What’s Up With Short-Term Vacation Rentals in Hawaii?
Hawaii’s Governor Josh Green signed a bill on May 3, 2024, to give the counties in the state the discretion to crack down on vacation rentals. The focus is on short-term rentals outside of hotel zones, with the intention of freeing up housing for local residents. Maui’s wildfires that devastated Lahaina last August have been a strong impetus for this demand for action to address the housing shortage in Hawaii.
For Oahu, this move primarily targets residential property with Airbnb units that have inserted themselves into neighborhoods and, over time, effectively, have changed the face of communities.
For Maui County the impact of this bill has Mayor Bissen making a target of apartment zoned, “grandfathered in” short term vacation rental units. That translates to approximately 7000 units which fall under a category known as the Minatoya List borne of something called the Minatoya Opinion.
What is the Minatoya Opinion?
This is about personal property rights. Back in the ’70s and ’80s, some apartment zoned condos were operating as short-term rentals.
Prior to April 20, 1989, transient vacation rentals were a permitted use within the Apartment District. Ordinance N. 1797 (1989)
Which apartment units are excluded from the prohibition on transient vacation rentals in the Apartment District?
I cite here the legal opinion given by Richard K Minatoya, Deputy Corporation Counsel in a memo sent to Mayor Apana. On July 30, 2001, Minatoya wrote, “It is our department’s opinion that exemptions to this restriction are: (1) projects with building permits, special management area use permits, or planned development approval lawfully issued and valid on April 20, 1989; or (2) apartment units that were operating as transient vacation rentals on or before March 4, 1991.”
The Minatoya list was compiled to clarify the grandfathered status, initiated after the County Council adopted ordinances in 2014 and 2016, Ordinance Nos. 4167, 4315 and 4369 served to codify the Minatoya list.
As a result, the Minatoya List condos continue to operate as transient vacation rentals in apartment zoning.
What Effect Will This Have on the Market?
I think we will be seeing more inventory this summer. With the threat affecting Minatoya list properties the market is being disrupted. This has potential for a ripple effect in Maui real estate. This is almost a forced cycle in our market. But we’ve been here before. Admittedly, it has a louder voice because of the sympathies towards displaced Lahaina folks. Requiring apartments to convert from short to long-term usage isn’t the solution to our housing crisis. We need to build new housing.
Inevitably, the targeting of A-1 Minatoya list properties meets with strong opposition. As such, the fiery discussion that’s been sparked shall continue to be fueled by the consequences of such action.
The proposed first phase of a successful overturning of the Minatoya Opinion would be west side apartments on the Minatoya list to see conversion in and by 2025.
So, Should I Sell My Property?
It’s true that disruption creates volatility.
It becomes all the more a personal decision whether now is the time to cycle out of Maui real estate or to hold.
Should I Buy?
For undecided buyers, although we don’t expect prices to decline, we suspect an increase of inventory will present opportunity to hop off the fence.
In either instance, brace for lengthy and likely heated talks ahead to dig through this. The County Council meets on June 25 at a Public Hearing to further this discussion.
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