End the Crackdown!
The case for leaving unpermitted transient vacation rentals alone
November 08, 2007
|Illustration: James Silvani
Brandon Shim and Anthony Arakaki worry. They own and operate Pauwela Café in Haiku Cannery. Both born and raised on Maui with family going back generations, they recognize that the fight to stay on the island is increasingly a challenge.
“We’re really tied to Maui, but my family comes first,” Shim, a graduate of Maui Community College’s Culinary Academy, said. In 2004, after burning out working for a big company, he and Arakaki purchased the small Eurocafé.
In the high winter and summer tourist seasons, many of their customers are people staying in the transient vacation rentals (TVRs). They provide the revenue for the fledgling café to survive through the slow season.
But now the County of Maui is closing down unpermitted TVRs, which actually make up the majority of all transient rentals.
“People say, ‘Well, you want to shut down all vacation rentals.’ That’s not true,” Maui County Planning Director Jeff Hunt said. “We don’t want to shut down vacation rentals. We want compliance with the law. I think we deserve some credit for responding quickly, for realizing we need to get something out.”
Before the Maui Planning Commission on Oct. 23, Shim stressed that not only does he need the revenue from TVRs and Bed & Breakfasts (B&Bs) to survive, but so do a lot of other businesses in Haiku.
“If these guys are gone, you’re yanking out a big economic portion of annual sales for a whole community,” he said. “It’s almost essentially like yanking the hotels out of Wailea, closing down the hotels in Ka‘anapali. People need this money to survive.”
Shim and Arakaki have already seen a shift due to rising costs in Hawai‘i. Repeat guests are staying for shorter amounts of time. Instead of buying new surf and kiteboards here, they bring their own with them. Shim and Arakaki are concerned that, coming next year when all unpermitted TVRs have to close or face fines, their restaurant will see a 20 percent decline in revenue. Overall, they only make a 15 percent profit.
“If you do the math, I’m probably not going to be here,” Shim told the commission.
In 2005, the county hired the Kauaian Institute to study the short-term vacation rental industry throughout Maui County. Located in Kapa‘a, Kauai, the Kauaian Institute is an independent research organization focused on sustainability issues from both a corporate and community standpoint.
According to the Kauaian Institute’s data, the TVR industry contributes just 1.5 percent of total visitor spending throughout the county, but surprisingly provides approximately 8.4 percent of all island jobs. That’s about 588 jobs. (Fair disclosure: I had one of those jobs, working as a bookkeeper for a vacation rental company that closed as a result of the county’s crackdown).
These jobs in the TVR industry include the homeowners and operators themselves, housekeepers and grounds maintenance. From there, the employment pool’s ripple expands to those who offer the rentals as management companies and the rental agents who book them. It rolls on to flower growers, restaurants, local retail and activities and trickles out through the rest of the island from there.
By comparison, the Maui Land & Pineapple Co. currently employs approximately 1,200 people; Hawaiian Commercial & Sugar has about 750 employees. Think of what would happen if ML&P let go of half of its workforce or HC&S laid off a whopping 78 percent of its employees.
Put another way, every $1 million in revenue the TVR industry brings in creates 19 jobs. On average, it’s estimated that the industry brings in about $38 million annually, which equates to the 588 jobs mentioned earlier. After the multipliers are applied, something like $56 million annually circulates throughout the county. It’s no wonder there are so many people—and not just homeowners—up in arms over the issue.
Then there are the visitor demographics. On Maui, the overall average nightly hotel room rate is at $290. Wailea comes in at an average of $490 per night. TVRs average slightly less than $500 per night, but that’s for the use of an entire house.
It’s logical that individuals who stay in lower-priced accommodations naturally have more money to spend out in the community. As a result, the increased visitor spending throughout the community results in better distribution of visitor dollars among islanders—thus producing the multiplier, or ripple, effect.
The Kauaian report’s data demonstrates that TVR visitors are much more likely to spend their money within the community on local activities and businesses. According to research, guests of TVRs are 25 percent more likely to patronize historic sites than the average island guests. They’re also 20 percent more likely to support local markets and 10 percent more likely to take part in craft fairs.
It’s not all rosy.
