MAUI VACATION RENTAL (TRANSIENT ACCOMMODATIONS) & SHORT TERM RENTAL UPDATE: MAY 2024

Maui, like many places around the US that are popular vacation destinations, has grappled with affordable housing and workforce housing for decades. The wildfire that swept through Lahaina town on August 8, 2023 has highlighted the critical need for affordable housing in Maui County.

Since the fire, the Hawaii State Legislature passed SB2919 on May 2, 2024.  It was signed into law by Governor Josh Green on May 4, 2024. 

Per the governor's website,  "By addressing the issue of illegal short-term rentals, SB 2919 aims to alleviate Hawaiʻi’s housing crisis and increase housing levels throughout the state. This bill provides counties with home rule authority to see that vacation rentals are not allowed in communities that do not want them."  Read More

In anticipation of the governor signing the bill into law, Maui County's Mayor Richard Bissen held a press conference on May 3rd.  During that conference, he announced his intent to present a bill  that “If successful, this legislation will support the return of approximately 7,000 transient vacation rentals (TVRs) to the local housing market and specifically 2,200 in West Maui, again, for long-term rental consideration.”  It should be noted that these rentals have not been operating illegally, but rather these are legal short term rentals through a section of the Maui County Code, Chapter 19.12.020

It should be noted that draft of the Mayor's proposed bill is not yet available.

As described by the Mayor, the measure would:

• Phase out all STRs on the Minatoya List located in West Maui effective July 1, 2025.
• Phase out all STRs on the Minatoya List located in all other parts of Maui effective January 1, 2026.

The Bill is scheduled to be heard by the Maui Planning Commission on June 25, 2024 with Molokai and Lanai Planning Commission hearings to follow.

Below are some frequently asked questions and links to resources and source information.  As always, interested parties are advised to do their own due diligence and consult with the appropriate professional, as county zoning rules and ordinances may change over time.

MAUI TRANSIENT/SHORT-TERM/VACATION RENTAL FAQS

For the purpose of the information below, "Transient Vacation Rental" or "TVR" is used interchangeably with the terms short-term rentals and vacation rentals. 

1. What is a Transient Vacation Rental (TVR)?

Per Maui County's website, a TVR (short-term or vacation rental) is any rental of a housing unit for less than 180 days. The Maui County Code Chapter 19.37 prohibits transient vacation rentals outside of the hotel district. 

List of Maui's Hotel Zoned Condos

2. What if the condominium property I'm considering does not fall under Maui County's Code's Hotel District?  Can I still rent it short-term as a TVR?  What is the Minatoya List?

Per the Maui County TVR FAQ webpage: "An estimated 16,000-plus TVRs may operate legally in the County, many in multi-unit buildings, along with several hundred single family units. They operate legally because they are in an approved zoning district (hotel, business, historic, etc). Those that are not in approved districts and are operating legally, have applied for and received a “conditional permit” that is required to conduct a vacation rental business in a residential, rural or agricultural zoned district."

Per the current county code (County Code Chapter 19.12.020 section G), TVRs of condominiums are currently permitted in apartment zoning (A-1 and A-2) if they meet the following criteria:

1. The building or structure received a building permit, special management area use permit, or planned development approval that was lawfully issued by and was valid, or is otherwise confirmed to have been lawfully existing, on April 20, 1989.
2. Transient vacation rental use was legally conducted in any lawfully existing dwelling unit within the building or structure prior to September 24, 2020 as determined by real property tax class or payment of general excise tax and transient accommodations tax.
3.  The number of rooms or units allowed for transient vacation rental use may not increase beyond those allowed for such use as of January 7, 2022. Existing transient vacation rentals may be reconstructed, renovated, or expanded if no new rooms or transient vacation rental units are added.
4. The property owner or operator holds general excise tax and transient accommodations tax licenses and is current in payment of State and County taxes, fines, or penalties assessed in relation to the transient vacation rental.
5. The planning director and director of finance must maintain a publicly available list of all transient vacation rental units allowed under this section to the best of the departments' knowledge at the time the list is posted. The list is informational only and is not a confirmation of zoning or allowable uses. Inclusion of a property on the list does not establish any right to operate a transient vacation rental unit, and no person may rely upon the list to establish the right to operate as a transient vacation rental unit. Any interested person must consult the department with respect to any specific property's ability to operate as a transient vacation rental unit.
6. Advertisements for transient vacation rental use must include the subject property's registration number, which is the subject property's tax map key number, without punctuation marks.
7. A declaration in accordance with section 19.12.025 must not have been filed.

