A Maui County Council investigative group has recommended creating two new hotel zoning districts to allow some existing short-term vacation rentals in apartment-zoned districts to continue operating, a proposal that drew sharp public debate over balancing economic concerns with residents’ urgent need for housing.
The Bill 9 Temporary Investigative Group, established to study policies related to a bill to phase out vacation rentals in A-1 and A-2 apartment districts, submitted its final report on Tuesday to the Housing and Land Use Committee. The TIG met seven times in September and was formed in response to proposed legislation, Bill 9.
First reading of Bill 9 is scheduled for Nov. 12. As drafted, it would eliminate more than 7,000 vacation rentals as grandfathered permitted uses (those on the so-called “Minatoya List”) over the next three to five years in apartment-zoned areas intended for residents.
The measure was passed out of the Housing and Land Use Committee on July 24 by a 6-3 vote.
No amendments to Bill 9
Uʻu-Hodgins clarified that the TIG’s recommendations “do not include amendments to Bill 9.”
The creation of the new hotel districts would “eliminate any gray areas” regarding where hotel uses are conducted, she said. The intent of these recommendations is to ensure that apartment district properties converted from vacation rental uses will “serve as long-term homes and they stay in the hands of local families,” while mitigating the potential decrease in real property tax revenue and lessening the impact of the vacation rental phase-out on hospitality-related businesses and jobs.
New hotel zones proposed
The TIG, chaired by Council Member Nohelani Uʻu-Hodgins, made two recommendations intended to create a pathway for specific vacation rentals to continue operating.
First, the TIG urged the Department of Planning to introduce legislation establishing new H-3 and H-4 Hotel Districts. This would involve identifying apartment district properties where continuing vacation rental uses “may be appropriate, even if the Council enacts an ordinance phasing out TVRs as permitted use.”
These new districts would be “like-for-like” with the A-1 and A-2 Apartment Districts, respectively, except that vacation rental uses would be “permitted outright.” This would allow properties where continued vacation rental use is deemed appropriate to be rezoned into these new hotel districts, preserving their operations.
The Council may consider ways to expedite the rezoning application and review process in the Planning Department. Introduction of legislation for rezoning TVRs from apartment to H-3 or H-4 would go directly to planning commissions, skipping the usual first step to the County Council.
In its second recommendation, the TIG called for the Council to initiate changes in zoning from the Apartment Districts to the proposed H-3 or H-4 Hotel Districts for specific properties (either individual units or entire buildings) identified in an attachment to the TIG’s report as Exhibit “2.”
The properties identified for continued vacation rental use included those with market values “not attainable by most Maui County residents”; those already impacted by or located in a Sea Level Rise Exposure Areas; and properties primarily made up of timeshare units.
The TIG conducted site visits around Maui and met with county officials, including the mayor and managing director, the Planning and Finance Departments, as well as real estate professionals, housing advocates and loan officers.
The report cautioned that the entire process of enacting these land-use changes “will likely extend beyond the current Council term.”
Public testimony divided on exemptions
During the Housing and Land Use Committee meeting, the TIG’s criteria for exemptions, particularly those related to the shoreline, became a flashpoint.
Resident De Andre Makakoa argued against exempting shoreline properties based on future sea-level rise risk.
The August 2023 wildfires intensified Maui’s housing crisis, Makakoa said. “So (for the TIG proposal) to carve out thousands of units in the town where we need housing the most is a little bit concerning,” he said. “Obviously, we believe in climate change. We’ve lived here all our lives. We’ve seen it changing drastically throughout our short lifetimes. But the need for housing right now outweighs the fear of shoreline rise, which is kind of decades down the road.”
Junya Nakoa strongly emphasized that the current housing discussion is directly tied to the Lahaina disaster, saying, “Lahaina needs to stay Lahaina… We’re losing our people.”
In contrast, property owners and managers expressed support for the TIG’s deliberate process and the idea of distinguishing between properties.
David Diven, a Napili Ridge owner, supported the distinction that properties that are clearly hotels should remain so, but those that are “substantially apartments should stay apartments.”
Steve Meyer, of Maui Sunset, advocated for his mixed-use property to continue its current operation, which he said helps accommodate “traveling nurses” and construction workers who need affordable, midterm stays.
Economic impact and owner hardship
The TIG reported that a vacation rental phase-out could result in a reduction in tourism and impact hospitality jobs, and that the financial effect on real property tax revenue is difficult to predict. The largest decrease in property tax income would occur if all units become owner-occupied.
Testimony from owners highlighted the financial risks.
Condo owner Brian Whittman detailed the various high costs of ownership.
“If current owners end up selling their places cheap because you folks pass Bill 9, and they can’t do their short-term rentals anymore, (I) guarantee the new buyers are not going to be local families,” he said. “Pay the mortgage on top of all those fees. It would be way too much. It’s going to be out-of-state retirees with cash who will grab the good deals, move here and then pay low tax by being resident owners.
“The housing prices for locals will continue, and Mali County will lose a lot of tax revenue and vacation revenue jobs for nothing. I just hope you, folks are really thinking ahead,” Whittman said.
Marilyn Steinmetz said she was concerned how the loss of tax revenue from a vacation rental phase-out would impact Maui County.
“I’m just worried that Maui County is going to go bankrupt or put a burden on the residential people to make up for the loss,” she said. “These people paid a lot of money for their units. And I don’t believe that this is helping anyone.”
As an alternative, Ruel Metcalf suggested the County take the estimated $7 million in monthly tax revenue generated by the targeted vacation rental phase-out and use it to buy “10 homes for families” each month, which the County could then rent out affordably.
Next steps
The Housing and Land Use Committee deferred decision-making on the TIG report.
The meeting was strictly limited to receiving public testimony and the report under the Hawaiʻi’s Sunshine Law, with no deliberation allowed by the council members. The Sunshine Law requires a waiting period of at least six business days before deliberations can begin. That will be scheduled for a future, duly noticed meeting.