Thousands of Maui Vacation Rentals in Limbo After Council Hits Gridlock

In arguably its biggest decision of the year, the Maui County Council recently voted to phase out roughly 7,000 vacation rentals over the next five years to make room for sorely needed longterm housing for residents.

The 5-3 decision on Bill 9 was coupled with the intention of quickly moving forward with a second bill that could effectively exempt 4,500 of those units by rezoning them for hotel use because they were deemed too costly for local residents, too prone to sea level rise or otherwise just best suited to remain short-term rentals. The goal in part was to head off lawsuits.

But when the council took up that legislation on Friday, it balked — further delaying an already lengthy process. That would have begun with a review of the rezoning bill by the county’s three volunteer regional planning commissions before it returns to the council for any final amendments and approval.

When it couldn’t agree, the council punted its discussion to Jan. 5.

“We’ve hit a wall,” Council Chair Alice Lee said. “You can talk for the next three hours and you probably wouldn’t change the minds of some people. So given that situation, we need to take a step back and figure this out another way.”

As the council hit pause there, the county also hit another snag: the first lawsuit over Bill 9. A group of property owners from the 105-unit Kāanapali Royal condo complex — which is already on the list of properties slated to be rezoned as hotel use so they can continue operating as vacation rentals — is suing the county for its “wrongful, oppressive, and unreasonable” conduct.

The lawsuit, filed Friday, claims Bill 9 has resulted in a total denial of the “viable economic use of their property,” rising to the level of a regulatory taking.

So the debate over the plan is far from over and its implementation, should it survive legal and political challenges, won’t happen overnight either.

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Under Bill 9, which Mayor Richard Bissen signed Dec. 16 shortly after the council approved it, the exemptions that have long allowed the roughly 7,000 apartment-zoned units across the county to operate as short-term rentals will expire on Jan. 1, 2029 in West Maui and Jan. 1, 2031 in the rest of the county.

Council member Tom Cook of South Maui, who served on the temporary group formed to craft recommendations for Bill 9, introduced Friday’s resolution to forward the rezoning bill to the planning commissions. The goal was to show worried property owners that officials were taking steps to ensure that many of them will be able to continue operating vacation rentals in the future.

“We’re simply creating a new zoning category,” he said. “I’d like to move this forward before the holidays, and it’s just one step in many for us to be addressing the solidification of Bill 9 and how it works.”

The group worked with the county’s planning department and legal counsel in crafting the proposed legislation, Cook said, and the two new hotel zoning districts where both residential and hotel uses are permitted would ensure a smooth transition period as Bill 9 goes into effect.

While some council members agreed it was important to forward the proposed legislation to the planning commissions as soon as possible, others said the council should discuss possible amendments and give the public a chance to comment before soliciting feedback from the commissions.

Council members agreed to discuss the proposed bill at a Jan. 5 meeting of the Disaster Recovery, International Affairs, and Planning Committee, chaired by West Maui Council member Tamara Paltin, before the full council takes up the matter again two days later.

“I don’t support sending half-baked ideas to the commissions,” Council member Keani Rawlins-Fernandez said. “We are the ones who are paid. The planning commissioners are not paid. It’s our responsibility to ensure that there has been time that we’ve fleshed out the ideas so that they can consider fully completed, thoughtful language.”

After a lengthy back and forth among all eight council members, Lee said it was clear that they were not going to reach an agreement on whether to forward the legislation. The council’s ninth member, the newly appointed Kauanoe Batangan, takes office Jan. 1.

‘The Most Immediate Way’

Bissen introduced Bill 9 in May 2024, less than a year after the deadly August 2023 wildfires displaced more than 12,000 people and exacerbated Maui’s longstanding housing shortage.

“Bill 9 has consistently stood out as the most immediate way to bring thousands of units back online and expand housing inventory,” Bissen said in a statement on Monday.

Over the next year and a half, council members heard emotional testimony from fire survivors, hotel workers, property owners, real estate agents and others who almost universally agreed that the island was experiencing a housing crisis, but disagreed on whether Bill 9 was an appropriate solution.

Many of those opposed to Bill 9 — including people who own or manage short-term rental properties — have repeatedly said affected property owners have a legal right to operate vacation rentals, and warned that stripping them of that right would inevitably lead to lawsuits and other legal troubles for the county.

Kāanapali Royal, which sits in the middle of Kāanapali Golf Courses a short distance from Whaler’s Village, is one of several properties in high-tourism areas that the council’s Temporary Investigative Group has recommended rezoning to allow for both residential and short-term rental uses. The mayor also supports the rezoning effort.

Opponents of Bill 9 have cited a University of Hawaii Economic Research Organization study that found eliminating roughly half of the county’s vacation rentals could lead to widespread job loss, result in a significant reduction in tax revenue and severely weaken Maui’s local economy. Supporters have pointed to the same study, which also found that the implementation of Bill 9 was likely to lead to improved affordability and decreased housing costs, and have argued that some negative economic consequences are worth it to free up housing for residents.

The proposed legislation that council members discussed on Monday would reduce the number of properties affected by Bill 9 from about 7,000 — including 6,208 that were listed as short-term rentals as of May 2024 — to about 1,700, according to the Department of Finance.

Almost all of the units that would fall within the new hotel zones are in West and South Maui, according to the temporary group’s October report. They are also more likely to be affected by sea level rise and to be too expensive for most county residents, the report says.

On Friday, community members who provided public testimony were largely in favor of referring the legislation to the planning commissions for feedback; however, some people were more enthusiastic about rezoning thousands of units than others.

Tom Crowley told council members that he had many concerns about how Bill 9 might affect the local economy, but he hoped the planning commissions would be able to offer suggestions for how to implement new hotel zones to shield the community from the worst economic effects.

“I hope that when this legislation returns to this body for adoption, the planning department will have cleared the pathway for rezoning without the need for expensive and sometimes impractical property improvements or public right-of-way upgrades,” he said.

Greg Rylsky said he was one of many residents of affected properties who was hopeful that Bill 9 would reclaim their neighborhood for local residents.

“There are residents in these properties that saw Bill 9 as an opportunity to regain their life,” he said, adding that some adamantly disagreed with public testimony provided by their homeowners associations arguing that residents supported allowing vacation rentals to continue operating in their communities.

“A lot of the residents are concerned about speaking out,” he said. “I’ve already been ostracized.”

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This story was originally published by Honolulu Civil Beat and distributed through a partnership with The Associated Press.