Pushback: Maui rent stabilization stopped before it’s started

Even before a bill’s drafted to rein in Maui’s runaway long-term rental increases, the chair of the Maui County Council’s Housing and Land Use Committee said she’s not considering any legislation that regulates rent.

In opening remarks Wednesday morning, committee Chair Tasha Kama said she had been asked about preparing rent control legislation after panel members heard extensive public testimony, mostly in favor of rent relief, on Sept. 16.

Since the meeting nine days earlier, Kama said, “I have been contacted by members of the development industry. Even the consideration of this topic has had a chilling effect on those in the private sector who fund affordable housing rental projects, to the point that they are considering abandoning Maui for future housing projects. We need housing, and we cannot afford to scare off investors that create housing.”

Kama said she wanted to be clear: “I’m not entertaining any legislation that regulates rent, but I’m open to future incentive measures to moderate rent for those who are challenged to pay in this very tight rental market.”

Later, Council Member Tamara Paltin said: “It’s a little disappointing that we’re just talking about the problem, and not taking steps to address the problem.”

That problem being skyrocketing post-disaster rental increases for Maui residents. The August 2023 wildfire disaster upended the island’s rental housing market when, among other things, the Federal Emergency Management Agency’s direct-lease program provided above-market rent payments to landlords who agreed to house wildfire survivors. The program has come under fire for leading to “predatory behavior” by some landlords who kicked out former renters to make housing available for displaced fire victims and cash in on higher FEMA rents.

The committee’s meeting on Wednesday was conducted under the Council’s Rule 7B, which allows council members to discuss general topics for informational purposes. Without draft legislation for rent stabilization, committee members’ questions were shots in the dark.

For example, Council Member Tom Cook asked Department of Housing Director Richard Mitchell about whether his department has the resources or ability to “map rents, pre-fire, pre-FEMA events, to establish some type of baseline of what the rental market was like before the (Maui wildfires) crisis, and be able to identify, somehow, the escalation and rent subsequently.”

Mitchell said his department doesn’t have the resources to gather a large amount of rental information, much of it private, in addition to what might be available from the state or FEMA.

“Mapping that and analyzing that will require significant staff time and resources, and we simply don’t have a person or persons just available to do something of that magnitude,” he said.

Council Member Gabe Johnson expressed empathy for tenants facing higher rent demands. “It’s a hopeless system,” he said. “I really think there must be a way we can help our tenants.”

Public comments submitted to the Housing and Land Use Committee on Wednesday included three written statements opposed to rent stabilization; one in favor; and one favorable, if other reforms were enacted first.

Linda Schatz, principal of Schatz Collaborative, showed a timeline and table demonstrating that past efforts by Maui County to regulate housing have produced “minuscule” results compared to a steadily rising demand of thousands of units. She said regulation has also been unsuccessful in San Francisco; New York; St. Paul, Minn.; Santa Monica, Calif.; and Portland, Ore., with impacts ranging from decreases in rental supply and reductions in new housing permits.

“A rental housing unit on Maui can cost about $500,000 to $700,000 per unit,” Schatz said. “Maui would need roughly $5 billion to produce enough units to meet the overall housing demand. The County nor the State has these funds to build this housing, the private sector is needed to infuse investment into projects to build these units. If rent stabilization is enacted in any form, housing investment will not be attracted to investing in Maui.”

Longtime Maui housing advocate Stan Franco said rent stabilization is needed now “because of the unaffordable rents which are being required by landlords. Three years ago, the Maui County Council established a plan to build 5,000 homes. Where are the 5,000 homes? When we build them, we may reconsider rent stabilization.”

Council Member Johnson countered arguments against rent controls, producing a four-page letter, signed by more than 30 economists. The July 2023 letter addressed to the Federal Housing Finance Agency analyzed tenant protections in properties with federally backed mortgages.

The economists said: “There is substantial empirical evidence that rent regulation policies do not limit new construction, nor the overall supply of housing. A 2007 study of rent control analyzed 76 cities in New Jersey with varying rent stabilization laws, controlling for population, demographics, income, and renter-occupied units, finding little to no statistically significant effect of moderate rent controls on new construction. Other studies have found similar results.”

“When rent control was repealed in Massachusetts, there was no corresponding increasing in housing supply, highlighting again a lack of causal relationship between rent regulations and housing supply,” they said.

Johnson also brought to committee members’ attention an October 2018 University of Southern California study titled “Rent Matters: What are the impacts of rent stabilization measures?” A portion of that study said: “Evidence suggests there is little negative impact on new construction, which is logical given that newly produced units have no initial rent targets.”

A section of the study addressing “Impact on New Construction” says that “on balance, new housing supply is more influenced by cyclicality in the local economy and other local conditions than rent restrictions.”

Council Chair Alice Lee said Maui County already has rent regulation, in a way, for tenants in living in state- and county-subsidized housing projects because they come with restrictions on rent tied to residents’ income.

The only reason the county can help low-income residents is through housing subsidies, she said. Otherwise, housing projects wouldn’t “pencil out,” or be economically feasible, for developers.

“Without subsidies, we can’t afford to have rent control,” Lee said.

So the private sector needs to be provided subsidies, tax incentives or some other motivation to build affordable housing, she said.

“Let’s face it; a lot of the problems are caused by the government,” Lee said, citing the long periods of time it takes for permit approvals. “We cause a lot of the expense for everybody, so we should be absorbing a lot of this responsibility.”

Mitchell said he agreed with Lee’s comments about government “getting out of our own way.”

“That is the government not creating hurdles for itself,” he said, citing as an example from a recent Maui Planning Commission meeting in which developers are being required to have “huge setbacks” that were “materially impeding their ability to develop affordable housing.”

After Wednesday’s meeting, Kama said she could see from Wednesday’s committee’s discussions that “there is interest in a more comprehensive approach to the issue of the lack of housing – both ownership and rentals.”

She said she would work with directors of the Housing and Planning departments “to explore a future discussion of that more comprehensive approach.”

The committee’s next regularly scheduled meeting will be at 9 a.m. Oct. 9.