It’s a tough sell though when operating a short-term vacation rental can be so much more lucrative than renting long term.
It was well-known that Maui and Hawaii were already facing a daunting housing crisis before at least 100 people died and Lahaina was mostly destroyed on Aug. 8.
Now is the moment when all of the pledges “to do whatever we can to help” are being held to account as the Legislature returns to session and there’s a real effort to address the crisis that confronts too many Maui families.
On Monday, Gov. Josh Green made his pitch in his State of the State address to solve the housing crisis by making a shift from the temporary to the permanent.
The governor is putting considerable effort into the tough task of convincing owners of short-term rentals not living in Hawaii to sell their houses for a slew of tax incentives.
“A sale of this kind — to an owner-occupier local family, or to someone who turns the home into a long-term rental for a local family — will be exempted from capital gains tax, conveyance tax and general excise tax,” said Green.
Green cited numbers saying that more than half of short-term rentals are owned by people not living in Hawaii and more than a quarter of the owners of short-term rentals, or STRs, have more than 20 units.
Green is trying to appeal to the better angels: “This is the right thing to do — and I urge you to join us.”
Matt Jachowski is a Maui resident and programmer who set up Maui Hale Match to connect families displaced by the Lahaina fire with homeowners. His remarkable work with the numbers made many understand the scope of the STR problem on Maui.
“West Maui STRs in particular are such a critical piece of getting our displaced families out of hotels and other temporary housing, especially in the immediate term,” said Jachowski. “As a community member, I am grateful to every STR owner who has stepped forward to provide stable housing to our families.”
While Green’s tax amnesty is a big step toward a solution, I fear this is going to be a tough sell. The money made from short-term rentals is lucrative given the current economic situation.
I don’t mean to demonize STR owners, especially since I used to be one in Georgia. We Airbnb’d the house we bought next to our primary residence for five years. We had bought the house in anticipation of housing aging parents, but in the meantime we took advantage of the situation to offset expenses.
I can understand how it will be difficult to convince STR owners to sell despite the appeal to do what’s best for the greater good. (Full disclosure: Even though I no longer own an STR, as part of a program for hosts, I did participate in Airbnb’s IPO and I currently hold the stock.)
My parents also operated a STR in Volcano for more than a decade. While they spent long stretches living not far from my father’s childhood home, they were part of the 52% of STR owners living outside of Hawaii.
It was a profitable place for my parents, but after Hawaii County passed STR regulations in 2018, it became a place exclusively for friends and family to stay. Then when my sister and her family chose to move from Texas to Hawaii, it became a permanent home for Native Hawaiians in Hawaii.
However, that’s the exception to the rule in a housing market that has been wildly out of balance and leads to a situation where more Native Hawaiians live outside of Hawaii than in Hawaii.
Since tourism became Hawaii’s primary economic activity, there’s been an ongoing struggle between putting resources into housing for kamaaina and lodging for malihini.
However, temporary housing for tourists can be four times more profitable than creating permanent housing.
And while addressing the crisis on Maui needs to take center stage, we still face a housing crisis in the rest of Hawaii.
Here on Hawaii island, it’s tough for me to believe that building in highly active lava zones is an answer to the housing crisis. We need smarter solutions.
My colleague Paula Dobbyn reported on the Hawaii County Council trying to get the situation under control with further legislation regarding STRs.
Our California neighbors are trying different approaches to solve their housing troubles. Could their plans come our way?
Palm Springs has seen its housing prices precipitously decline after passing strict regulations limiting STRs. According to the Los Angeles Times, this has caused investors and speculators great pain, but local residents are hopeful that it’ll help the place keep the charms that attracted so many visitors.
Meanwhile, Bloomberg reported out the effect of Los Angeles’s mansion tax. While the tax on sales of homes over $5 million hasn’t been “a silver bullet,” according to a top official in LA’s Housing Department, it has been the closest thing to “a needle mover” in solving the region’s affordable housing crisis and many cities are now considering similar proposals.
While Green’s plan certainly won’t be a silver bullet to solve Maui and Hawaii’s housing crisis, it could be a needle mover and that’s better than the place we’ve been stuck in for way too long.
Civil Beat’s coverage of Maui County is supported in part by grants from the Nuestro Futuro Foundation.
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