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Attempts by Maui County to convert short-term vacation units into long-term rentals will be confronted by a lawsuit, according to the Honolulu attorney who plans to file it.

“If the bill as it exists now is ultimately passed by the County Council, and approved by the mayor and takes effect, I think the chances of litigation over it against the county of Maui are 100% guaranteed,” Greg Kugle said.

Kugle previously represented Oahu owners who successfully fought the City and County of Honolulu’s efforts to impose a 90-day minimum for short-term leases.

Maui Mayor Richard Bissen said that legal action was likely when he announced the bill that would change the zoning designation of over 7,000 short-term units, a move intended to open up more long-term rentals. The effort is strongly supported by the grassroots organization Lahaina Strong and council members Tamara Paltin and Keani Rawlins-Fernandez, among others.

The county said in a statement that the bill would “phase-out and repeal decades-old transient vacation rentals,” likely through amending their zoning codes, and it set deadlines of July 1, 2025 for West Maui transient vacation rentals and Jan. 1, 2026 for South Maui.

The bill will be heard by the Maui Planning Commission on June 25. But if enacted, an injunction would immediately be sought to halt the process until it could be heard in court, Kugle said. That would be only the first act of a protracted legal contest.

Kihei Complex is Prime Example

Were the county to prevail, there would still be significant challenges getting local households into places such as the 15-acre Kamaole Sands complex in Kihei.

Almost all of 440 apartments in the development are on the county’s inventory of 7,069 apartments that have been allowed to operate as short-term rentals but are now targets for conversion to long-term housing. South Maui has the highest concentration of STRs on the island.

Kamaole Sands was built in 1983 on the site of a former mango orchard and a search on the VRBO vacation rental website generated 340 rental listings. A week at the condominium complex in a two-bedroom apartment currently costs up to $2,500, not including taxes and fees. 

Almost 90% of the owners of the Kamaole Sands units do not have Maui mailing addresses, a common characteristic of the STRs on the county’s list. Their status as second or third homes for mainland residents have stoked calls to convert them to long-term rentals.

“These mostly off-island owners have benefited immensely from turning our apartment-zoned housing into investments,” Lahaina Strong spokesman Paele Kiakona said.

Paltin and Rawlins-Fernandez were also behind efforts in 2021 to repeal the carve-out for these short-term rentals.

Attorney and planning consultant Jason Economou lobbied against that effort in his role as government affairs director for the Realtors Association of Maui. But now “I’m kind of in the middle,” he said.

Economou’s big concern is that the county is “going to rush this, they’re not going to do it properly and it will lead to other lawsuits and various other economic consequences down the line.”

Legal arguments against Maui County would likely rely heavily on the prohibitions on the taking of private property in the state and federal constitutions, and the protections against laws that eliminate an existing lawful use, in this case short-term rentals.

Kugle intimated as much, saying, “There’s been no changes to the Hawaii Constitution or the U.S. Constitution and those still exist to prevent Maui from taking away rights from property owners that have existed for decades.”

Certain uses can be phased out over time — a process known as amortization — but Economou believes the county’s plan will run into issues on that point as well. “What it comes down to is that it’s unlikely, that the nine months or whatever they’re envisioning once they get this signed into law, is a sufficient amortization period” for the court, he said.

Other Hurdles to Access

The situation on Maui is unusual, said Noah Patton, disaster recovery manager of the National Low Income Housing Coalition.

“The closest analog would be during Covid-19, when we had folks experiencing homelessness staying in a hotel and then the municipality buys the hotel and turns them into permanent single-room occupancy,” he said

Patton said Maui is fortunate to have a large inventory of short-term rentals. But any conversion plan also needs to include targeted subsidies for the lowest-income households to ensure access, he said.

So far, Maui County hasn’t spelled out any plans for subsidizing tenants. In Kihei, one-bedroom apartments lease for $2,500 to $3,000 a month.

While the increased rental stock might eventually ease rental pressure, condos like Kamaole Sands also carry HOA fees and other costs, including the kind of maintenance assessments common to older buildings, according to local real estate agent Evan Harlow, who has sold units there. Harlow said owners at the Sands had recently been assessed for tens of thousands of dollars each for major plumbing work.

Those expenses were only manageable for many owners because of the income generated through the vacation rentals, he said. There are also practical problems, including limited parking and kitchen and storage facilities built with vacationers in mind.

Patton acknowledges those potential complications and takes no position on the county’s proposed bill. But from talking to groups on Maui, he understands the need is acute.

“You still have a significant number of individuals in hotels,” he said. “You’re running subsidy programs that are likely to cause longer-term harm to housing affordability in Maui, and I think it makes sense given the additional constraints on new housing.”

Civil Beat’s coverage of Maui County is supported in part by a grant from the Nuestro Futuro Foundation.