Hawai‘i Appleseed Center for Law & Economic Justice Releases “Hawaiʻi Vacation Rentals: Impact on Housing & Hawaiʻi’s Economy”

News Release from Hawai‘i Appleseed Center for Law and Economic Justice

Honolulu, HI, MARCH 22, 2018 — The Hawai‘i Appleseed Center for Law and Economic Justice is releasing a report entitled “Hawaiʻi Vacation Rentals: Impact on Housing & Hawaiʻi’s Economy,” which explores the consequences of the proliferation of vacation rentals in Hawaiʻi. Vacation rental units (VRUs) put pressure on Hawaiʻi’s already-stressed housing market by reducing the shelter available for Hawai‘i residents and driving up rents.

The report summarizes the state of housing demand in Hawaii and details how the recent proliferation of illegal vacation rentals has exacerbated the challenges local residents face in finding affordable and appropriate housing.

Hawaiʻi’s housing costs are among the highest in the nation. Hawai‘i workers earn the lowest wages in the nation after accounting for cost of living. These financial pressures are compounded by Hawai‘i’s regressive tax system, which places the second highest tax rate in the nation on people in poverty. Given these factors, an unusually high percentage of our residents are renters—43 percent, the fourth highest percentage in the nation. Rent is more expensive in Hawai‘i than any other state. In recent years, rents have been increasing at more than twice the rate of wages. It’s no surprise that Hawai‘i has the highest rate of homelessness in the nation, and families who have called Hawai‘i home for generations are being priced off the islands.

At a time when Hawai‘i is only building half of the units necessary to keep up with demand, housing stock available to Hawai‘i residents is being eaten up by nonresident purchasers. Twenty-seven percent of Hawai‘i home sales are made to nonresidents. On Maui, 60 percent of condominium sales are made to nonresident buyers. The proliferation of short term vacation rental units (VRUs)—the majority of which are operated by nonresidents—has added another pressure point by further limiting the availability of housing for local families.

Over just the last two years, the number of VRUs has increased by 35 percent. There are currently 23,000 VRUs being advertised around the state. Up to 93 percent of them are for entire homes, rather than the rent-out-a-room image purveyed by the VRU industry. One out of every 24 housing units in the state is a VRU, with some communities being completely overwhelmed by the industry’s growth. On Kauai one in eight homes is used as a VRU. In Lahaina, the ratio drops to one in three. The reason why investors are choosing VRUs over long-term rentals is obvious: the average VRU brings in about 3.5 times more revenue than a long-term rental unit.

The loss of long-term rentals to VRUs means higher housing costs for Hawai‘i residents. Although Hawai‘i derives some benefits from VRUs through increased tourism spending and tax collection, the benefits are far outweighed by the costs. San Francisco, which like Honolulu has struggled with high housing costs and a proliferation of VRUs, found that every housing unit withdrawn from the market to be used as a VRU produces a net negative economic impact, even if the unit generates host income, visitor spending, and hotel taxes. San Francisco estimates that their local economy loses up to $300,000 per VRU per year. The impact of VRUs in Hawai‘i is likely to be similar.

“Affordable housing is the most crucial issue affecting our residents’ quality of life and their ability to economically survive” says Victor Geminiani, Co-Executive Director of Hawaiʻi Appleseed. “Speculators and investors have been eager to take advantage of the tremendously profitable vacation rental industry at the expense of our residents. We need to establish controls to protect our communities from fragmentation”.

The report presents some key recommendations that would significantly improve the enforcement capabilities of the counties to end illegal vacation rental operations and improve the legal permitting system.

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The Hawai‘i Appleseed Center for Law and Economic Justice is committed to a more socially just Hawaiʻi, where everyone has genuine opportunities to achieve economic security and fulfill their potential. We change systems that perpetuate inequality and injustice through policy development, advocacy, and coalition building.

PDF: Read Appleseed’s Hawai‘i Vacation Rentals Report

HNN: Report: 1 in 24 homes in Hawaii is now a vacation rental  

MN: Report: 1 in 7 homes in Maui County a vacation rental