Debate erupts around short-term rentals in Hawaii as hotels estimate 30,000 illegal rentals

US: An Oxford Economics study released by hotel associations last week set fire to a debate between short-term rental and hotel lobbies around Hawaii’s hospitality industry and its effect on the housing crisis.

The report claimed there are 30,000 illegal short-term rental properties across the Hawaiian Islands. This comes after governor Josh Green said in a January address that he would “return more homes to local families — including short‑term rentals that have taken too many units off the market.”

Hawaii faces a housing crisis. Green claims 20,000 to 30,000 young people leave the state each year, partially because of that. Politicians like Green claim that transitioning vacation rentals to residential properties could ease that burden efficiently.

However, Hawaii’s flagship industry is tourism — and hotels in a state with the highest average room rates nationwide stand to benefit if short-term rentals are taken off the market.

Vacation rentals make up roughly 5.5 per cent of the housing market in Hawaii, both permitted and unpermitted. That percentage would mean the report classifies nearly all of those properties as illegal.

Short-term rental advocates say that framing is not in good faith. Short- and mid-term rental advocate Caitlin Miller said most properties are owned by families, not institutional investors. Two thirds of operators, she continued, rent to offset household expenses.

Data from the University of Hawaii Economic Research Organization suggest that regulation which will phase out more than 6,000 vacation rentals on the island of Maui could lead to a $900 million loss and $75 million less in tax revenue. Lawsuits have already been filed against the bill.

Despite that, others say an economic hit is worth it to free up more housing for residents. Leading Hawaii politicians argue that transitioning vacation rentals to residential housing is more efficient than slow construction of new properties.

“People said the land is too sacred, you can’t build,” Green said. “But I said the people are too sacred. Losing local people, especially younger people who have grown up their whole lives here — that is what is sacred also.”

Combine those factors with the fact that hotels and vacation rentals often serve different localities, injecting money into the local economy asymmetrically, and a tense picture emerges.

Hawaii’s housing crisis needs to be addressed, but debate rages as to who should pay the costs of residential expansion.

Highlights:

• A hotel-commissioned Oxford Economics study estimates 30,000 illegal short-term rentals exist across Hawaii, representing nearly all vacation rentals in the state’s housing market, which has prompted renewed debate between hotel and short-term rental lobbies.
• Governor Josh Green stated in his January address that he would “return more homes to local families — including short‑term rentals that have taken too many units off the market,” citing 20,000 to 30,000 young people leaving the state annually amid a housing crisis.
• Short-term rental advocates contest the report’s framing, with the Hawaii Mid and Short-Term Rental Alliance stating two-thirds of operators rent to offset household expenses and most properties are family-owned rather than investor-owned.
• University of Hawaii Economic Research Organisation data suggests proposed regulations phasing out over 6,000 Maui vacation rentals could result in a $900 million economic loss and $75 million reduction in tax revenue.
• Governor Green and other politicians argue transitioning vacation rentals to residential housing offers a more efficient solution to the housing crisis than slow new construction, despite potential economic impacts to tourism.