Maui County officials are considering a proposal that could dramatically increase the county’s long-term housing stock by restricting transient vacation rentals (TVR). According to a new University of Hawaiʻi Economic Research Organization (UHERO) blog, if enacted, the policy could expand Maui’s long-term residential housing supply by 13%.
The proposals outline several potential actions and outcomes that could make significant impacts on the housing supply and/or county taxes are detailed below.
Minatoya List
Condominium units operating as vacation rentals as of 1989 were permitted to continue renting in the short-term market, also known as the Minatoya List. The list covers 7,167 units, however, some of these units are not currently operating as a vacation rental, as indicated in property tax filing information. UHERO identified 6,172 units that are both operating as TVRs and appear on the list. These 6,172 properties would be directly affected by the policy change, as they would be forced to cease operating as TVRs.
Maui County has a total stock of 63,000 housing units according to property tax records. Currently, 47,400 units are used for local housing, while 13,000 are used as TVRs, and an additional 2,500 operate as time-share units. Moving 6,172 units from TVRs to the long-term supply would expand the supply of long-term housing on Maui by 13%.
Potential lowering of housing prices
Authors of the UHERO blog, Justin Tyndall and Emi Kim, wrote that an expansion of housing supply would likely lead to lower prices and rents.
“In months when the inventory of available condo units was below 1,000, annual price appreciation averaged 10%. In months where inventory exceeded 1,000 units, average appreciation was -9%,” according to the blog. “In April 2024, there were only 500 available condos on Maui. If even a small share of the Minatoya List units end up on the for-sale market, we would expect to see significant—possibly double digit-declines in condominium prices on Maui.”
Policy consequences
While housing may benefit, UHERO said the shift could trigger a substantial loss of property tax revenue for the county and could negatively impact the recovery of tourism on Maui by lowering accommodation capacity.
“These drawbacks could have significant consequences for Maui’s local population in terms of reduced county services, higher taxes, or a weakening labor market,” Tyndall and Kim wrote. “While falling home prices are a benefit to those struggling to find housing, incumbent homeowners could lose equity if the price of homes fell county-wide, which could have broader economic impacts.”
Possible alternative approach
Rather than banning Minatoya TVRs, the blog suggests significantly increasing the property tax rate for TVRs. A drastic increase in the rate could potentially increase county property tax receipts, and at the same time may incentivize some owners to sell their units or convert them to long-term rentals. Using the existing property tax system rather than banning Minatoya units might also encounter fewer legal barriers to implementation.
Support for Lahaina families
The 6,172 units that would be added to the long-term supply of housing are a mix of small and mid-size condominium units. According to U.S. Census Bureau data, half of the households in Lahaina had a household size of two or fewer people, and two-thirds had three or fewer people. These families affected by the Lahaina wildfire could be accommodated by the Minatoya List properties.
Read the entire blog on UHERO’s website.
UHERO is housed in UH Mānoa’s College of Social Sciences.
