TVR/STR Real Property Tax Trends

Speaking of real property tax increases, Here is what we know about the last 6 years in property tax trends and the Short Term Rental Classification.

The short term rentals generated 40% of real property tax revenue this fiscal year (FY23-24), or $213.7M. This amount represents 20% of the county operating budget. This is the largest single revenue generating category in the real property tax classifications. Next would be Non Owner Occupied property $127.6M, followed by Timeshare $54.7M and Hotel Resort with $51M. 

The county increased their budget this year by $102M, and 52% of that increase or $53M came from increased revenue in the TVR/STR category. The next highest increase was $7.5M in the Hotel/Resort classification (7 times less than the STR increase).

The short term rental category is the only category out of all twelve of the county land use classifications that has seen 6 consecutive years of increased tax revenue generation. It is also the only land use classification that has seen 6 consecutive years of increased assessment value in this period as well. The TVR/STR classification grew from 28% in FY2018-2019 to 40% of the total Real Property Tax revenue in 5 years.

Looking at visitor adjacent land use classifications specifically, the county has an increasing propensity to lean on the visitor industry to make up the lion's share of their budget. The classifications of Hotel/Resort, Timeshare, Non Owner Occupied and TVR/STR together comprise 84% of the Real Property Tax revenues in this fiscal year. That figure was 56% in FY2018-2019. 

To view this data stream click here. 

Source for all data sets https://www.realpropertyhonolulu.com/state-reports/2023/

Gov. Josh Green's Proposal

The Governor also announced a proposal on Wednesday to incentivize housing on Maui. Gov. Josh Green’s version includes long term rental pricing at $5K/mo for studio or 1 bedroom; and up to $11K/mo for a 4 bedroom; and plans to use federal, state government and private foundation money.

Green’s program also involves dedicating funding of $50K per unit to build 1000 accessory dwelling units on private property. Property owners would be able to choose from 5 pre approved models of ohanas and get any necessary zoning changes within 30 days. Green’s plan includes expediting existing housing projects as well.

Green has a plan B as well, but that focuses on a ban of short term rentals. “A second option would allow the government to impose an 18-month ban on short-term vacation rentals on Maui. Under that plan, some $324 million of federal, state and private funds would be used to pay property owners who would give 18-month leases to displaced residents instead of renting to tourists or others for a short term.” according to the article by Civil Beat.

The state legislature has formed working groups to work on recovery solutions for the wildfires. The Shelter working group led by Troy Hashimoto and Luke Evslin published their draft report that include 4 recommendations for expediting housing. The first is expediting housing projects with state financing options; the second is cutting regulatory burdens; third is to utilize short term rentals for long term housing; and fourth is ideas for housing the vulnerable. 

Recommendations 3 starts with incentivizing the short term rentals to convert with tax incentives as we are seeing the government do now.

But the darker side of recommendation 3 is for the state legislature to introduce a bill granting counties authority to phase out non-conforming STRs as a tool to create long term housing. While Green’s proposal is not going that far, it is likely that the state will bring forward the same measure from last year that aims to grant counties this control.

In the report it does say, “Currently, counties are prohibited from phasing out the zoning of non-conforming residential uses of single-family homes or duplexes. The counties have interpreted this to include a blanket prohibition on changing the zoning of STRs without allowing existing STRs to continue to operate through non-conforming use permits.”

Governor Green’s proposal isn’t available for review just yet. So far he has only announced it through the media. 

To Contact the Governor:

The Honorable Josh Green

Governor, State of Hawai‘i

Executive Chambers

State Capitol 

415 South Beretania St. 

Honolulu, Hawai‘i 96813

Phone: (808) 586-0034

Fax: (808) 586-0006

Email Governor Green

Instagram @govjoshgreen

To contact your state legislators visit: https://www.quorum.us/dashboard/external/kodetamkqmIeBqaRxXLB/

Mayor's STR RPT Tax Waiver Incentive

This weeks news was abuzz with proposals and potential mandates from the Mayor and Governor with regard to housing. There have been weeks of meetings and suggestions, and the state and county are desperately trying to locate mid-term housing. 

“By converting short-term units to long-term rental properties, and renting them to residents who have been displaced by the disaster, owners of Maui’s thousands of short-term vacation rentals, timeshares and non-owner-occupied homes will be exempted from paying real property taxes,“ says Mayor Bissen in a press release.

