Address Maui housing crisis with incentives, not mandates

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Fresh carrots in her bush about to be harvested
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By Keli‘i Akina

Usually when people negotiate, they are looking for a “win-win” result — one that will leave everyone happy — or at least satisfied. Ideally, no one is left feeling angry or taken advantage of.

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Hawaii’s leaders should keep that in mind as they try to persuade short-term rental owners to house Maui residents who lost their homes to the tragic wildfires of Aug. 8.

Keli’i Akina

The latest proposals on the table from Gov. Josh Green and Maui Mayor Richard Bissen are thoughtful and well-intended, but the sticks overshadow the carrots.

One of the carrots involves subsidizing the efforts of homeowners to build accessory dwelling units on their properties to house the fire evacuees. In terms of providing dependable long-term housing, it’s probably the best of the ideas so far suggested, though it would come at some cost.

The rest of the carrots have to do with enticing short-term rental owners to house displaced residents.

One involves reimbursing STR owners up to $5,000 a month over an 18-month period for offering up a one-bedroom or studio unit, and up to $11,000 a month for a four-bedroom home.

Despite coming in at about 400% over fair market value, this would actually save the state money compared to the current cost of more than $13,000 a month to house displaced residents in hotel rooms.

Other carrots include giving participating STR owners a two-year break from transient-accommodation taxes, and possibly exempting them from Maui’s property taxes from Feb. 20, 2024, through June 30, 2025.

Setting aside budgetary concerns for the moment, these seem like attractive incentives to help address a serious policy problem. But as I mentioned earlier, these proposals also include sticks — and that’s where the negotiating becomes problematic.

For example, the governor mentioned the possibility of simply banning short-term rentals that do not participate in the program. Similarly, both the governor and Maui’s mayor mentioned imposing a significant potential property tax hike on STR owners who do not participate.

The governor said he recognizes an STR ban could result in long legal battles. But even a backdoor STR ban through a massive targeted tax hike could prove to be a legal nightmare.

The result is that these proposals, taken as a whole, would not be a win-win situation for STR owners who, for whatever reason, might choose to not participate.

Let’s not forget: STR owners are property owners. Many of them are long-term local residents — our friends, families, neighbors. They have their reasons for choosing to rent short term instead of long term, and the courts have recognized that this freedom to choose the terms of their rentals is, within certain limits, a valid part of the intrinsic right to do as you wish with your own property.

If STR owners determine that the incentives offered by the state or county are a good deal, then they will probably leap at the chance to participate in the program. But what if they think it’s not a good deal?

Or what if it isn’t a question of money at all?

What if owners have existing rental contracts that cannot be canceled without major penalties? What if they live in the home for part of the year and can’t rent long-term? What if they’re concerned about the legal and financial ramifications of taking on long-term tenants?

Yes, finding housing for Maui’s fire victims is an urgent need. We want to act with compassion and support the victims of the Lahaina fires. But in our attempt to help, there is a delicate balance that must take place, and we cannot overlook the rights of STR owners.

Ultimately, the governor and Maui’s mayor have offered attractive carrots, but the sticks are simply too punitive.

Providing incentives for property owners to offer long-term leases to the Maui fire victims could result in a win-win, but everyone loses when we infringe on basic property rights.
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Keli‘i Akina is president and CEO of the Grassroot Institute of Hawaii.

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Grassroot Institute of Hawaii is a nonprofit, nonpartisan research institute dedicated to the principles of individual liberty, the free market and accountable government. Through research papers, policy briefings, commentaries and conferences, the Institute seeks to educate and inform Hawaii's policy makers, news media and general public. Committed to its independence, the Grassroot Institute of Hawaii neither seeks nor accepts government funding. The institute is a 501(c)(3) organization supported by all those who share a concern for Hawaii's future and an appreciation of the role of sound ideas and more informed choices.

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