A study funded by a group representing “travel technology innovators,” including short-term rental platforms, projects huge tax revenues and economic losses for Maui County if Mayor Richard’s proposed bill Bissen’s plan to phase out 7,000 vacation rentals in apartment districts was passed. to make way for residential housing.
In response Friday evening, Bissen questioned the study’s facts, objectivity and underlying assumptions while emphasizing that it does not attempt to assess the economic impact of housing Maui residents.
“This report has not yet been verified and was commissioned by the Travel Technology Association, which has a clear financial interest in a robust STR industry, and no compelling interest in the housing of Maui residents,” he said. declared. “The County is working to engage the University of Hawaii Economic Research Organization to provide a more balanced economic analysis, which we believe is certainly warranted given the importance of tourism to the economy of Maui.”
Under the bill referred by the mayor to Maui County planning commissions, apartments now used for short-term vacation rentals would become long-term housing for residents beginning July 1, 2025 for the west of Maui and January 1, 2026 for residents. the rest of Maui County.
Bissen’s announcement of the phase-out bill came May 2, a day after the state legislature passed Senate Bill 2919. The measure, now signed into law by Gov. Josh Green , allows counties to regulate grandfathered vacation rentals by clarifying that temporary vacation rentals are not considered residential uses in state law and can be phased out.
According to a press release from the Travel Technology Association, converting short-term rentals into residential apartments would cost Maui County between $53.3 million and $91.8 million per year in real estate, transient housing. and in general excise taxes to the County of Maui.
The press release’s “key findings” from the study also include $1.3 billion in annual economic output and 7,800 jobs. The study projects that Maui County’s revenues would fall by $370 million a year.
If other Hawaii counties were to follow Maui County’s lead, phasing out short-term rentals statewide could result in losses of $554 million in annual tax revenue statewide , according to the association’s press release.
Hawaiian economic consultant Kloninger & Sims conducted the study at the request of the Travel Technology Association. The 26-page study and the methodology used to report its findings can be viewed here.
Bissen questioned the hypothesis underlying the association study.
“This analysis assumes that all economic activity generated by tourists currently staying in Minatoya’s short-term rental units will leave the island. That’s simply not true,” he said. “Since 2022, monthly hotel occupancy rates vary between 60% and 75%; we therefore expect that a significant fraction of these visitors will remain in the existing hotel stock and in the more than 7,400 STRs that will remain. Additionally, fewer tourist stocks will result in higher fares, which will also reduce the loss of revenue from GET and TAT.
The association’s study focuses its analysis on projected reductions in Maui County’s tax base if short-term rental housing were returned to residential use — taxed at a lower rate — in apartment-zoned districts. There is no comprehensive analysis of the economic impacts of how Maui County’s now historically low housing inventory after the wildfires has priced residents out of the home buying or renting market.
In May, nine months after the Lahaina wildfire disaster, an estimated 75% of the more than 1,400 residential households displaced by fire reported remaining in temporary housing, according to a report released by the Council for Native Hawaiian Advancement. Among the 25 percent of households that found permanent housing, some had moved from Maui, although specific information was not available.
The association’s study includes a note on the residential use of converted short-term rentals in its conclusion on page 24. It says:
“We note that the residential use that would have the smallest negative impact on county property tax revenues, the non-owner-occupied classification, does not increase Maui County’s housing supply. Rather than being rented short-term during periods when owners are not using them, these units would sit empty, generating none of the visitor spending that is the lifeblood of Maui’s economy. Conversion to owner-occupied housing would increase the supply of available housing, but would result in the largest decrease in property tax revenue.
Bissen said, “It is important to note that this study does not attempt to measure the economic impact of housing Maui’s resident population. While the county works to encourage the construction of more housing for residents, we cannot simply move our way out of this housing crisis. Especially on West Maui, new housing construction is already severely limited by infrastructure, including water. Given the reality of limited resources, it is imperative to ask whether our distribution of housing between residents and non-residents is appropriate.
In its conclusion, the association’s study indicates that consideration should be given to the “relevance” of using grandfathered apartments for residential housing.
It refers to the “Minatoya List” of properties. The nickname comes from the legal opinion of the late former deputy company counsel, Richard Minatoya. His opinion paved the way for allowing apartments previously used as vacation rentals to continue, or be grandfathered, as visitor accommodations, even if they had become nonconforming to current neighborhood zoning of apartments. The exception applies to properties built or approved before 1989. Their use may continue provided it does not stop for more than 12 consecutive months.
The association’s study concludes by saying, “Since the intent of the proposed legislation is to increase the supply of housing on Maui, the suitability of Minatoya List properties to address Maui’s housing shortage should also be taken into account. Papakea, a 364-unit project built in 1977 on 13 beachfront acres in West Maui, includes a mix of studios and one-, two- and three-bedroom units. Units in Papakea would generate about $5 million in 2024 if taxed at short-term rental tax rates. While studios can accommodate individuals or couples, families with children will need multiple bedrooms. It should be evaluated whether the mix of unit types in Papakea and other projects matches the residential needs of the community.
According to its press release, the “Travel Technology Association gives travelers choice by advocating for public policy that promotes transparency and competition in the marketplace. Travel Tech represents travel technology innovators, ranging from dynamic startups, small and medium-sized businesses to leading online travel agencies, metasearch engines, short-term rental platforms, global distribution systems and travel management companies.
The association said the study’s analysis found that all short-term rental customers, including those outside of Maui County’s apartment neighborhoods, spent $2.2 billion directly on 2023, which generated $4 billion in economic activity. In Hawaii, short-term rentals generated $11.3 billion in economic activity in 2023 and 66,000 jobs.
“About a third of all visitors to Hawaii use short-term rentals. On Maui, that ratio is even higher,” said Erik Kloninger, economist and partner at Kloninger & Sims. “Reducing the number of short-term rentals would limit lodging options and likely result in fewer visitors, leading to job losses in various sectors of the economy and a significant shortfall in tax revenue for the county of Maui and the State.”
“Short-term vacation rentals have been a vital part of Maui’s economy for decades,” said Laura Chadwick, president and CEO of Travel Tech. “They have opened up the beauty of the island to countless visitors and created jobs and tax revenue to support the local community. We hope that Maui and Hawaii leaders will consider other options to balance the economic benefits of short-term rentals and the housing needs of the community.
Bissen concluded by saying that: “Any economic impact of phasing out Minatoya STRs will likely be significantly less than that reported by the study, and we expect that a more balanced economic analysis will be conducted before the County Council does not adopt the measure. It is imperative that we consider the value of our residents’ homes, even at the cost of reduced tax revenue.
Kloninger & Sims, led by principals Erik Kloninger and Mimi Sims, focuses primarily on market and financial analysis for Hawaii’s hospitality and real estate industries. The company has worked on projects for the Hawaii Tourism Authority, State Hawaii Department of Economic Development and Tourism, major hotel brands, Ali’i Trusts and others.