This section of the county code and the vested rights to conduct transient vacation rental use may change under the Mayor's proposed bill.

List of Condominiums under the County of Maui Short Term Rental List as of 3.20.2024. 

3. What is the Minatoya List?

In 2001, Maui County's Deputy Corporate Counsel, Richard K. Minatoya, issued a legal opinion that was later  codified in Chapter 19.12.020.  Subsequently, there is a list of condominiums, apartments and planned developments that meet the criteria outlined above in question 2.  

The County of Maui maintains "a list of Apartment-zoned properties that are generally recognized to have the vested right to conduct transient vacation rental use under the current county code." This list is often referred to as the "Minatoya List".

It is noted on the list "This list does not grant any entitlement that is not allowed by zoning or any other provisions of the Maui County Code. This list is subject to error; to determine if short-term occupancy is allowed on any property, confirmation should be obtained from the Department of Planning."  

If the mayor's proposed legislation passes, the apartment-zoned condominiums on this list would be affected.   It is not known if other zonings would be affected or those rentals allowed by ordinances. The proposal may go through revisions at the Planning Department and at the County Council.  It is advised to seek confirmation from the Department of Planning and keep updated on the legislation.

4.  What if I am considering a single-family residence or ohana?

For a single-family and/or ohana home in the Apartment, Residential and Agricultural Districts, if an exemption is not in place for the subdivision, an owner would have to apply for and gain approval for one of the following in order to use the property as a TVR:

• B&B Permit (County Code Chapter 19.64), per the zoning ordinances, the owner/proprietor of a B&B shall be a resident of the County and shall reside, on a full-time basis, on the same lot being used as the bed and breakfast home.
• Short Term Rental Home (STRH) Permit (County Code Chapter 19.65).  It should be noted that short-term rental home permits are subject to a variety of conditions, the owner must have owned the home for five years prior to the application, they are currently non-transferable, and the county has placed caps on the number allowed in each area.
• Conditional Use Permit: Outside of the above zoning districts, there are short-term rentals that have received approval to operate with a Conditional Permit.  

5. For homes with Short-Term Rental Home Permits.  Any Updates since originally the permit process was introduced? 
Yes.  The following are some key updates to the code:

• Update as of 4/12/2018: Maui County has passed a law that changes one of the requirements for the ability to apply for a permit to rent for any period of less than 180 days if the property does not have hotel zoning.  Previously, the application required that the home be at least five years old.  With the new law, the applicant must have owned the home for five years prior to applying for the short-term rental home permit.  This new law was passed on 3/27/2018 takes effect on 9/27/2018.
• Update as of 1/7/2022: Maui County Council passed a two-year moratorium on new short-term rentals (Ordinance 5316)
• Update 4/8/2022: The Maui County Council’s Planning and Sustainable Land Use Committee recently advanced legislation that would essentially codify the moratorium, and function to cap the number of visitor accommodations at existing levels (Resolution 22-70)
  Any interested parties should investigate current legislation and proposals at the time of your purchase, as well as the applicable county zoning ordinances that apply to the property that is of interest. 

6. With the 2-Year Moratorium on Transient Accommodations in Ordinance 5316 how does that affect buying a condominium at a property where rentals are permitted but the unit isn't currently rented?

This is something the Realtor's Association of Maui's Government Affairs department has been asked, and they responded that "this legislation should not impact any units that are allowed to conduct transient accommodations, even if those units aren’t actually conducting transient accommodations now. This specific point was discussed at the PSLU Committee’s March 23, 2022 meeting, and the original bill was amended to ensure that this right would be preserved, even if vacation rentals aren’t being conducted." For details on these changes, and a clearer understanding of the legislative intent on this matter, they point us to the meeting minutes from March 23rd beginning around page 34.