Those are the words of Maui Planning Commissioner Bruce U‘u, said during the Oct. 9 hearing. The room was so crowded that concerned residents had spilled out into the hall.
No, it’s not all rosy, and there are multiple reasons why. First, the majority of unpermitted TVRs are located on ag land. Land specifically zoned for agriculture gets county tax breaks, which are meant to support farmers.
By definition, a farm is a tract of land with a house, barn, etc., where crops or livestock are raised for livelihood. In order to be a farm, you have to be farming. A farm is a challenging operation, though—especially when dealing with nutrient poor soil, water shortages and severe labor issues, which are big issues on Maui.
Because of this, the county has helped out farmers by allowing them to act as B&Bs.
“We want to encourage farming; and so we feel that if you are a real farmer, you can be rewarded with a bed and breakfast,” county planner Joe Alueta said at the Oct. 9 committee hearing. “If you are not farming, then the county and the governments are not entitled to grant you any entitlements. You are supposed to be a farmer in an agricultural district.”
In fact, most TVRs and B&Bs aren’t farms. Currently, the county proposal requires that they bring in at least $35,000 annual revenue for two consecutive years to qualify as a farm. But on two-acre ag lots, generating that much gross revenue can be nearly impossible—especially if prices drop.
For this reason, the Planning Commission is reviewing the TVR and B&B bills and looking for alternative benchmarks. One possibility is simply lowering the gross revenue requirement.
But another option I came up with would be to dedicate a certain percentage of the total lot size to active ag production, and then to measure output yield. For example, it could be required that 90 percent of every two-acre lot be set aside for agriculture use only. That 90 percent could be mandated to produce a certain yield which could be determined by taking into consideration the type of crops or livestock raised and the environmental conditions impacting growth.
For those who can’t meet any of the benchmarks, the conditional use permit process still stands in place. One woman who operates a B&B in her Haiku home as a way to supplement her Social Security income said at the Oct. 9 hearing that the conditional use permit will make all the difference. In her situation, she said, farming is not a viable option because “most of my land is in a gulch and the only way I can get to it is to rappel down the walls of the steep banks.”
Then there’s the TVR industry’s perceived impact on the housing market. The use of the ohana unit seems to be the biggest concern to planners and commissioners alike. Opponents of TVRs argue that by including ohanas in the B&B and TVR ordinances, the short-term rentals take affordable housing out of the long-term rental pool for both na kama‘aina and long time malihini—particularly on the Northshore of Maui.
“When you allow the B&B, you gonna push out the guys who was raised there who try rent affordable housing and they the ones who going be living in Kahului or in the places that the other ones don’t wanna live,” Commissioner U‘u argued at the Oct. 9 Planning Commission meeting.
The Planning Department cites the 2005 Kauaian Institute study’s finding that “renters and owners lost share to seasonal units during this decade.” But reading further down the page, it clearly states that while the “seasonal” share increased approximately five percent, the percentage of renters remained constant at 31 percent. Therefore, based on these numbers, it’s misleading to say that TVRs displaced renters.
Further research done by SMS, an Oahu-based research company, shows that if all of the available TVRs and B&Bs operating today closed, just 1.1 percent would actually make it to the affordable rental pool. The reason for this is because the grand majority of these homes will never be affordable to average Maui citizens.
“If one unit were lost because an ohana were converted to a B&B, that would be too much,” Commissioner Wayne Hedani said. But Commissioner Joan Pawsat kept trying to wrap her head around why it was being discussed. “I still don’t understand why we are holding individual citizens responsible for providing public housing,” she said.
If current homeowners who work hard to hold onto their homes and are already struggling to make ends meet have to sell, their properties will be sold to the highest bidder. But the highest bidder, in all likelihood, will be those people purchasing their second or third homes who live abroad. The individuals in that income bracket will not need to make money off the property as a means of paying the mortgage. As a result, a majority would sit empty.
On the flip side, forcing homeowners to sell could depress the already slacking real estate market and regular residents might actually be able to afford once unattainable homes. But further depressing the real state market has other consequences.
There will be less jobs in the construction industry. Also, affordable housing initiatives may end up being pushed back to wait for a better real estate market that can subsidize the lower income units with the higher priced ones.
