Maui, known for its stunning beaches, lush landscapes, and vibrant culture, is also home to a bustling vacation rental market. Recently, there has been a significant discussion regarding the potential impacts of removing one-third of the short-term vacation rental condos in apartment-zoned areas and requiring their dedication to long-term rental use. This blog post will delve into the findings of a comprehensive study conducted by Paul H. Brewbaker, Ph.D., CBE in 2022 on this topic, outlining the potential economic ramifications and what it could mean for prospective buyers and sellers of Maui real estate.

The Proposal and Its Scope

The 2022 Maui County Council proposed legislation that could remove approximately 6,749 of the 7,306 condominium units in apartment-zoned areas from short-term rental use. This represents about one-third of Maui's total lodging units. The aim is to redirect these units towards long-term rental use, potentially reshaping the island's housing and tourism landscape.

Economic Impacts: An Overview

The study, conducted by Paul H. Brewbaker, Ph.D., CBE, outlines several key economic impacts if this proposal were to be implemented:

Tourism Revenue Decline: The immediate effect would be a significant reduction in tourism receipts. Condominiums and rental houses account for about one-third of Maui's total visitor accommodations. This shift could lead to a foregone annual amount of $1.67 billion in tourism receipts, representing about 32.6% of Maui's annual tourism revenue.
Decrease in County Output: Maui County's overall economic output would decrease by approximately $2.74 billion. Including the ripple effects across other Hawaiian counties, the total statewide economic decline could reach $3.25 billion.
Job Losses: The reduction in tourism would lead to a substantial loss of jobs. Maui could see a decrease of 14,126 jobs, with an additional loss of 2,555 jobs in other counties, totaling 16,681 jobs lost statewide.
Earnings Decline: Workers' earnings in Maui would decline by $747.7 million, with a statewide earnings loss of $885.3 million. This decline would affect various sectors, including accommodation, retail, real estate, food services, transportation, and business services.
Reduced State Tax Revenues: State tax revenues would also take a hit, with a projected decline of $137.3 million from Maui and $23.05 million from other counties, totaling $160.35 million statewide.

Industry-Specific Impacts

The proposed shift from short-term to long-term rentals would have varied impacts across different sectors:

Accommodation and Food Services: These sectors would be the hardest hit, with significant reductions in revenue and employment. Many businesses that rely heavily on tourist spending, such as hotels, restaurants, and cafes, would feel the pinch.
Retail Trade and Real Estate: These industries would also experience a downturn as the flow of tourists diminishes. Reduced foot traffic in shopping areas and lower demand for vacation rentals could lead to a decline in retail sales and property values.
Transportation and Business Services: With fewer tourists, demand for transportation services like car rentals and tours would drop, leading to further economic contraction.

Visualizing the Impact

To better understand these impacts, let's look at some illustrative graphs from the study.

Graph 1: Projected Decline in Maui County's Economic Output

Graph 2: Job Losses by Industry in Maui County

These graphs highlight the extensive economic ripple effect that the removal of short-term vacation rentals could have on Maui.

A Scalable Impact

The study emphasizes that these impacts are scalable. For instance, if only one-sixth of the proposed units (1,125 units) were removed from short-term rental use, the economic impact would be proportionately smaller, yet still significant. This smaller change would result in a statewide output decline of about $540 million and a loss of approximately 4,700 jobs in Maui.

The Bigger Picture

While the immediate economic impacts seem daunting, it's essential to consider the long-term implications and potential benefits of such a policy. Redirecting these units to long-term rentals could alleviate some of Maui's housing shortages, providing more affordable housing options for residents. However, balancing the needs of the local community with the economic benefits of tourism remains a complex challenge.

Conclusion

The proposal to remove a significant portion of short-term vacation rental condos in Maui presents both challenges and opportunities. While the immediate economic impacts are substantial, this shift could pave the way for long-term benefits, such as more housing options for residents. As prospective buyers and sellers of Maui real estate, understanding these dynamics is crucial in making informed decisions.

For a full review of the economic impacts and detailed analysis, please refer to the comprehensive study by Paul H. Brewbaker, Ph.D., CBE, titled "Economic impacts of removing units in apartment-zoned areas of Maui County from short-term rental use." (Linked below)

For more detailed insights and updates on Maui real estate trends, stay tuned to RomvariRealty.com. Whether you're considering buying or selling property in Maui, our team is here to provide expert guidance and support every step of the way.