7. The Resolution also changes Section 19.32.040 of the Maui County Code to say that “transient vacation rentals are not permitted in planned developments.” Does this mean that transient vacation rentals will become unlawful in planned developments?

Again turning to our Government Affairs Department: "According to Section 20 of the proposed legislation, these changes will only apply “to new transient accommodation applications that have not received final discretionary approval prior to January 7, 2022.” Therefore, existing planned developments that currently allow transient accommodations will continue to be allowed to conduct transient accommodations. Notwithstanding, TVR use will likely be considered a “lawful non-conforming use,” which means it is allowed but it may potentially be susceptible to elimination through legislation down the line."

8. Can I manage a vacation rental or long-term rental property myself?  Can a relative or an employee manage the property for me?

An owner can manage their vacation rental or long-term themselves, but they must be on island to do so. If the owner are not on island, they do need to provide their renters with a Local Contact and/or managing agent, who resides on island.  Per Hawaii Landlord Tenant Code, Chapter 521, "An absentee landlord shall designate an agent to act on the landlord's behalf. The agent must reside on the same island as the rental unit."  Per the DCCA, the designated on-island agent must be licensed if engaging in any activity for which a real estate license is required or manages property for more than one owner.

9. Is a landlord obligated to collect General Excise Tax (GET) and Transient Accommodations Tax (TAT)?
Yes. The landlord must collect and pay GET and TAT per the Revised Statute 237.  MCTAT is also collected (Maui County Transient Accommodations Tax)

GET=4.5% (4% Hawaii State GET and .5% Maui County GET)
TAT=13.25% (10.25% Hawaii State TAT and 3% Maui County TAT)

These tax rates are subject to change.

10. When advertising a vacation rental online, are there any requirements?

Yes...enter Act 204 in 2016 and requirements relating to providing the registration, tax ID and provide the Local Contact information. In addition to helping to ensure owners of transient vacation rental properties collect and pay the appropriate taxes, it also helps consumers investigate whether an online rental advertisement is real or fraudulent and provides a contact in case of an emergency at the property.
 
Per the website for the Governor of the State of Hawaii, Act 204: "authorizes DOTAX to enforce civil penalties for operators and plan managers who fail to display the certificate of registration and registration ID numbers for transient accommodations and resort time share vacation plans. Authorizes DOTAX to issue citations for failure to provide the registration identification number or link to the number and the contact information of the local contact in an advertisement for a transient accommodation or resort time share vacation plan." 

11. Does operating a TVR affect my property tax rate?  Does owning a condominium where TVR's occur impact my tax classification? 

Yes.  Per Maui County's Website on the date of this post, the county classifies real property tax for properties as follows:

• Time Share – real property that is subject to a time share plan as defined in section 514E-1, Hawaii Revised Statutes.
• Non-owner-occupied - real property improved with a dwelling that would not be classified as “owner-occupied,” “hotel and resort,” “time share,” “TVR-STRH,” “commercial,” “industrial,” “commercialized residential,” or “long-term rental."
• Commercialized Residential – real property that serves as the owner’s principal residence and has been granted a bed and breakfast home permit, a short-term rental home permit, or operates as a transient vacation rental, and cannot qualify for a home exemption.
• TVR-STRH – lodging or dwelling units occupied by transient tenants for periods of less than six consecutive months, including real property that does not serve as the owner’s principal residence and has been granted a short-term rental home permit or a conditional permit allowing transient vacation rental use without regard to its highest and best use and cannot qualify for a home exemption.
• Apartment – multi-dwelling-unit improvements containing five or more dwellings that would not be classified ““TVR-STRH.”
• Commercial 
• Industrial 
• Agricultural 
• Conservation 
• Hotel and Resort – properties occupied by transient tenants for period of less than six consecutive months, have eight or more lodging or dwelling units and employ more than twenty full time persons.
• Owner-occupied – real property owned and occupied as a principal home and for which a home exemption was filed and granted. The exemption is $200,000 as of the date of this post.
• Long-term rental – dwelling units occupied by long-term tenants for periods of twelve consecutive months or more to the same tenant and have been granted a long-term rental exemption.  As of the date of this post, the exemption up to $200,000 on a parcel that is occupied as a long-term rental for twelve (12) consecutive months or longer to the same tenant.  