The Mayor has introduced a new proposal, bill 131 that will be introduced in the 12/5/23 County Council Meeting. This new tax relief proposal is aimed at incentivizing short term rental owners to rent to the residents displaced by the wildfire disaster.

According to the press release from the county the exemption is meant to work like this:

“If you have a property assessed at $1,000,000 classified as TVR-STRH, your taxes for this fiscal year are $11,850. If you lease your entire property and the lease begins January 1, 2024, and ends December 31, 2024, you will receive a $5,925 reduction in this year’s taxes (2nd installment) and the full $11,850 in next year’s taxes if you apply by January 30, 2024. That is an estimated savings of $17,775.”

Some of the things we have asked the administration to clarify are:

• What FEMA will pay: We hear that it is 175% of HUD rates plus utilities, plus extra if the unit is furnished but knowing some of the ranges they are offer would be useful.

• What is the time period and what happens after that term

• Who takes care of the unit, and damages if incurred

What the proposal does not put in writing is the Mayor’s intention to increase tax rates for next year. However he does verbalize this idea saying, ”I also intend to propose to the County Council an increase of property taxes for all short-term vacation rentals, timeshare units and non-owner-occupied properties assessed at over a million dollars that do not participate in this program designed to help our Maui people secure housing. Owners who help our disaster-impacted families by making their units available will receive a tax waiver. While those who choose not to can help by contributing more in taxes to make up for the loss of tax revenue.”

To participate in the 12/5/2023 meeting:

https://maui.bluejeans.com/295235670

website: http://co.maui.hi.us/Archive.aspx?AMID=226

e-mail: countv.clerk@mauicountv.us

Regardless of what the Mayor says here, the county may have little alternative to raising property taxes next year, as it looks at more than 65 lawsuits, huge infrastructure builds post recovery, and other post disaster budget increases. 

If you are interested in participating in the FEMA direct rental program you can gain more information from this page that The State Department of Business Economic Development and Tourism has put together. Thyere is a short explanation of the FEMA direct lease program, just one of the ways FEMA is working on housing. On this page it says they are offering 175% of market value rent, and looking for 12 to 18 month rentals. For more information https://dbedt.hawaii.gov/hhfdc/fema-direct-lease-program-for-maui/

State DBEDT also has a resource website where you can go to watch previous Maui recovery webinars, FAQs and updates https://dbedt.hawaii.gov/pathwaystorecovery/

Feel free to reach out to your County Council representatives via email or phone: 

• Alice.Lee@mauicounty.us, Council Chair, Phone: (808) 270-7760; 
• Yukilei.Sugimura@mauicounty.us, Vice-Chair, Phone: (808) 270-7939;
• Tasha.Kama@mauicounty.us , Presiding Officer Pro Tempore, Phone: (808) 270-5501;
• Thomas.Cook@mauicounty.us, Councilmember, Phone: (808) 270-7108;
• Gabe.Johnson@mauicounty.us, Councilmember, Phone: (808) 270-7768;
• Tamara.Paltin@mauicounty.us, Councilmember, Phone: (808) 270-5504;
• Keani.Rawlins@mauicounty.us, Councilmember, Phone: (808) 270-7678;
• Shane.Sinenci@mauicounty.us, Councilmember, Phone: (808) 270-7246;
• Nohe.Uu-Hodgins@mauicounty.us, Councilmember, Phone: (808) 270-5507;

Wildfire Disaster Recovery Group

We are forming a group of interested member owners, management teams and individuals interested in discussing topics related to the wildfire disaster and rebuilding. Please sign up below to be included in future emails and meetings.

Hawaii State Legislature End of Session Summary for Vacation Rentals

It was a brutal season for the Vacation Rental industry at the state legislature. We were watching over 10 bills make their way through the state legislature with a calls to action on a several of them. This is your summary on some of those bills and where we are at now.

This year House Representative Sean Quinlan (North Shore Oahu) is the new chair of tourism, and he kicked off the season by sponsoring a bunch of bills aimed at managing the visitor industry and eradicating illegal vacation rentals. However, these bills were far reaching and punitive, failed to have any input from stakeholders, and would have put legal vacation rentals out of business or altered property rights.

We successfully organized and testified at these meetings to let the state know about our legal operators and what they are doing to benefit our communities. We also informed them about the benefits of community based accommodation businesses and the contributions they continue to make in their counties. Lastly, we gave them pause as to why they would even consider closing down small businesses in our current economic climate. 

