Who pays for Maui’s Affordable Housing?

This may surprise many, but Maui’s vacation rentals are in fact the largest contributor to Maui’s affordable housing fund. Since 2018, Maui’s vacation rentals have contributed $18.9 million towards affordable housing, more than all the hotels, all the homeowners and all other businesses COMBINED! In the same time period timeshares, hotels, and homeowner properties together have contributed $16 million. Vacation Rentals include legal permitted short term rental homes, condos, and Bed and Breakfast operations. By law at least 3% of real property tax goes toward the affordable housing fund, and this year the county council voted to have 6% of real property tax appropriated to the fund. Maui’s number one supporter of affordable housing by far is vacation rentals. While much has been said about the impact of vacation rentals, without them there would be dramatically less money available for the County budget and specifically for affordable housing.

This year alone, short-term rentals will supply Maui County with $142.4 million in real property tax revenue. That is more than 1/3 of all the real property tax revenue collected County wide! As such vacation rentals are the largest source of funding for the Affordable Housing Fund raising $8.6 million this year alone, and have been the biggest source of funding for the last 3 years. The second highest contributor is non-owner occupied properties with $5.8 Million, this tax classification includes long term renters.

Compared to other visitor related accommodations, vacation rentals are the only segment to have increased their tax contributions this year. Timeshares saw a 7% decrease in their assessed value, and will contribute $2.2 million less than last year. Hotel and Resort classification saw a 19% decrease in assessed value this year resulting in a $3.7 million decrease in funding from last year. Meanwhile, vacation rentals will generate $28.6 million more in property tax revenue this year, a staggering 25% increase from last year!

The council and administration depend on short-term rental properties to fund our county. Likewise, vacation rentals support Maui’s homeowners as well, by subsidizing lower taxes for residents. Right now Maui homeowners generate $33 million in real property taxes. Without the $142.4 million in taxes generated by vacation rentals, homeowners would have to more than quadruple their taxes to keep the same county budget. Plus, Maui’s vacation rentals also generate local jobs, supporting a network of small businesses like accountants, contractors, landscaping, cleaning, restaurants, shops, and interior design professionals, all of whom in turn spend money sustaining the economic circle.

While vacation rentals are often criticized, and seldom praised, it’s worth considering the value vacation rentals bring to the table as a whole to fully understand the context of the situation.

Subscribe to our newsletter for more updates like these!

To see this article in the Maui News go to https://www.mauinews.com/opinion/columns/2021/06/vacation-rentals-contribute-the-most-to-affordable-housing-fund/

Visitor Accommodations Moratorium & Condo Registrations going to Planning Commission

On Friday June 18th the county council approved the transmittal of a proposed resolution entitled "REFERRING TO THE MAUI PLANNING COMMISSION A BILL FOR AN ORDINANCE ESTABLISHING CHAPTERS 19.98 AND 20.41, MAUI COUNTY CODE, DECLARING A MORATORIUM ON NEW TRANSIENT ACCOMMODATIONS ON MAUI." 

The resolution from council member Keani Rawlins-Fernandez includes the establishment of a Temporary Investigative Group by the Budget, Finance, and Economic Development Committee to look at tourism management. Fernandez said at the meeting and further explained in an Op Ed piece in the Maui News that, “A main focus of this TIG will be a substantial reduction of vacation rentals, including the approximately 11,000 units on the short-term occupancy list and aggressive enforcement of illegal transient accommodations. This is an effort that is supported by the hotel industry and unions alike, and I look forward to working closely with them during the TIG process. Steering tourism back into the hotel and resort areas is of high priority.” 

(https://www.mauinews.com/opinion/columns/2021/06/transient-accommodations-moratorium-prioritizes-management-of-tourism/)

We know vacation rentals are a legitimate part of a diversified and healthy transient accommodations industry for Maui. This TIG is of concern, the members of this TIG should also be working with members of the vacation rental industry and not only the hotel unions when looking at tourism management of Maui.  We anticipate this item appearing on the planning commission agenda around September. 