The website notes: "Property is classified based upon its highest and best use. Properties receiving home exemptions, long-term rental exemptions, permitted bed and breakfasts and permitted transient vacation rentals are exceptions."

12. What about using my property as a Long Term Rental?

In an effort to bolster housing for local residents, the county passed Bill 129 which creates an additional tax advantage to someone choosing to rent their property on a long-term basis.  This bill essentially creates a "long-term rental" tax classification and exemption.  

On January 1, 2022, lodging or dwelling units occupied by long-term tenants for periods of 12 consecutive months or more to the same tenant may be granted a long-term rental exemption.  Six-month and month-to-month leases do not qualify.  Properties without a home exemption will be eligible for a $200,000 long-term rental exemption.  Those that have a home exemption and qualify for a long-term rental exemption will be eligible for an additional $100,000 exemption and will be classified as Owner-Occupied.

To Apply, an owner must complete the Long Term Rental Exemption Form and a copy of the valid signed lease agreement by visiting www.mauipropertytax.com.  The deadline for filing is at the end of each calendar year.

A long-term rental is subject to GET (General Excise Tax) but is not subject to TAT (Transient Accommodations Taxes)

13. Any other comments?

When purchasing real estate, it is always advised to consult with the appropriate legal and tax professionals.  

If considering a property that would be used as a TVR and not living on island, it is recommended to speak with and interview licensed professional management companies.  There are sometimes on-site rental management offices, as well as independent real estate companies that specialize in the management of transient vacation rentals.

If you are considering purchasing a property here on Maui to use as a Transient Vacation Rental (TVR), you should be sure to check with the Planning Department, as well as on the current state and county zoning laws, rules and regulations, and tax laws, as well as the Residential Landlord-Tenant Code.  Per the Maui County website, there are proposed legislative bills that may change the permitting process, requirements and areas.  Find more information on these resource sites:

HELPFUL RESOURCES:
Information in this post is taken from the Maui County website and the Maui County Municipal Code website. Landlord Tenant Code and Short Term Rentals/Taxation are addressed in chapters 237, 467, and 521 of the Hawaii Revised Statutes

• Maui County Codes: Chapter 19 Zoning Ordinances and Permitted Uses
• Maui Real Property Tax Assessments: search properties
• Maui County: Real Property Division
• Act 204
• Short Term Rental Permit Information
• Minatoya Opinion
• Brochure Renting Residential, April 2016
• Brochure Transient Accommodations April, 2016
• For Consumers booking a vacation rental:  "Per Maui County Website, there are more than 16,000 units (i.e., apartments, condos, houses) that are legally eligible to operate as short-term (less than six months) rentals without requiring a Bed & Breakfast Permit or Conditional Permit. These units are generally located in districts zoned for hotel use, but some are also located in apartment districts, or are covered by other pre-existing situations. The operation of short-term rentals in these zoning districts is consistent with current County of Maui zoning ordinances, Community Plans, General Plan, and State law. All short-term rentals are also required to pay State of Hawaii General Excise Tax (GET) and Transient Accommodation Tax (TAT). It is recommended that you inquire with the owner as to whether they are operating in compliance with all current laws."  Lists of Permitted B&B's, STRH's, TVR's can be found on the county website using the link above.

Disclaimer: Information is taken from the above listed resources on the date of this post, May 15, 2017 and updated in 2018, June 13, 2022, and May 6, 2024.  While every effort has been made to ensure the accuracy of this article, it is not intended to provide legal, zoning & property use, or tax advice as individual situations will differ and should be discussed with your property management company, tax professional and/or attorney.  Zoning and land use questions should be directed to the Maui County Department of Planning. Updates and amendments may be made to the county and state laws and rules and regulations cited above, so all information contained herein should be not be relied upon without independent verification and should be researched at the time of purchase.