Then there’s the impact on our island way of life and culture. Culturally speaking, Hawai‘i is a huge mixing pot that blends residents and visitors from around the world. But the TVR debate brought to light that along the way it became divided not between indigenous Hawaiians and the malihinis, but between those who have brown skin, brown hair and brown eyes and those who do not.
That issue came up very strongly at the Oct. 9 Planning Commission meeting. “If I look at you guys right now, I don’t see a lot of local people in hea, you guys infringin’ on my lifestyle,” Commissioner U‘u lectured, to the horror of shocked attendees. , local… been hea for generations.” The outrage was such that Hawaiians, locals and haoles packed the Oct. 23 hearing and spoke out on this.
There were locals on both sides. Proponents claimed that because our island economy was shaped to be dependent on tourism, the only way for Maui to continue to thrive is to make allowances and adapt to the changing needs of tourism. Globally, the eco-tourist market is booming, with visitors much more interested in finding the true heart of the locations they visit. They want to live among the people, learn about their customs and ways of life first hand and not simply be sold a commercialized image.
But opponents say visitors don’t belong in residential areas because they simply don’t understand the diversity of customs here in Hawai‘i. They also worry that the sense of security and community is being lost in neighborhoods where TVRs exist.
In her Sept. 30 Maui News op-ed , titled “Urbanization, commercialization of neighborhoods threat to traditional Maui” (and later posted on the County of Maui website), Mayor Charmaine Tavares—largely mute throughout the unfolding controversy—maintains a strong desire to preserve island way of life as being her objective.
“I believe we must respect the desires of those who want their children to grow up in neighborhoods where people know each other,” she wrote. “Our island communities were built upon the strengths of families who were bonded by friendship.”
Commissioner U‘u shared that concern as he told his fellow commissioners about his experience with guests in a neighboring TVR. They reported smoke to the fire department while he made kalua pig in his backyard.
If preserving neighborhoods is really Tavares’ objective, then we have to wonder why allowing 20-room vacation rentals in areas such as Paia, Haiku and Kula found its way into her administration’s draft ordinance on TVRs. By allowing these rentals and eliminating traditional home-based TVRs, motels will be able to quickly fill in the gap in accommodations.
One thing is certain—the Planning Commission has a difficult job ahead of them. The issue’s been deferred indefinitely, but they’ll have to address it again at some point.
Many eyes around the world are watching them, and the economic and social impacts are already being felt. “I think that someone did bring up a good point that it might not be the best times for the economy to be shutting down another industry at the same time construction may be slowing down throughout the islands as well as real estate, etc.,” Commissioner John Guard IV said on Oct. 9.
In an attempt to alleviate the stress of immediate closure, the Planning Department granted a grace period until the end of 2007 for TVRs operating under the previous administrations amnesty program.
“We granted a grace period and we took a lot of heat for that grace period,” planning director Hunt said. “At least one councilmember questioned whether we could do that and we defended that. We thought it was fair to give people a reasonable amount of time to make other plans to switch over to the long-term housing. Which is what those ohana units are intended for.”
The current permitting process is arduous at best. It has been known to take up to seven years and tens of thousands of dollars. Applicants must provide the plans for their homes dating back to three previous owners. Up to 15 agencies do site inspections and hold hearings on each application.
I’ve watched Maui grow, lost access to places that I once enjoyed. I’ve seen beautiful areas stripped and trashed at the hands of visitors and residents alike. At the same time, I know there’s no way to stop all development and roll the clock back 30 years.
Change is inevitable. Unfortunately, previous generations lacked the foresight to develop broad economic opportunities, to make Maui sustainable, without becoming dependent on tourism and construction as the main economic drivers.
But understanding that doesn’t make it any easier to accept. Don Atay and his wife have operated the House of Fountains B&B in Lahaina for 13 years. They’re one of the 13 B&Bs currently permitted to operate.
Atay operates legally, and the county crackdown doesn’t affect him—other than possibly increasing visitor traffic to his front door—but he’s concerned that realtors and developers wield too much power and are keeping the locals from accessing treasured places once available to all.
“Money! Money! Money!” he told me. “It’s all about money, and it’s not about the people of Maui.” MTW
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