Another item on the planning commission agenda of July 13th is the creation of a registration system for the legal permitted short term rental condos.  Here is the Planning Department report on the proposed ordinance

https://www.mauicounty.gov/DocumentCenter/View/126257/Draft-Bill-for-Ordinance-Relating-to-Chapter-1912-Apartment-District-Vacation-Rentals?bidId

For more updates like these sign up for our newsletter!

MVRA in the news

MVRA was interviewed and contributed to the NPR story “Vacation Rentals Continue To See High Demand, But Regulations Create Uncertain Future” that broke on Tuesday June 1st. We had the opportunity to comment on the benefits that vacation rentals bring to the Maui Community, and some of the issues we have seen this year with regulation on Maui.

You can read the article or listen to the interview here: https://www.hawaiipublicradio.org/local-news/2021-06-01/vacation-rentals-continue-to-see-high-demand-but-regulations-create-uncertain-future

Travel announcements Maui County’s post arrival covid testing ended Friday, June 4, 2021. From May 4-31 - 92,963 travelers did post arrival testing, that resulted in 29 positive antigen tests, that equaled 5 positive NAAT tests.  Did your guests arrive with the wrong COVID test? It can happen, so what do you do? Unfortunately vacation rentals are still mandated to not take guests if they MUST quarantine. Some folks have said they have gotten calls from airport screeners with guests that do not have tests from one of Hawaii’s trusted partners. The county has a posted approved hotels for quarantine list here: Hotels/Motels in Maui County Approved for Quarantine by State of Hawaii and County of Maui as of 5/7/2021 * Property Name Open? For a list of the approved COVID test Hawaii travel partners check here: https://hawaiicovid19.com/travel-partners/ For more information visit hawaiicovid19.com/travel and recommend guests register with the State of Hawaii Safe Travels online system. Only test results from Trusted Testing and Travel Partners will be accepted. All incoming travelers are required to have their temperatures checked and complete a health questionnaire online before they can leave the airport.

Governor Ige announced some changes to Hawaii travel at his press conference yesterday. As the percentage of Hawaii population with vaccinations increases Ige plans to continue to lift restrictions. On June 15, 2021 restrictions on interisland travel will be lifted. There will be no testing and no quarantine requirements for inter-county travel,” said Gov. Ige. Travelers that have been vaccinated in Hawai'i will be able to bypass quarantine without a pre-travel test when returning to the state. This will end requirement for pre-travel test/ quarantine for trans-Pacific travelers who can verify that they were fully vaccinated in Hawaii. When the fully vaccinated in Hawaii reaches 60% the state plans to allow those vaccinated in the US to avoid quarantine without a pre-travel test, for those traveling within domestic locations. At the 70% vaccinated benchmark the state plans to end the safe travels program. Hawai'i is currently at the 52% vaccinated rate. You can watch the press conference here: https://www.facebook.com/387637784744953/videos/902735660283035

County Property Tax Rates are Set

The Maui County Council voted unanimously yesterday to approve the proposed rates and their budget for fiscal year 2022. 

The short term rental class saw the implementation of tiers and rates set at $11.11 for tier one, $11.15 for tier two, $11.20 for tier 3. The largest amount of real property tax revenue in Maui County comes from short term rentals, this year they will generate $142.4 million, up from $113.8 million last year during the pandemic. Vacation rentals represent 37% of our real property tax revenue for the current fiscal year and pay for 17% of the county’s operating budget. As such vacation rentals are the largest source of funding for the Maui County Affordable Housing Fund raising $8.6 million in the current fiscal year, and have been the biggest source of funding for the last 3 years.

On the whole visitor accommodation related properties raised 55% of the County’s real property tax revenue. The hotel class saw an increase in rates to $11.75, and Timeshare saw a raise in rates to $14.60. 

Certified values increased for short term rentals in FY2022. Certified values decreased by 19% for Hotel classification and 7% for Timeshare classification.

For more updates like this sign up for our newsletter!

