renting to visitors. Instead, he wants the units rented long-term to people who live on Maui to address a chronic housing shortage that intensified after last August’s deadly wildfire." width="880" height="495" />renting to visitors. Instead, he wants the units rented long-term to people who live on Maui to address a chronic housing shortage that intensified after last August’s deadly wildfire." width="880" height="495" />
Economists have suggested that Maui County should not get rid of thousands of short-term rentals but instead place higher taxes on them.
The county has been discussing the fate of more than 6,000 rental units on what's been dubbed the “Minatoya List.” New legislation could ban those rentals from operating and free them up for long-term housing.
But economists say a total ban could have harsh economic impacts on the local tourism industry, including thousands of tourism-related jobs and revenue from various tax categories.
Dylan Moore, a University of Hawaiʻi Research Organization’s assistant professor of economics, said higher property taxes on rentals could be a middle-ground solution. He published a blog post on UHERO’s website this week exploring the idea.
“It would raise some revenue for the county, and it would have a sort of less negative impact on the tourism industry than an outright ban would,” he said.
Banning all the STRs on the Minatoya List, according to UHERO, would increase the housing stock on Maui by as much as 13%, which is likely more than a higher property tax would provide.
“It wouldn't free up as much housing as a full outright ban would, but the idea is … the value provided to the economy by the most valuable short-term rentals might be sufficient to justify having that one unit of housing out of the housing market,” Moore said.
The property tax rates in the county are already higher for STRs than for owner-occupied homes, long-term rentals and most other types of properties. Depending on the valuation of the STR, that tax is anywhere from 1.25-1.5%, while long-term housing rates range from 0.3-0.8%.
However, Moore noted that STR property taxes are still relatively low compared to other jurisdictions around the country.
He also said some cities are also implementing taxes on empty housing units to address housing shortages, which Hawaiʻi could explore.
There’s no guarantee that, if banned, all the Minatoya List rentals would shift to long-term housing. The UHERO blog said some would “end up being held as vacation homes, or simply as an empty investment property.”
In either case, some rentals are likely to cease to exist — the worst-case scenario for those who would be affected.
“If the goal is to free up these housing units for residential housing, then by definition, the other business activity has to be destroyed, and that will create some harm,” Moore said. “I think the question is how best to balance these things against one another.”
