Hawaii’s Colossal Short-Term Rental Problem

by Keolu

Short-term rentals (STR) like Airbnb and VRBO started out as a great idea.

Rent out your extra space to travelers.  Owners make extra income and the vacationer gets to stay in a real home.  What’s not to love?

But what started out as a good thing, turned into a business model that has exploited residential areas until it pushed housing beyond the reach of kamaʻāina.

Short-term rentals are lucrative. In Hawaiʻi, owners can rent a STR property for four times the money to tourists as you can rent to a local family.

Investors began to buy mass properties from the Hawaiʻi residential pool with the specific intention of creating short-term vacation rentals for tourists.

This is not a unique problem to Hawaiʻi. Short-term rentals have been destroying affordable housing world-wide from Lāhainā to San Diego to Paris to British Columbia to Berlin to Mallorca to Austin.

Everyone knows building new housing for kamaʻāina is a must.  I don’t think anyone disagrees.  Increasing the inventory of new homes is a no-brainer.

But, when you look at the numbers, you will see that we cannot outbuild the problem of short-term rentals.

The Massive Scale of Hawaii’s Short-Term Rental Problem

According to Governor Josh Green:

The State of Hawaiʻi has 89,000 short-term rentals but only 15,000 are legal.  

Think about the context of those numbers…  That means 83% of the short-term rentals in Hawaiʻi are illegal !

52% of short-term rentals are owned by mainland owners.  Most short-term rental owners don’t even live in our State or keep the profits in our economy.

27% of short-term rental owners own 20 or more rentals!  Greed is pricing kamaʻāina out of paradise.

According to the University of Hawaiʻi Economic Research Organization (UHERO):

14% of total housing on Maui are short-term rentals.  32% of total housing on Maui is owned by an out-of-state owner.

Over 16% of total housing on Kauaʻi are short-term rentals.

Only a small share of residents are reliant on short-term rental income. 

Only 1 in 5 people in the State of Hawaiʻi can afford to buy a house at the current inflated prices.

According to Maui Strong:

87% of the housing north of Lāhainā are designated as short-term rentals.

How Short-term Rentals Destroy Kamaʻāina Affordable Housing

Short-term rentals are excessively more lucrative than long-term rentals

STR owners can get four times more money by renting to tourists than to a local family.

Local ʻohana cannot compete against a 400% rent increase!  Kamaʻāina are barely keeping their heads above economic water as is.

This means to be competitive against tourist rental dollars, the average kamaʻāina renter would need to make 126% more per paycheck.  Good luck asking your boss for a 126% raise!

STR owners do not rent to kamaʻāina when the profits they can make from tourists are quadruple.  

Short-term rental investors are chasing profits at the expense of our community.

Short-term rentals inflate the cost of housing and displace kamaʻāina

The UHERO Blog “Short-term Vacation Rentals and Housing Costs in Hawaiʻi” details how:

Each STR represents a housing unit that could otherwise be part of the local supply of permanent housing, exacerbating the state’s current housing shortage.”

and that

…the economic logic linking STRs to increases in the cost of housing is fairly unequivocal: diverting units from the pool of long-term housing reduces long-term housing supply and pushes up rents and home prices.”

Short-term rentals are taking up the land for kamaʻāina housing and are one of the factors driving the cost of housing to unaffordable prices.

Investment short-term rentals should not be in residential neighborhoods taking up housing for kamaʻāina.

You Cannot Outbuild the Problem of Short-Term Rentals

Deep pocket investors can outbuy new houses faster than they can be built

We all know many stories of local families bidding on homes only to have a mainland buyer with deep pockets swoop in and outbid everyone.  

These mainland deep pocket buyers are more than willing to pay over market value because they know they will make up the difference by the massive profits they can charge tourists.  

When housing is sold way above market value, the median market value keeps skyrocketing.  Greed has inflated the current real estate supply out of reach of local families.

Kamaʻāina families cannot buy new houses when the rich easily outbid them.  The faster houses are built, the faster they are scooped up by investors.

It is a money machine for them while you are just fighting for your right to exist.

New housing is already out of reach for most kamaʻāina ʻohana

Hawaii’s median home price is more than $1 million and climbing.

Common financial wisdom says, ideally, you should not be spending more than 30% of your income on your mortgage.

The United States national average is 36%.

According to Hawaii News Now:

A typical Honolulu family needs 73% of their income to pay a mortgage!

A low-income Honolulu family needs 147% of their income to pay a mortgage!

We have a finite amount of land

We live on islands.  Every housing unit built takes up a little bit of our finite ʻāina.

As the available land diminishes, it further drives up prices because the demand remains high but the supply is always slowly going down.

STR properties take away long-term or permanent housing inventory for locals.  

Reducing vacation rental investments in our residential neighborhoods by creating updated management laws frees up those properties for kamaʻāina families.

What Our Goal Should Be

Short-term rentals are one of the major roadblocks to affordable housing for kamaʻāina.

Out-of-state short-term rental owners are purchasing properties at the expense of kamaʻāina housing for massive taken-out-of-state profits.  

Investors see a house as an investment property.  Kamaʻāina see a house as a home.

The short-term rental industry artificially inflates the cost of housing by removing properties from the local housing pool.  

These investors put their profits and tourists’ needs over the well-being of our kamaʻāina.

We should prioritize our local kamaʻāina housing over investment profits and housing for tourists.

Reducing short-term rentals will help local families afford homes, give housing back to our people, and keep kamaʻāina from being priced out of paradise.

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