New “Short Term Rentals” Law Explained

By Susan Halas

The Maui County Council passed a new law on May 22 authorizing short term housing. Courtesy image.

The Maui County Council passed an ordinance that will allow 400 Maui home owners to obtain permits for legal short term rentals (formerly known as Temporary Vacation Rentals – TVAs).

The council voted 5-1 on May 22 to approve Ordinance 3941. In favor were council member Mateo, Baisa, Carroll, Couch and White.  Opposed was member Cochran. Excused were members Hokama, Pontanilla and Victorino.

Application and processing for the new permit category will begin in June and be carried out by the Planning Department according to Gina Flammer, staff planner for the Department of Planning-Current Division.

Flammer said applications are expected to be posted online by June 5. Applications fees have yet to be set. There will also be a public hearing fee for properties on agricultural land; the amount of that fee also has not yet been announced.

Vacation Rentals Have Long History

The practice of renting accommodations to travelers in areas not permitted by zoning had been pervasive on Maui for decades. Recent estimates of the number of properties offered for vacation rentals ranged between 1,000 and 2,000. Though officially this kind of use was not allowed, the law was seldom enforced except when there were complaints.

Matters came to a head in 2007 during the administration of Charmaine Tavares. She took a more vigorous approach to enforcement and instructed staff to shut down illegal vacation rentals.

The move came as a surprise, since there were statements of record saying that the county and the representatives of those owning vacation rentals were in the process of working out regulations that would allow at least some limited legal use.

The enforcement caused considerable hardship and bad feelings. It also coincided with a general downturn in the wider economy. The question of finding a workable solution became a significant political issue that played through the elections of 2008 and 2010.

B&B Legislation Passed in 2008

The first step toward addressing the question went into effect in January of 2008 with passage of legislation that allowed a total of 400 bed and breakfast operations in specific geographic regions of Maui.

The B&B permit is non-transferable; it stipulates that the owner must live on the property.

The second step came last week with the adoption of new law that allows an additional 400 units of short term rental housing for homes on Maui owned by people who live within 30 miles of the property.

Short Term Rental Housing

County Ordinance 3941 creates a new category of permitted use called Short Term Rental Housing, and sets out the conditions and steps for permitting. Most of this information can be found in Section 19.65.

The purpose of the law is to establish a permitting process for short-term rental homes … “consistent with the county’s general plan and the state’s land use laws; to retain the character of residential neighborhoods; to provide varied accommodations and experiences for visitors; and to allow small businesses to benefit from tourism.”

A short-term rental home is defined as no more than six bedrooms on Maui and Lanai and no more than three bedrooms on Molokai. The total number of guests may be no more than twice the number of bedrooms.

Properties eligible for the new category must be single family structures constructed at least five years before the passage of the law.

A total of 400 short term rental homes permits are allowed on the island of Maui:

Hana: 48.

Kihei-Makena: 100; provided that, of which no more than five are in Maui Meadows. Flammer said that the provision restricting the number in Maui Meadows came at the request of that community.

Makawao-Pukalani-Kula: 40.

Paia-Haiku: 88.

Wailuku-Kahului: 36.

West Maui: 88.

The law is silent on the authorized number for Molokai and Lanai. Flammer said “I don’t believe there is a cap for those islands.”

Short-term rental homes already operating with a conditional permit (Chapter 19.40) are included in the number of short-term rental homes permitted. These properties have the option of continuing under the terms of their existing permit conditions or applying for the new permits.

Many Requirements

The new law says that those applying for one of the permits must be a “natural person” (as opposed to a business entity), must  show evidence of ownership, obtain a transient accommodation tax (TAT) license and tax clearance, and supply other relevant documents.

Those who do not live within the 30 mile radius specified by the ordinance are required to retain property management as spelled out by the new law. All permitted properties must post rules and regulations related to operation. Owners of properties granted a short term rental permit are not eligible for the home owner property tax exemption.

One curious provision of the new law says:

“An applicant can hold only one short-term rental home permit, except when: additional permits are for short-term rental homes that each have a county assessed market value of $3,200,000 or higher at the time of each application; and permit holder files complete applications for the short-term rental home permits within one year of this chapter’s original effective date.”

Flammer said she she thought that this language was to accommodate properties currently operating on Keawakapu Beach, and stressed that the exception would expire if completed applications were not filed within one year of the law’s effective date.

The permit, once obtained can not be transferred, except upon the death of a permit holder to an immediate family member.

Asked about the apparent discrepancy between the short-term housing law and the bed and breakfast law which does not allow any kind of transfer, Flammer said she believes it is the intention of the council to revisit the B&B legislation and adopt comparable wording at some later date.

The law also sets requirements for giving notice, parking, inspections, and granting of temporary permits, complaints and enforcement.

Violations and Enforcement

Advertising a short-term rental home without displaying a valid permit number is prohibited. Such advertising is considered prima facie evidence of  a violation that  may result in enforcement action.

Other evidence of operation includes: guest testimony, rental agreements, receipts, or any other information deemed relevant by the department.

Those who are found to be operating without a permit are ineligible to apply for a permit for five years.  Other enforcement rules and penalties include stiff fines, community service and possible criminal penalties. Details can be found in section 19.530 of the Maui County Code.

The Planning Department is responsible for issuing the permits and administering the new law.

In the event of disputes or objections to an application, the matter is forwarded to the Planning Commission. The text of the law gives the department the authority to devise administrative rules.

Flammer said that there will be two new enforcement officers on staff to make sure that the conditions set out in the ordinance are carried out.

“There is no amnesty period,” she said. The county will begin notifying owners of properties that do not comply with the law within 60 days of the effective date. She urged those who were currently operating to “apply now.” She also pointed out that the law makes provisions for temporary permits.

Links:

Short Term Rental Housing – Click here for text of Ordinance 3941 (County Code 19.65)

Bed and Breakfasts (County Code 19.64) – Click here then type 19.64 into search box and select Bed & Breakfast homes (third one on the list) from the results that appear.

Penalties for violations (19.530) – (click link above) then type 19.530 into search box. Select the third one down “Enforcement.”