Mayor Victorino has announced his FY2022 budget. The proposed budget totals $828.9 million, including $669.6 million for operations and $159.3 million in capital improvement projects. There is a decrease in projected operation costs by $13.2 million over FY 2021. 

The Mayor has proposed a decrease in the real property tax rate for owner-occupied residences below $1.5 million of assessed value and a decrease in all tiers of short-term rental classifications. 

Short term classification details on the proposed rates:

STR Class Assessed Value Tiers	FY21 Rate	FY22 Proposed Rate	Change
<=$800,000	$11.08	$10.70	($0.38)     -3.4%
$800,001 - $1,500,000	$11.08	$10.85	($0.23)     -2.1%
>$1,500,000	$11.08	$11.00	($0.08)     -0.7%

The proposed Commercialized residential classification rate is $4.60, no change from FY21.

Mayor Victorino is also proposing spending $1 million to implement climate action projects and programs for Maui County departments. 

“We must take action on climate change,” he said. “To manage this effort, my office will coordinate climate action to ensure the County’s resiliency.”

To promote cultural perpetuation, the mayor is proposing grant funding for the Maui Arts & Cultural Center, Maui Film Festival and support for a Cultural Resource Training enter to perpetuate traditional Hawaiian research and education.

“Investing in arts, culture and recreational facilities yields a double return on investment by generating economic activity while contributing to our quality of life,” the mayor remarked.

“I look forward to working with the Council during the upcoming budget process. We share the same desire to ensure the needs of our citizens are met, now and in the future. Our partnership will lead Maui County of recent dark days into a brighter tomorrow,” concluded Mayor Victorino.

Throughout the month of April, the County Council’s Budget and Finance committee will review the Mayor’s proposed budget and in late April will make their own proposal for Real property tax rates. We will keep you informed when it would be appropriate to send in testimony concerning tax rates, later this month.

https://www.mauicounty.gov/DocumentCenter/View/126246/FY-2022-Synopsis_Mayors-Proposed

By Jason A. Economou, Government Affairs, Realtor Association of Maui (RAM)

        I’ve been getting a lot of questions lately regarding recent changes to the Maui County Code that impact real property taxes, so I thought it prudent to try and explain what these changes mean. In order to do that properly, I need to start by providing some context.

        On December 4, 2020, the Maui County Council passed a number of bills that made changes to the County’s real property tax system. Among these bills were Bill 129 (2020) and Bill 130 (2020), which have been the cause of many recent questions. Both of these bills passed the County Council unanimously, but both were opposed by RAM. Bill 130 took effect immediately upon approval, and will impact property owners during the 2021/2022 tax year. Bill 129, on the other hand, does not take effect until January 1, 2022, but it is already raising a lot of concerns for the 2022/2023 tax year. For the sake of clarity, I will address these bills one at a time.

        First, I want to address Bill 130, because Bill 130 is the more immediate issue. Bill 130 (which is also known as Ordinance No. 5160) makes changes to Section 3.48.305 of the Maui County Code, which deals with the classification of land and buildings for the purposes of real property taxes. More specifically, it amends the portion of the code that relates to declarations of use for properties that have been subdivided into condominium units. The most significant of the amendments made are to the definitions of the “Non-owner-occupied” tax class and the “Short-term rental” tax classification. For more clarity, I have put side by side comparisons of the previous version of definitions and the newly amended definitions below:

Previous version of definition	Newly revised definition
Non-owner-occupied. Only those units occupied by the owner for personal use or by a lessee for a term of at least six consecutive months or more will be classified as “non-owner-occupied.”	Non-owner-occupied. Units occupied by the owner for personal use where transient vacation rental use is prohibited by the comprehensive zoning ordinance or units occupied by a lessee for a term of at least six consecutive months or more.
Short-term rental. Unless classified as “time share,” “hotel and resort,” or “commercialized residential,” lodging or dwelling units, as defined in the comprehensive zoning ordinance, occupied by transient tenants for periods of less than six consecutive months will be classified as “short-term rental,” including properties granted a short-term rental home permit, or conditional permit allowing transient vacation rental use.	Short-term rental. Unless classified as “time share,” “hotel and resort,” or “commercialized residential,” lodging or dwelling units, as defined in the comprehensive zoning ordinance, occupied by transient tenants for periods of less than six consecutive months, including properties granted a short-term rental home permit, or conditional permit allowing transient vacation rental use and units occupied by the owner for personal use or are vacant where transient vacation rental use is allowed by the comprehensive zoning ordinance.

