MAUI VACATION RENTAL (TRANSIENT ACCOMMODATIONS) & SHORT TERM RENTAL FAQs

May 7, 2024

Since this post there have been significant changes and proposed changes in Maui County and the State of Hawaii with regard to short term rentals.  Read the updated post: May, 2024

Original Post Follows

This is an update to a post I wrote in 2017.  Since writing that post, there have been updates to the county code and new legislative proposals affecting short-term rentals.  Maui, like many places around the US that are popular vacation destinations, has grappled with affordable housing and workforce housing.  In 2022, a moratorium was passed on the approval of new transient accommodations, as well as the implementation of a new long-term rental tax category to incentivize owners to tenants for 12 months or longer to create more housing.   

When purchasing a property on Maui, it's important to understand the possible uses of the property with regard to how it can be rented (long-term, short-term, limited short-term (by virtue of AOAO or HOA rules for example), or both).  As a realtor here on Maui, working primarily in resort areas, the most frequently asked questions I encounter are "can I vacation rent this property when I'm not using it?" and, if so, "can I manage the property myself on a website like VRBO or AirBnB?".  

The answer is, it depends. It isn't always straightforward, as there are several factors to consider that may govern the use of the property as a short-term Transient Vacation Rental (TVR), including, but not limited to, state laws and statutes, Maui county zoning rules and regulations, and CC&R's (Declaration of Covenants, Conditions, and Restrictions). 

For the most part, it is easier to rent condominiums short-term than homes due to zoning, county ordinances, particularly the 5-year ownership requirement prior to application to permit a home for short-term rentals, along with the limited number of available permits, which are capped by area.

The county has put some regulations in place, which do require an on-island manager, and my recommendation is to hire a licensed property manager specializing in either short or long-term rentals (whichever you need).

While this does come at an expense to owners and guests alike, it is important to have an on-island manager for tenants in case there is a leak or issue with the property, as well as for owners, to prevent property damage.  It also protects consumers from online scams for both short and long-term rentals.   I often get calls from people planning their vacation here on Maui and considering a home instead of a condo or hotel. The calls sometimes come when it just seems too good to be true; at other times, it's after they've paid deposits and can't reach their contact; and some come after they google the address and see the home is listed for sale.  Unfortunately, in almost all of these cases, the property is not a legitimate rental.  Photos are simply taken from websites and used in online ads in a rental scam. 

Below are some of the questions I'm asked most often and links to helpful resources and source information.  As always, interested parties are advised to do their own due diligence, as county zoning rules and ordinances may change over time.

TRANSIENT/SHORT-TERM/VACATION RENTAL FAQS

For the purpose of the information below, "Transient Vacation Rental" or "TVR" is used interchangeably with the terms short-term rentals and vacation rentals. 

1. What is a Transient Vacation Rental (TVR)?

Per Maui County's website, a TVR (short-term or vacation rental) is any rental of a housing unit for less than 180 days. 

The Maui County Code Chapter 19.37 prohibits transient vacation rentals outside of the hotel district. 

2. What if the property I'm considering does not fall under Maui County's Code's Hotel District?  Can I still rent it short-term as a TVR?

Per the Maui County TVR FAQ webpage: "an estimated 16,000-plus TVRs may operate legally in the County, many in multi-unit buildings, along with several hundred single-family units. They operate legally because they are in an approved zoning district (hotel, business, historic, etc). Those that are not in approved districts and are operating legally, have applied for and received a “conditional permit” that is required to conduct a vacation rental business in a residential, rural or agricultural zoned district."

Per the current county code (County Code Chapter 19.12.20 section G), TVRs of condominiums are permitted in apartment zoning (A-1 and A-2) if they meet the following criteria:

1. The building or structure received a building permit, special management area use permit, or planned development approval that was lawfully issued by and was valid, or is otherwise confirmed to have been lawfully existing, on April 20, 1989.
2. Transient vacation rental use was conducted in any lawfully existing dwelling unit within the building or structure prior to September 24, 2020 as determined by real property tax class or payment of general excise tax and transient accommodations tax.
3. The property owner or operator holds general excise tax and transient accommodations tax licenses and is current in payment of State and County taxes, fines, or penalties assessed in relation to the transient vacation rental.
4. If a building or structure is reconstructed, renovated, or expanded, transient vacation rental use is limited to the building envelope and number of bedrooms that can be confirmed as approved or lawfully existing on April 20, 1989.
5. Advertisements for transient vacation rental use must include the subject property's registration number, which is the subject property's tax map key number, without punctuation marks.

View a List of Condominiums that fall under the Maui County Short Term Rental List as of  4.27.2022

This is a list of Apartment zoned properties that are generally recognized to have the vested right to conduct transient vacation rental use.  Note: This list does not grant any entitlement that is not allowed by zoning or any other provisions of the Maui County Code. This list is subject to error; to determine if short-term occupancy is allowed on any property, confirmation should be obtained from the Department of Planning.