We met with Tourism House Committee Chair Sean Quinlan before the end of session:

His sentiment is pro-resort zoning for STRs and getting them out of residential neighborhoods because of the housing crisis (except maybe for Big Island where it isn't as big an issue due to size and current home prices). 

He isn't happy with the large numbers of unhosted rentals on Maui. He also said the residential non conforming properties doing STR are definite targets. He believes Kauai has the best model, STRs in resort zoning. 

• He would like to work on a possible statewide Bill on STRs this summer. He'd like to get representatives from each island, along with the heads of DPP and the Mayor's office as a working group. He realizes the Counties may be too different to regulate together though.

• He will be off for a couple weeks after the session. We will be back in touch at the beginning of June.  

• Our stance in the conversation: We are rationale people that understand we need to balance the STR issues with the other housing issues on the islands. We do not want to see illegal activity in the community either. We need to work together on this.

Our takeaway is that we would like to continue to educate our community on why small business accommodations are critical to cultural and regenerative models of hospitality. The state level legislators need to know more about the legal pathways on Maui and show them our enforcement reports from the Department of Planning that clearly show there are not large numbers of unhosted rentals in residential areas on Maui. We need our legislative representative to make data and fact driven decisions.

Quinlan has indicated he wants to bring several bills from this session back. See the bill summaries below

Hawaii Island county employee, and hosted stay operator testifies that Bill 84 gives county councils too much control, and gives the hotel industry and lobby high advantage over small local operators

State Bill Updates for STR

There were some calls to action for some of the recent committee meetings at the State Legislature for measures we are watching. I wanted to give an update on where they stand or where to find more information on other concerning bills:

HB84  

A measure which seeks to give counties complete power to strip STR use on properties currently legally doing STR, no matter whether you are grandfathered, zoned, permitted.

At the Water and Land Committee (WAL) meeting there were over 395 pages of testimony. There were only 5 in support: the HTA, a group called Keep it Kailua, Honolulu Department of Planning, a Mrs. Pahinui, a Mr. Thorman; The remaining 390 pages were in opposition. 

The Committee votes were as follows: The committee on WAL recommended that the measure be PASSED, UNAMENDED. The votes were as follows: 6 Ayes: Representative(s) Ichiyama, Poepoe, Takayama; Ayes with reservations: Representative(s) Ganaden, Morikawa, Souza; Noes: none; and 2 Excused: Representative(s) Chun, Hashem. 

The measure is referred to the Judicial committee where chair Ichiyama of the WAL committee indicated it “needed some work.”

However in Chair Ichiyama’s report, after she notes the many testimonies in opposition, she added this in her report:

“     Your Committee finds that from 2009 to 2019, the State experienced an increase in visitor arrivals from six million to over ten million, a 59.5 percent increase in arrivals without a corresponding increase in accommodations.  These additional visitors likely stayed in non-traditional units, including short-term vacation rentals.  This measure supports county zoning efforts and enforcement by allowing the counties to eliminate short-term rentals on residential and agricultural zoned lands.”

This is nearly a direct quote from the Hawaii Tourism Authority’s testimony in favor of this bill. This seems to be the WAL committees “reason” for recommending despite the opposition. We are going back and reviewing these accommodation figures, because for the legal STR’s on Maui, many were built way before the 2009-2019 data set they are pointing to. Phasing out legal operators should not be a “tool for enforcement” to battle illegal operations. I submitted to the committee copies of our own Maui County enforcement reports that show numbers for last quarter were 3 notices of warning and 0 violations found in 25 complaints. (see below)

The next step for this measure is to go to the JHL committee. This committee does not have any agenda scheduled for this matter yet.

HB820 

A measure that sought to charge a special 25% to STRs on top of the existing 10% TAT that would go to the State TAT coffers.

This bill was heard in the State Finance Committee. The committee received 443 pages of testimony: 2 in support: the HTA, and Liezl Bag-Id; the remaining 441 pages of testimony were in opposition.

Maui has 13,744 legal short term rental properties, 8,336 hotel rooms, and 2,475 timeshare units in our diversified visitor accommodation industry (please reference the State reports at the end of this report). Each provides the potential Maui visitor different options. The clear differentiation regarding the legal short term rental properties is that thousands of them are owned by Maui County families. This is one of the only ways local families can directly participate in and benefit from the hospitality industry.