If it isn’t clear from the side by side comparison, the basic gist of Bill 130 is that it will cause a number of condominium property owners who were in the “Non-owner-occupied” tax class to be moved into the “Short-term rental” tax classification for this tax year. This sudden shift in tax classification means that some property owners may get stuck paying upwards of 60% more in property taxes this year than they did last year. If you are asking yourself “what the heck is the County thinking,” you can get some sense by reading the memorandum from Finance Director Teruya that was attached to the original version of the bill. If you don’t have time for that, let me summarize: the County sees this as a fast way to add upwards of $9,000,000 in tax revenue without a major impact to people who vote here.

        If you or one of your clients is a property owner impacted by Bill 130, you have until April 9th, 2021, to appeal the assessment or classification on your property. Please note, however, that you still need to pay your property tax even while it is under appeal. For more information on the appeal process, or to find additional forms, please follow this link and navigate accordingly.

        Bill 129 is a bit more complicated to explain, because it does not go into effect until 2022, and it also has a mixed impact on property owners. The positive side of Bill 129 is that it creates a “long-term rental” tax classification, as well as a long-term rental tax exemption. This means that effective Jan. 1, 2022, real property occupied as a long-term rental, with a signed contract to lease for 12 consecutive months or longer to the same tenant, may qualify an owner for an exemption of up to $200,000 of assessed value. Real property rented on a long-term basis (12 consecutive months or longer) without a home exemption, will be eligible for the $200,000 long-term rental exemption and will be classified as Long-term Rental. Real property with a home exemption that also qualifies for the long-term rental exemption will be eligible for an additional $100,000 exemption and will be classified as Owner-occupied. Thelong-term-rental exemption claim form

is available with other forms at: 

https://www.mauicounty.gov/1953/RPA-Forms-andInstructions. The deadline to file for the long-term rental exemption will be 12/31/2021.

        Though RAM has been a proponent of creating a separate tax class and additional incentives for property owners who provide long-term rentals, we did oppose some of the more troublesome aspects of Bill 129. The most troublesome aspect of Bill 129 is that it removes the portion of the Maui County Code that relates to real property tax classifications for condominium units and actual use declarations^[1]. Without the ability to declare their actual use, condominium units will end up being taxed based on “highest and best use” of the property, unless some other property tax exemption applies and puts them in a different class (e.g. homeowners exemption/owner-occupied class, or long-term rental exemption/long-term rental class). This means that an apartment zoned condominium that is allowed transient vacation rental use pursuant to zoning^[2] may now be taxed in the Short-term rental classification by default, even if the bylaws prohibit TVR use or the owner has never conducted such use. That is a drastic change to the status quo, and not nearly enough has been done to prepare property owners for this change. 

        Both of these bills have already been signed into law, so you’ve missed your opportunity to formally oppose the legislation. Notwithstanding, you are still allowed to reach out to your elected officials and share your thoughts. Moreover, you can even suggest additional changes to the law that might improve our real property tax system. If you are so inclined, here is the contact information for your elected representatives:

