study won’t be done. Only Lee responded to a request seeking comment and more information.

The Council’s request for proposals had extensive requirements for the study’s scope of work. Aside from reviewing Mayor Bissen’s bill itself and reviewing other relevant information, the contractor would be required to create a list of all apartment units that would be affected by the proposal, including (for each unit) the age, number of bedrooms and bathrooms, number of parking stalls, the unit’s original use after it was constructed and habitable (owner-occupied, long-term rental, transient vacation rental, etc.), original county permitting information, current real property tax classification, current assessed value, monthly common area maintenance or homeowners’ association fees, and total carrying cost per month.

The scope of work also included more than a dozen other specifications for information sought by the Council.

Since Bissen announced the vacation rental phase-out bill in early May and Maui County planning commissions conducted their respective reviews in June and July, uncertainty about the fate of the vacation rental phase-out bill has had a chilling effect on Maui County condominium resales. There are two metrics to measure the temperature of a resale market — sales volume (the number of unit sales per month) and monthly median sales prices.

A downward trend of condo sales volume first became evident in August 2024 after the May 2 bill announcement and falling numbers of closed sales in May, June and July of that year. Condo median sales prices held steady for about half a year.

Then, in November 2024, median sales prices fell 19.7% from $890,000 to $715,000 in and dropped 15.6% from $800,000 to $675,000 in January 2025. The last time condo median prices were in the mid $600,000s was in January 2023, and before that, prices were in that range during the worldwide COVID-19 pandemic. Condo owners who bought units at recent, high prices may find themselves “under water” if they owe more money on their units than they’re worth for sale at current market values.

The vacation rental legislation is aimed at freeing up direly needed affordable workforce housing for Maui residents, a premise disputed by short-term rental owners who say the units are not appropriate as long-term housing for local families.

They say complexes lack adequate parking and storage space. Many vacation rental complexes are old and badly in need of costly repairs and maintenance. High condo maintenance fees are another barrier.

The bill’s introduction has generated some heated rhetoric from alarmed transient vacation rental unit owners. Many live on the Mainland or reside part-time on Maui and rent out their units during their absence. Some owners rely on vacation rental income. Owners have found a niche market by pricing their accommodations below average daily room rates in hotels and resorts, while in some cases providing similar amenities, like pools and barbecue areas.

Since the nearly back-to-back COVID-19 pandemic and August 2023 wildfire disaster, Maui hotel occupancy has dropped to a little more than 50%, a rate that hasn’t been that low for Maui hotels since the Great Recession, according to UH economist Carl Bonham.

During an Zoom interview with reporters in December, Bonham said he couldn’t go into much detail about the pending UHERO forecast of vacation rental phase-out impacts. But, he said, “it’s not rocket science” to surmise that taking thousands of visitor accommodations away from the island’s inventory of available units is “going to have a negative impact.”

Bonham called Maui’s vacation rental dilemma “a complicated mess.”

“It’s pretty hard to come up with any analysis that would tell you that you won’t end up with too many negatives,” he said. “Any way you slice it, you know, even with additional spending because of higher prices and because of people staying in hotels or resort condos that are legal, you’re still going to end up with a decline in spending and therefore some impact to jobs and overall household income. Just no way to avoid that.”

Now that the highly divisive vacation rental phase-out bill looms on council members’ to-do lists, they’re also awaiting submission of the administration’s proposed fiscal 2025-26 budget, due March 25. For most of April and May, the County Council will be in the thick of budget review and deliberations.

The Council must take final action on its revised budget by June 10, or the administration’s submitted budget automatically becomes law. The new fiscal year starts July 1.