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Commission mulls short-term rental cap

Bill would reduce permits on Maui, Lanai from 349 to 278

Halama Sunset Hale’s lanai overlooks the ocean in Kihei in this photo taken Tuesday. The permitted short term rental on Halama Street is owned by a fourth-generation Maui family. The Maui News MATTHEW THAYER photos

County officials are hoping that fewer short-term rentals will reduce the impacts of tourism on local neighborhoods, but owners say their businesses are not the drivers behind the overburdened visitor industry.

The Maui Planning Commission, which is considering a bill that would cut the number of permitted short-term rentals on Maui and Lanai from 349 to 278, heard testimony Tuesday from nearly two dozen testifiers, many of them short-term rental owners who opposed the reduced cap.

“COVID has done one thing for this community that is actually really needed,” testifier Heather Loughridge-Buono said. “It has illustrated in a very profound way that we need to diversify our economy. . . . Concentrating on this very small microcosm of the economy might not be the best way to do it.”

Back in February, Planning Director Michele McLean said the department was looking into possibly phasing out short-term rentals, partially because of the Maui County Council’s decision to ban them on Molokai, along with resident complaints about the way short-term rentals were changing their neighborhoods. The department held a meeting in March that drew a standing-room only crowd of many rental owners and real estate agents in opposition.

Now the council is considering a bill that would still allow short-term rentals but reduce the cap. Current rules provide for up to 349 short-term rental permits, with 212 existing permits as of May 26. (There are, however, many vacation rentals on Maui that are in older, apartment-zoned buildings and are allowed to operate without a permit — about 5,575 units, according to the county.)

The current limits, existing permits and pending applications by districts are as follows:

• Hana: 30 (current cap), 25 (existing permits), 2 (pending).

• Kihei-Makena: 100, 45, 5.

• Makawao-Pukalani-Kula: 40, 12, 0.

• Paia-Haiku: 55, 44, 3.

• Wailuku-Kahului: 36, 6, 0.

• West Maui: 88, 61, 6.

• Lanai: No cap, 19, 2.

The caps proposed by the Planning Department and the council are as follows:

• Hana: 27 (department), 23 (council).

• Kihei-Makena: 50, 100.

• Makawao-Pukalani-Kula: 12, 11.

• Paia-Haiku: 47, 55.

• Wailuku-Kahului: 6, 6.

• West Maui: 67, 63.

• Lanai: 21, 20.

As of Dec. 31, when there were 229 existing permits, 118 property owners had Hawaii addresses and 111 had Mainland or international addresses, according to the department.

Current permits can still be renewed even if the bill passes, so long as they are submitted on time, McLean said.

Council Member Tamara Paltin, who chairs the council’s Planning Committee and authored the bill that would reduce the cap, said Tuesday that she was initially looking to reduce the number of short-term rental homes only in her district of West Maui, but decided to include all districts after learning that Council Members Shane Sinenci and Riki Hokama were already writing similar laws for their districts of East Maui and Lanai, respectively. She said others did not object, but that Council Member Kelly King did not want South Maui included.

Paltin said her goal is not to eliminate short-term rentals altogether, but that she felt a reduction was warranted.

“Housing for local people is the priority right now,” she said in testimony to the commission. “There are many options for people who want to invest in short-term rental properties outside of permitting a home. Personally, I do not want to encourage the building of more luxury home investment properties that would need to be subsidized through short-term rental home permits.”

Short-term rental owners testifying on Tuesday described their operations as small businesses employing local residents. They said that they were bringing in smaller groups of families looking to stay in one home as opposed to the scores of tourists drawn by the hotels and resorts.

“If we want to switch our economy and change things with the way tourism is and manage it more tightly, I believe that smaller, localized lodging is more sustainable,” testifier Colleen Medeiros said. “It’s got a lower environmental footprint. We use less resources, water, electricity. We don’t demand the volume that large hotels demand. The money stays local.”

Testifiers also worried that the lowering of the cap was the first step toward phasing out short-term rentals and said that a lot of work had gone into creating a program for legal rentals in the first place.

“We had prohibition and no regulation, no oversight, no controls,” testifier Greg Mebel said. “A carefully designed program was put in place to answer that problem. We lead the state of Hawaii in creating such a rigorous, thought out program. We should not be repeating our own very recent history by now ripping that down and going to the back of the line.”

Commission members asked what the county stood to lose in taxes should it reduce the number of permitted short-term rentals, which range in value from $243,000 to $12 million (with a median value of $1 million) and generate about $3.9 million in real property tax revenue, according to the department.

McLean said that the department could do an estimate, but that it was difficult to say without knowing what type of tax category future applicants’ properties will be in.

“We can give a ballpark, but it won’t be a loss versus where we are today,” she explained. “It will just be a gain that we would not realize.”

Chairman Lawrence Carnicelli said his concern was the lack of “empirical data to make this decision.” He said he was mostly concerned about Maui’s high unemployment rates and the uncertainty of the pandemic.

“There’s a part of me that doesn’t want to put a restriction on anything until we can ferret out all this data and see what we are doing,” he said. “I almost kind of feel like it’s a little irresponsible to make this decision right now without knowing what we’re going to do in September or October.”

The Maui Planning Commission — which can only make recommendations to the council, not approve the bill — had to recess the issue because of problems with the virtual meeting that included a nonworking phone number and struggles with people calling into the meeting. At one point there were 150 participants listening in.

The commission will take it up again at its June 23 meeting.

* Colleen Uechi can be reached at cuechi@mauinews.com.

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