When it comes to legislation that could affect the livelihood of thousands of its constituents (actual voters), the State should be considering factual and data driven based decisions. At the very least, the State should be supporting this legally operating small business sector that offers such a vibrant and diverse ecosystem for our visitors, while our county and state are already leveraging significant taxes on these businesses to benefit our local economy. The legal short term vacation rentals already generate the largest amount of tax revenue for Maui County than any other category by a very large margin. 

The State should not be favoring large international corporations in the transient accommodations industry while targeting the Hawai’i's legal small business entities in the same industry. We cannot support a bill that could potentially shut down small legal operators with unfair taxation schemes that favor large outside corporate operations in this state. 

This bill was badly written. The committee Chair deferred this bill, so for now it is dead.

HB1376

A measure that would dissolve the HTA and reorganize another management group and establish an office of tourism and destination management in the Department of business, economic development and tourism (DBEDT). 

This bill was heard in the State Finance Committee. We testified, as did some of the other outer island groups, that the State should mandate proper representation for legal Short Term rental stakeholders in this bill, in order to make good policy and strong management decisions.

This bill passed with some revisions, but not the ones we asked for.

The legislative process can call any bill back for a special session so we are not in the clear yet.

To see the other bills we are watching go here:https://1drv.ms/x/s!AjltVNtsr_fZknNhcV7qDeZZ7Jlg?e=wQZHeM

Right now it looks like the county has raised assessments for STR about 5% overall, and increased revenue generated by STR by 12%. These figures for Hotel / Resort are 49% increase, and 9% for Time Share. 

Proposed tax rate figures are flat for Bed and Breakfast but because of a decrease in assessed values the change over last year is -3%.

Overall this council is seeking 57% of the total real property tax revenue from Visitor Accommodation properties. When you include Non Owner Occupied properties, that are largely vacation homes, that number goes to 83%.  That means this county council is planning to be even more dependent on the Visitor Industry, and the funding it brings in.

The council is proposing to change the tiers to [<=1,000,000]; [1,000,001-3,000,000]; and

[>3,000,001] for Owner Occupied, Short Term Rental, and Long Term Rental. 

The council is proposing to change the tiers to [<=1,000,000]; [1,000,001-4,500,000]; and

[>4,500,001] for Non Owner Occupied classified properties.

To comment on the Council’s proposed rates:

Public Hearing April 27, 2021 6:00 PM will be held virtual online here: BlueJeans link https://maui.bluejeans.com/295235670

To phone in to the meeting:

Call 1-408-317-9253 and input meeting code 295235670

To submit written testimony: Email county.clerk@mauicounty.us. 

View the agenda here: 

https://mauicounty.legistar.com/View.ashx?M=A&ID=956311&GUID=75A1E9F9-889C-49D8-8E5E-6F1494E8B937

Finally, feel free to reach out to your County Council representatives via email or phone: 

Alice Lee, Council Chair: Alice.Lee@mauicounty.us, Phone: (808) 270-7760; 

Keani Rawlins-Fernandez, Council Vice Chair: Keani.Rawlins@mauicounty.us, Phone: (808) 270-7678;

Tasha Kama, Presiding Officer Pro Tempore of the Maui County Council: Tasha.Kama@mauicounty.us, Phone: (808) 270-5501; 

Gabe Johnson, Councilmember: Gabe.Johnson@mauicounty.us, Phone: (808) 270-7768; 

Kelly King, Councilmember: Kelly.King@mauicounty.us, Phone: (808) 270-7108;

Mike Molina, Councilmember: Mike.Molina@mauicounty.us, Phone: (808) 270-5507;

Tamara Paltin, Councilmember, Chair of Planning and Sustainable Land Use Committee: Tamara.Paltin@mauicounty.us, Phone: (808) 270-5504;

Shane Sinenci, Councilmember: Shane.Sinenci@mauicounty.us, Phone: (808) 270-7246;

Yuki Lei Sugimura, Councilmember: Yukilei.Sugimura@mauicounty.us, Phone: (808) 270-7939

Links:

Range of Property Tax Rates for Public Hearing

https://mauicounty.legistar.com/View.ashx?M=A&ID=956311&GUID=75A1E9F9-889C-49D8-8E5E-6F1494E8B937

4/25/22 Maui County Council Budget Meeting

https://www.facebook.com/MauiCountyCouncil/videos/1048567236091627