Maui’s mayor, Richard Bissen, proposed a policy to phase out vacation rentals in an effort to address the severe housing shortage exacerbated by the 2023 wildfires. A report by University of Hawaii economists concluded that while this policy would increase housing affordability, it would also negatively impact the economy, leading to a decline in visitor spending, job losses, income reductions, and decreased tax revenues.
The policy would add over 6,000 vacation rental units to Maui’s long-term housing supply, equivalent to a decade’s worth of new housing development. Condo prices would drop significantly, benefiting residents. However, the policy would also lead to the elimination of one-quarter of Maui County’s visitor accommodations, a 15% decrease in visitor spending, and a 4% contraction in GDP.
Most of the affected vacation rental owners are from out-of-state, primarily California and Washington. The policy would not require additional water sources, which are scarce on Maui, for the conversion to long-term housing.
The report suggested alternative approaches to achieve the desired housing boost with less economic disruption, such as increasing taxes on vacation rentals, taxing empty homes, and implementing zoning and permitting reforms. Another option proposed was to cap the number of vacation rental licenses and auction them off, a strategy commonly used for taxi medallions and fisheries management.
The study was conducted at the request of the Hawaii Community Foundation, a nonprofit organization. The Maui County Council’s Housing and Land Use Committee may consider incorporating the mayor’s proposal into a bill in the near future.
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