Maui Mayor Richard Bissen has proposed phasing out vacation rentals to address the severe housing shortage on the island caused by the 2023 wildfires. A report from University of Hawaii economists found that while this move would increase housing affordability, it would also lead to job losses, income reduction, and a decline in tax revenues. Visitor spending is expected to sharply decline as well.
While Bissen acknowledges the potential economic impact, he believes the cultural loss of displaced residents is more significant. The Maui County Council’s Housing and Land Use Committee will consider a bill based on the mayor’s proposal in about 60 days. However, concerns have been raised about the legal implications and costs of the policy.
The report highlighted that about one-third of Maui’s visitors stay in vacation rentals, which have become a source of tension on the island, especially after the Lahaina wildfire. The proposal would convert 21% of Maui County’s housing supply from vacation rentals to long-term housing, increasing the housing stock by 13%.
The study estimates that this conversion would lead to a 20-40% drop in condo prices, benefiting residents. However, it would also result in the elimination of one-quarter of visitor accommodations, a 15% decrease in visitor spending, and a 4% contraction in GDP.
To mitigate the economic impact, alternatives such as increasing taxes on vacation rentals, taxing empty homes, and adopting zoning and permitting reforms have been suggested. Auctioning vacation rental licenses could also be considered, which would push less profitable units out of the market. The report was commissioned by the Hawaii Community Foundation.
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