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As the search for housing for thousands of people displaced by the Maui wildfires becomes more desperate, officials are mulling proposals to incentivize long-term rentals and enable counties to convert more short-term rentals into units for locals, even though past efforts to do so have had limited success.

More than three months after the Aug. 8 disaster, nearly 6,700 wildfire survivors are still living in 35 hotels under an American Red Cross program, according to Gov. Josh Green. Meanwhile, 230 families are in Airbnb vacation rental units and another 527 families found housing through a Hawaii Housing Finance and Development Corp. program that maintains a list of homeowners willing to provide shelter on a temporary basis.

The Federal Emergency Management Agency says it has provided rental assistance on Maui to 171 eligible homeowner households and 3,466 renter households, but so far has only been able to find long-term rentals for 21 households, despite upping payments to cover 175% of fair-market rates.

The issue of short-term rentals has long been a sore point on Maui and elsewhere in Hawaii amid an acute affordable housing shortage and concerns about tourist behavior in residential neighborhoods. Since the fire, advocates have stepped up pressure on the government to convert the rentals into long-term homes for survivors looking for stability.

Maui Mayor Richard Bissen said in an emailed statement that he recently met with a group of property managers representing a large number of short-term rentals “and was encouraged by their interest and willingness to find ways we could work together.”

He didn’t provide details. “Shared sacrifice is necessary at this crucial time as we work to incentivize interim housing,” he said.

While community advocates have called for a moratorium on vacation rentals to open up more housing for fire survivors, Bissen said such an action would likely bring costly legal challenges and unintended consequences.

Meanwhile, the Maui County Council is considering a gentler approach involving real property tax relief.

Zoning Issues

FEMA said owners have told the agency that their short-term rentals generate substantial yearly income and are demanding per diem rates for their units at “a higher rate than the fair market rates that are affordable.”

STRs accounted for 40% of housing in West Maui, according to the released in June by the University of Hawaii Economic Research Organization.

The need to convert short-term rentals to long-term housing – through tax incentives and other means – to help relieve the housing crisis on Maui is mentioned in from the House Working Group on Shelter, convened to evaluate temporary and transitional housing issues following the wildfires. The report also recommends potential legislation granting counties the authority needed to phase out and otherwise regulate legal and illegal short-term rentals.

A proposed measure that would have done just that failed to advance during the 2023 legislative session after the “vested rights” of property owners and would result in substantial litigation.

“Let’s help each other out and sign a lease with a displaced resident and get a tax break.”

Council member Tamara Paltin

At the heart of their arguments is a section of relating to county zoning. It says no ordinance shall prohibit “the continued lawful use of any building or premises for any trade, industrial, residential, agricultural, or other purpose for which the building or premises is used at the time this section or the ordinance takes effect.”

The law allows for zoning ordinances to eliminate nonconforming uses as they are discontinued or to phase them out “over a reasonable period of time” in commercial, industrial, resort, and apartment zoned areas only. “In no event shall such amortization or phasing out of nonconforming uses apply to any existing building or premises used for residential (single-family or duplex) or agricultural uses,” it says.

That was used by a federal judge last year to grant a preliminary injunction blocking Honolulu from enforcing a new ordinance setting a 90-day minimum stay in short-term rentals that was meant to limit people from renting residential properties to tourists.

Tax Incentives

The is taking a different tack to entice more owners of short-term rentals and other nonowner-occupied properties to consider leasing to displaced individuals and families.

Since January 2022, the county has offered an exemption of up to $200,000 on parcels occupied as long-term rentals for at least 12 months by the same tenant. The council has proposed similar tax relief for owners who let residents displaced by the fires move in for periods ranging from six months to less than 12 months.

The council’s Budget, Finance and Economic Development Committee discussed Bill 95 CD1 on Tuesday and the measure, which is to be posted Friday, is scheduled for first reading Dec. 1, with the goal of final passage in time for Jan. 1 property valuations for the coming fiscal year.

Council member Tamara Paltin, whose residency district covers West Maui, said she hopes the measure will draw attention to the existing long-term rental exemption as well, “because we have a lot to pay for in the upcoming year,” and that burden is likely to fall on the owners of STRs and other nonowner-occupied properties.

“Let’s help each other out and sign a lease with a displaced resident and get a tax break, because otherwise it looks like those types of categories may go up,” she said, adding the council needs to “balance the budget somehow.”

Search For ‘Dignified Housing’

Bissen has projected a $31.2 million budget shortfall due to the wildfires, most of that from a decrease in real property taxes, including an estimated $11.16 million the county stands to lose as a result of his Aug. 16 emergency proclamation waiving FY24 real property taxes on improved properties destroyed during the fires. 

Paltin said other legislation may be in the works to phase out STRs in certain apartment-zoned districts over time.

Referring to short-term rental laws passed in the 1980s that grandfathered established STRs, council member Keani Rawlins-Fernandez of Molokai said in an email that she is working on a proposal “to correct a misstep from the 80s that commodified Maui’s workforce housing and will return those units from the investment inventory to, instead, house our residents in need.”

She declined to elaborate.

Bissen left open the question of just how far his administration would go toward pushing STRs into long-term rentals during an appearance at the ’s annual convention last week when he said voluntary compliance was falling short.

“Government can take from one and give to another – we can do that, we’ve been working on that,” Bissen told an audience at the Maui Arts and Cultural Center.

Bissen didn’t elaborate, but his remarks gave hope to the dozens of Maui residents who have been camping on Kaanapali Beach since Nov. 10 to draw attention to the need for “dignified housing.” Organized by the Lahaina Strong Hui of 28 community organizations, the campers are determined to hold their ground at least through the New Year’s holiday and are eager to hear more details from Bissen, according to spokesperson Paele Kiakona.

He said their main request is to convert the county’s list of some 7,100-plus legal short-term rentals allowed to operate without a state or county permit.

“That is the quickest and easiest and more accessible housing right now that is available to be converted,” he said Monday. “I know they have made statements that they are working on that and it is hopeful to see that he is actually listening and he hears us. We just need it to happen quickly.”

Civil Beat’s coverage of Maui County is supported in part by grants from the Nuestro Futuro Foundation.