Maui short-term rental owners say a ban would be financially devastating

Maui officials have launched a plan to phase out more than 7,000 short-term rental properties in an effort to make more homes available to local residents and lower the cost of housing. Church says the move will devastate his family.

“My family loses sleep every night over this thing,” Church told Business Insider. He said that if the ban goes into effect, he might not be able to pay his mortgage and would likely have to sell everything and leave Maui, where his fiancée’s family roots go back more than a century.

“If they enforce this ban, my family will go bankrupt,” he said.

With some of the most expensive real estate in the U.S., Maui has long struggled with housing. The average home price in Hawaii is higher than almost any other U.S. state. According to Redfin, the median home price on Maui in July 2024 was about $1.1 million, compared to the median home price nationwide of $438,706.

The island’s housing problems were exacerbated by the wildfire that devastated Lahaina in August 2023, destroying much of the town center and displacing thousands of residents.

The plan to phase out some short-term rentals came after the fire, but as a tourist destination with local housing problems, Maui is not alone. Barcelona and New York City are among the cities that have banned or restricted Airbnb and vacation rentals.

But on an island the size of Maui, where the tourism industry is estimated to be directly or indirectly responsible for 70 percent of every dollar generated, the impact could be significant.

Owners say their property values ​​will drop

The ban, which applies to properties on the so-called “Minatoya List,” covers 7,160 properties largely concentrated in the tourist areas of South Maui, primarily Kihei, and West Maui, primarily Kaanapali.

The properties are technically zoned as residential apartments, but since 2001 they have been legally allowed to be used as short-term rentals — and have been taxed for doing so. The listing is named after the city employee who initially wrote a memo allowing short-term rentals that eventually became law.

Maui Mayor Richard Bissen announced a plan to end those permits earlier this year. The Maui Planning Commission voted unanimously in favor and recommended it be passed by the City Council. If approved, the ban would go into effect in 2025 and 2026, depending on the area.

Church said three of his four properties are on the list, but when he bought them in 2022 and 2023, he had no idea the list existed. When he researched the properties, he confirmed their tax status as short-term rentals on the county website.

He said the units were marketed and sold to him as vacation rentals and that no one, not a realtor or government official, had mentioned the listing to him. Church said other owners he knows have said the same thing and are also concerned about the financial impact of the ban. The Maui County mayor’s office did not comment when reached by Business Insider.

Jason Gobey, another short-term rental condo owner, told BI he did his research and spoke with realtors and others before buying his one-bedroom condo in Kihei in 2019. He also said he confirmed the property’s tax status as a short-term rental condo and had no idea there might be a problem with it.

Gobey and his wife live in Arizona, but spend about four months a year on Maui. He said he doesn’t make a substantial profit on his condo, but that buying and renting it out was the only way they could afford to visit Maui as often as they do, while also spending a lot of money in the local economy during that time.

“We bought it to use it,” he said. “But we do need some revenue from it.”

Both owners said the value of their properties will plummet as a result of the ban. They said many similar units have been put up for sale since the ban was proposed, but no one is buying them. They are certain that when they eventually sell their properties, it will be at a significant loss.

While some of the properties on Minatoya List will likely be converted to long-term rentals, Church said that is not financially feasible for him. He believes that because of the high costs associated with maintaining the property, he would have to charge far too much to make a long-term rental deal work.

Gobey said that since he and his wife spend a month on Maui every few months, his unit will simply sit empty when they’re not on the island. Both owners said that the people who help them maintain the units, such as good managers and housekeepers, would also lose jobs as a direct result of the ban.

The ban is supposed to solve Maui’s housing problem, but the broader implications are unclear

The owners also said they did not think eliminating their rental properties would solve Maui’s housing crisis, saying the value of the properties would likely still be higher than the average family could afford.

However, Justin Tyndall, an associate professor of economics at the University of Hawaii at Manoa, said the policy change would have a significant positive impact on housing in Maui, increasing the number of long-term housing units by 13%.

“That would just be a huge flood of new units. Some of them would eventually be put up for sale, or some of them would be rented out to locals,” he told BI, adding: “It would definitely make housing more affordable.”

Even though many of the homes would still be out of reach for lower-income residents, increasing the housing supply would likely reduce pressure on house prices and rents in general.

Tyndall said Maui’s housing problem is largely due to a lack of housing supply, which results in extremely high prices. A big reason for this is how few new construction projects are underway that have been on the island for the past two decades, partly because of government regulations that make obtaining a permit difficult and expensive.

He said some of the rules make sense, such as those meant to protect environmentally sensitive areas, but others are misleading. He also said the government could make changes to encourage developers to build more housing.

But the advantage of adding the Minatoya List homes to the housing stock is that they have already been built.

He said the value of those units will almost certainly decline, but that won’t be bad for Maui’s broader housing problem. He also noted that 85% of the units on the list are owned by out-of-state residents, while 92% are owned by non-Maui residents.

He said there is consensus among experts that the change will be beneficial to Maui’s housing market by increasing supply and lowering costs, but he is still investigating the broader implications.

“Maui is so dependent on tourism that taking away 7,000 lodging options for visitors will definitely reduce the number of tourists,” Tyndall said. “It’s unclear by how much.”

He added that most hotels on the island are generally operating at 60 to 70 percent of capacity, so there will likely be some potential short-term tenants that end up there, but right now that’s still a big unknown.

If the change leads to a significant drop in the number of tourists visiting Maui, it will mean less tax revenue for the region and job losses for people in the service sector.

As for short-term rental property owners, Tyndall said people should have known this was a possibility and that many people working in real estate were at least aware of the list.

“Investing in real estate carries risks,” he said.

“There is no guarantee that you can continue to operate a vacation home forever.”

Are you a short-term landlord on Maui, or have you or your family struggled to find housing on Maui? Would you like to share your perspective on the plan to phase out some vacation rentals? Contact this reporter at [email protected].