• Mayor Michael Victorino:Mayors.Office@co.maui.hi.us

• Council Chair Alice Lee:Alice.Lee@mauicounty.us

• Council Vice-Chair Keani Rawlins-Fernandez:Keani.Rawlins@mauicounty.us 

• Presiding Officer Pro Tempore Tasha Kama:Tasha.Kama@mauicounty.us 

• Councilmember Gabe Johnson:Gabe.Johnson@mauicounty.us 

• Councilmember Kelly King: Kelly.King@mauicounty.us,

• Councilmember Mike Molina: Mike.Molina@mauicounty.us,

• Councilmember Tamara Paltin:Tamara.Paltin@mauicounty.us,

• Councilmember Shane Sinenci:Shane.Sinenci@mauicounty.us,

• Councilmember Yuki Lei Sugimora: Yukilei.Sugimura@mauicounty.us,

PS: While you are at it, you can also tell them that you oppose Bill 10 (2021). This bill increases the requirements for 201H development projects in Maui County, and it will likely result in a reduction of affordable housing construction in Maui County. The current requirement is that 201H fast-tracked developments have to offer 50% of their units at affordable rates; Bill 10 increases the requirement to 75% of the units at affordable rates for Maui County. That will make it harder for developers to finance 201H projects in Maui County, and that means less developers will be looking to build affordable units in Maui County.

[1] This also happens to be the portion of the code that was amended through Bill 130. That means that the changes made in Bill 130 will be removed when Bil 129 goes into effect on January 1, 2022. It also demonstrates how unnecessary Bill 130 actually is.

[2] Like one of these properties: https://www.mauicounty.gov/DocumentCenter/View/112945/Short-Term-Occupancy-List-as-of-12242020?bidId=

In fiscal year 2020-2021 about 14 cents of every dollar budgeted in Maui County came from vacation rentals. Legal Vacation Rentals in the form of permitted bed and breakfasts, short term rental homes and condos are the number one source of revenue for Maui County in Real Property Taxes, and have been for the last three years.

Support Maui's Vacation Rental Industry, they support you

Join Maui Vacation Rental Association. MVRA unifies the vacation rental ownership community of Maui.  We believe in fair regulations that balance the rights of responsible owners, operators and their neighbors.

Engage your Maui community, be informed on local property rights and taxes, protect your investment, and be a part of your local alliance. For more information go to Mvra.net/Join

Thank you to everyone who mustered testimony for this last minute item that came up at the State Legislature threatening property rights.

There were issues with the state website this morning and I know folks were struggling through getting testimony in.

However, hundreds of written testimony did come in, much of it in opposition.

Chair Nakamura deferred the measure, stating that she spoke to Kaʻāina Hull, Director of Planning for County of Kauai about the cooperation and agreement that they have worked on with AirBnB and Expedia, and how effective that has been in eliminating illegal short term operations. Nakamura also said she hopes that every county will also go into these agreements. She said the bottom line is to open up housing for local people.

To watch the hearing please go to https://www.youtube.com/watch?v=BhTqCnBGMIQ

To read testimony: https://www.capitol.hawaii.gov/Session2021/Testimony/HB76_TESTIMONY_HSG_02-04-21_.PDF

It was disappointing to see Maui County support of this measure.

Other Testimony:

Dear Hawaii State Representatives,

My sincere apologies for sending this message to you directly, but the Hawaii State Gov. website is apparently having problems generating the "confirmation letters" needed for citizens to register to submit written testimony through normal channels.

At any rate, thank you for the opportunity to speak out in opposition to Bill HB 76.

In my opinion, the Bill is neither necessary nor useful at this time. As I understand it and speaking from my experience on Maui, short-term vacation rentals are hugely beneficial to the State. On Maui the taxes generated by short-term vacation rentals are one of the principal sources of revenue for Maui County, generating $114 Million for FY2020 (!) And this was even while being mandated closed by the State for much of the year (!)

Short-term vacation rentals support a host of small businesses ranging from restaurants and shops to maintenance and landscaping. Short-term vacation rental guests spent an estimated $4.4 billion dollars on Maui in 2019, representing nearly a quarter of all visitor spending in the state!

Short-term vacation rentals also support the State with TAT taxes. In 2019 Maui county generated $207,773,430 in TAT revenue for the state, about 33% of the overall Transient Accommodations Tax collected in that year. Maui has more legal vacation rentals (11768) on the island then hotel rooms (7372) according to Real Property Tax data.

