Important Information Regarding Vacation Rentals

It is once again up to us to voice our opposition to the upcoming legislative proposal to phase out TVRs in the Apartment Districts and gut the protections outlines in the Minatoya codified opinion. I just recently Co-Hosted a radio show with the REALTORS Association of Maui’s Director of Government Affairs, Jason Economou and the Director of the Maui Vacation Rental Association, Jen Russo; that explains the situation, so if you want all the details on the preliminary proposal, please watch starting at the six minute mark here:

The proposal would affect the approximately 7,000 condo units that are allowed to conduct vacation rentals by virtue of their zoning. Under this proposal, current owners of these units would be allowed to continue vacation rentals in their unit, but once the unit transfers ownership the new owner is no longer allowed to short term rent that specific unit. 

This gift to the hotel industry would create a myriad of problems for the island. As Jen Russo points out, the Short Term Rental tax classification  brings in the largest amount of Real Property Tax (RPT) revenue, with a Certified Value in FY21-22 of $12,791,760,050, or roughly $12.7 Billion. That was a $2.5 billion increase over FY20-21, or about 25% increase in raised revenuei. That is equal to 17% of the operating budget, and 37% of the entire RPT revenue. For comparison, the Hotel classification raised $29M, and our residential homeowners in the Owner Occupied class only brought in $33M. It is worth noting, the non owner occupied, Hotel and Resort and Timeshare classes all saw decreases in Certified Value last year, which resulted in lower revenues being generated in those categories for FY21-22. Yet the county was able to increase revenue by $20M this year largely with levies of STR class. There are 13,466 units/TMKs in Short Term Rental Classification. The average amount of Real Property Tax paid  per unit is $10,576. So, using a broad estimate, losing those 7,000 units = $74 million in lost Real Property Tax revenue! For perspective, our Operating budget this year is $843,483,660. This is 8.77 % of their operating budget (if this bill passes and revenues drop from STR class, where do you think taxation will increase?)! 

From the perspective of Transient Accommodation Tax (TAT), in 2019 Maui’s tax base (the amount on which taxes were levied) was $2,027,057,842. This was 33% of the State’s total base of $634,355,669. This raised $207,773,430 in TAT, of which the State usually kicked back $23 Million to Maui County. Leaving the State with $184,773,430 in earnings leftover. This year the state will keep all of the TAT earnings, and let the county levy their own 3% surcharge on the TAT. Visitor Unit #’s between hotels and STRs total 21,037, So if we average the TAT tax revenue by 21,037 units, that means each unit brings in $9,877 in TAT. A loss of 7,000 units may mean a possible loss of $69,139,000  in revenue.

The immediate devaluation of equity on these vacation rentable properties is not only a concern for reduced tax income, but also a nightmare for these buildings to pull loans to repair aging infrastructure that was never intended or designed for long term accommodations. This means that even if ownership of these properties were to move to lower income individuals and families, these disadvantaged demographics would be stuck with these multimillion dollar repairs as they would not have the equity, nor income stream, to make the repairs. Properties that were never designed with the storage nor parking that full time residents need.  

While the intent of the bill is to increase available inventory for the residents of Maui, it would likely create greater scarcity as those who own these 7,000  units are disincentivized to sell a money making asset for a depreciated sale value. With this loss in sellable inventory, buyers would come to Maui and buy residential units as there would be few other options to consider. 

The changes made through this legislation, and the removal of these vested property rights, would likely constitute regulatory taking and that condemnation would inevitably lead to decades of legal battles in the form of both individual and class action lawsuits. These suits would cost millions of dollars in legal fees and burden a county that will already be missing millions of dollars in tax income.  

We need your help to reach out to all of the Maui County Council so that when Tamara Paltin and Keani Rawlins-Fernandez draft bills like these, they understand the impact they have on you. The intent of this bill is to help those who need affordable housing so please don’t get angry, they simply don’t understand the devastating and far reaching effect that this would have on Maui. You need to make it clear that they can no longer skirt their responsibilities to create infrastructure so that REAL affordable housing can be built, not dismantle the rights of property owners in areas that support a host of local businesses. 

In addition to privately emailing the council members below, please publicly bring attention to the issue by commenting on this facebook post and tagging any Council member of friend you see fit., Council Chair
County Council Member Alice Lee, Council Vice-Chair
Council Member Keani Rawlins-Fernandez, Presiding Officer Pro Tempore
Councilmember Tasha Kama, Councilmember 
Gabe Johnson for Maui County, Councilmember 
Kelly King – Maui County Council, Councilmember, Councilmember 
Council Member Tamara Paltin, Councilmember
Council Member Sinenci, East Maui, Councilmember
Council Member Yuki Lei Sugimura