by Michael Williams, Maui Tomorrow Foundation President, and Albert Perez, Maui Tomorrow Foundation Executive Director
For generations, Maui has been a beautiful, but expensive place to live, especially if you have keiki. Although many parents have decided to make sacrifices so that their children can grow up here, overtourism and the ongoing COVID-19 pandemic have resulted in record increases in housing costs that have made it more difficult to survive here.
The nature of the visitor industry is that it brings people here to experience one of the nicest places on earth. Many of these visitors have the means to buy homes, and they are driving up the cost of housing. The number of millionaires in the world reached 56.1 million in 2020, a 9.8% increase since the pandemic began. The median price of a 3-bedroom, single-family home on Maui now stands at $1,050,000, and a 3-bedroom condo costs $713,000. Few residents who work in normal jobs are able to compete. According to the county’s affordable sales price guidelines, a household making the median income can only afford to pay $528,600 for a home.
In other high-cost areas, people have the option of commuting long distances from areas with lower housing costs. However, Maui residents do not have that option. Many are faced with a choice of living in overcrowded dwellings, cutting essentials like food or dental care, leaving the island, or becoming homeless.
Some say that we just need to increase the supply of housing, but even if Maui were to be covered with homes, prices would still be astronomical; there is just too much outside demand. Oahu is a good example of not being able to build your way out of a housing shortage.
In the past, the county contributed to this shortage by failing to make hotel developers build housing for their workers. Then in 2014, the county allowed 10,000 condos in the Apartment zone to operate as vacation rentals. This decision took homes away from Maui’s workforce.
The Maui County Comprehensive Affordable Housing Plan (CAHP) calls for the county to subsidize homeownership for working families, by providing land, necessary infrastructure, and interest-free loans for down payments. Although we don’t agree with all aspects of the plan, we do support the call for a shared equity model of homeownership, wherein the county retains a partial equity stake in the home for up to 30 years. For those who cannot afford to own, the county would subsidize rental units.
The CAHP estimates that it will cost the county about $58 million a year for these subsidies. While that’s a lot of money, the 2021 Hawaii State Legislature recently enabled the county to collect a 3% tax on visitor accommodations, which would yield at least $60 million per year. In addition, the county can raise property taxes on non-occupant owners of second homes and legal short-term rentals, which together comprise about 21,000 dwelling units, and are concentrated in the luxury communities of South and West Maui. Taxing these at levels 2% per $1,000 of assessed value, as is common in the continental US, would likely yield at least an additional $100 million per year.
In summary, there are two actions the Maui County Council can take to fund affordable housing, using the global demand for vacations on Maui:
- Impose the 3% Transient Accommodations Tax, and use part of the new revenue to fund the CAHP.
- Raise property taxes on visitor accommodations, both commercial ones (Hotels, Timeshares, Short-Term Rentals) and the non-commercial visitor accommodations provided by second homes, and use part of the new revenue to fund the CAHP.
In addition, the county can increase the housing stock for residents by:
- Phasing out the nonconforming use of condos as short-term rentals in the Apartment District, thus returning 10,000 condos to our long-term housing stock.
With these changes, Maui residents will have a fighting chance of staying here and raising our keiki!