Short-term vacation rentals on Maui are also the largest single source of revenue for the Maui Affordable Housing Fund. They have generated $5.89 million for the fund since 2018 (!)

Needless to say, then, doing anything to curtail short-term vacation rentals will only damage the local economy and inadvertently cripple county government financially.

Why, then, would the state legislature consider a Bill that would undermine short-term vacation rental?! Would this not be to commit fiscal suicide?

STRH permit holders on Maui have done their due diligence, often at considerable expense, to operate responsibly and within the law. Does not good governance require the State and County governments uphold their side of this social contract?

Most permitted dwellings are owned by people who live in their properties for part of each year. They are thus never going to become available either for permanent resident housing or for long term rental.

For all of these reasons I urge you to vote no on HB76.

Thank you for your consideration.

Craig Gay

For more information on HB76 check here: https://www.capitol.hawaii.gov/measure_indiv.aspx?billtype=HB&billnumber=76&year=2021

We will be watching for further updates on this proposed bill.

The Planning Department Long Range Division has announced the beginning of South Maui's Community Plan Update. The online hub is located at https://southmaui.wearemaui.org/

It's going to be critical to participate. We want the South Maui Community Plan to be better than ever, and balance goals of the community plus continue to have the benefits of their vacation rental ohana as well. Right now they have scheduled 4 Vision Workshops to be held via zoom.

This is what the press release said:

Members of the South Maui community are encouraged to attend one of these workshops to brainstorm ideas with their neighbors and envision what South Maui should look and feel like in 20 years. All four workshops will have the same agenda, so people are asked to sign up for only one workshop so that as many people as possible can participate. The workshops will take place on the Zoom videoconferencing platform on the following dates and times:

Thursday, January 21, 5:30 – 7 p.m.

Register at this link: https://us02web.zoom.us/meeting/register/tZArfu6vrTwiH9ekFr2ZTmh7dRyB4Mr635SB

Saturday, January 23, 10 – 11:30 a.m.

Register at this link: https://us02web.zoom.us/meeting/register/tZEudO6hrT4oGtFiTXVIcpRB57OWZsLyw0H4

Tuesday, January 26, 12 – 1:30 p.m.

Register at this link:

https://us02web.zoom.us/meeting/register/tZUocu-rrjgtH9Ml5ro4AD7KYXwbKwnOsGj6

Wednesday, January 27, 5:30 – 7 p.m.

Register at this link: https://us02web.zoom.us/meeting/register/tZEucuqqqD4sHdNcGg1tp_Kvsdgvt6m8umJE

Clicking on the links above will take you to a registration form for that meeting date. The County will accept registrations until each workshop is full. Each of the workshops has a maximum capacity of 30 people to allow everyone participating time to share their ideas. The County may add more workshop dates based on interest.

“Even while our community is working hard to stop the spread of COVID-19, we must still plan for the future,” said Mayor Michael Victorino. “I encourage everyone in South Maui to sign up for these workshops. Talk with your neighbors about what makes South Maui great and how we can plan for future generations.”

Those community members who are unable to attend the virtual workshops are encouraged to share their ideas by participating in the self-directed, online version of the vision workshop here: https://southmaui.wearemaui.org/get-involved-vision-survey/. The online workshop will be available through February 7.

Additionally, organizations like neighborhood associations, youth groups, and civic clubs in South Maui who are interested in hosting their own virtual vision workshops with their members may contact County planners at wearesouthmaui@mauicounty.gov to find out how to get access to a “workshop in a box.”

“Building a vision for South Maui’s future is key to making sure that all the goals, policies and actions in the community plan take us in the right direction,” said Planning Director Michele McLean. “We are looking forward to these conversations with the community.”

For more information on the South Maui Community Plan update process, visit the project website—southmaui.wearemaui.org—or follow us on Facebook or Instagram @wearesouthmaui. For general planning information, visit www.mauicounty.gov/planning.