For a single-family and/or ohana home in the Apartment, Residential and Agricultural Districts, if an exemption is not in place for the subdivision, an owner would have to apply for and gain approval for one of the following in order to use the property as a TVR:

• B&B Permit (County Code Chapter 19.64), per the zoning ordinances, the owner/proprietor of a B&B shall be a resident of the County and shall reside, on a full-time basis, on the same lot being used as the bed and breakfast home.
• Short Term Rental Home (STRH) Permit (County Code Chapter 19.65).  It should be noted that short-term rental home permits are subject to a variety of conditions, the owner must have owned the home for five years prior to the application, they are currently non-transferable, and the county has placed caps on the number allowed in each area.
• Conditional Use Permit: Outside of the above zoning districts, there are short-term rentals that have received approval to operate with a Conditional Permit.  

3. Short Term Rental Homes.  Any Updates since originally the permit process was introduced? 
Yes.  The following are some key updates to the code:

• Update as of 4/12/2018: Maui County has passed a law that changes one of the requirements for the ability to apply for a permit to rent for any period of less than 180 days if the property does not have hotel zoning.  Previously, the application required that the home be at least five years old.  With the new law, the applicant must have owned the home for five years prior to applying for the short-term rental home permit.  This new law was passed on 3/27/2018 takes effect on 9/27/2018.
• Update as of 1/7/2022: Maui County Council passed a two-year moratorium on new short-term rentals (Ordinance 5316)
• Update 4/8/2022: The Maui County Council’s Planning and Sustainable Land Use Committee recently advanced legislation that would essentially codify the moratorium, and function to cap the number of visitor accommodations at existing levels (Resolution 22-70)
  Any interested parties should investigate current legislation and proposals at the time of your purchase, as well as the applicable county zoning ordinances that apply to the property that is of interest. 

4. With the new 2-Year Moratorium on Transient Accommodations in Ordinance 5316 how does that affect buying a condominium at a property where rentals are permitted but the unit isn't currently rented?

This is something the Realtor's Association of Maui's Government Affairs department has been asked, and they responded that "this legislation should not impact any units that are allowed to conduct transient accommodations, even if those units aren’t actually conducting transient accommodations now. This specific point was discussed at the PSLU Committee’s March 23, 2022 meeting, and the original bill was amended to ensure that this right would be preserved, even if vacation rentals aren’t being conducted." For details on these changes, and a clearer understanding of the legislative intent on this matter, they point us to the meeting minutes from March 23rd beginning around page 34.

5. The Resolution also changes Section 19.32.040 of the Maui County Code to say that “transient vacation rentals are not permitted in planned developments.” Does this mean that transient vacation rentals will become unlawful in planned developments?

Again turning to our Government Affairs Department: "According to Section 20 of the proposed legislation, these changes will only apply “to new transient accommodation applications that have not received final discretionary approval prior to January 7, 2022.” Therefore, existing planned developments that currently allow transient accommodations will continue to be allowed to conduct transient accommodations. Notwithstanding, TVR use will likely be considered a “lawful non-conforming use,” which means it is allowed but it may potentially be susceptible to elimination through legislation down the line."

6. Can I manage a vacation rental or long-term rental property myself?  Can a relative or an employee manage the property for me?

An owner can manage their vacation rental or long-term themselves, but they must be on island to do so. If the owner are not on island, they do need to provide their renters with a Local Contact and/or managing agent, who resides on island.  Per Hawaii Landlord Tenant Code, Chapter 521, "An absentee landlord shall designate an agent to act on the landlord's behalf. The agent must reside on the same island as the rental unit."  Per the DCCA, the designated on-island agent must be licensed if engaging in any activity for which a real estate license is required or manages property for more than one owner.

7. Is a landlord obligated to collect General Excise Tax (GET) and Transient Accommodations Tax (TAT)?
Yes. The landlord must collect and pay GET and TAT per the Revised Statute 237.  

8. When advertising a vacation rental online, are there any requirements?

Yes...enter Act 204 in 2016 and requirements relating to providing the registration, tax ID and provide the Local Contact information. In addition to helping to ensure owners of transient vacation rental properties collect and pay the appropriate taxes, it also helps consumers investigate whether an online rental advertisement is real or fraudulent and provides a contact in case of an emergency at the property.
 
Per the website for the Governor of the State of Hawaii, Act 204: "authorizes DOTAX to enforce civil penalties for operators and plan managers who fail to display the certificate of registration and registration ID numbers for transient accommodations and resort time share vacation plans. Authorizes DOTAX to issue citations for failure to provide the registration identification number or link to the number and the contact information of the local contact in an advertisement for a transient accommodation or resort time share vacation plan." 

9. Does operating a TVR affect my property tax rate?  Does owning a condominium where TVR's occur impact my tax classification? (Updated 6.12.2021)

Yes.  Read more on Maui County Property Taxes: new bills, assessments, and rates for 2022-23

10. What about using my property as a Long Term Rental?

In an effort to bolster housing for local residents, the county passed Bill 129 which creates an additional tax advantage to someone choosing to rent their property on a long-term basis.  This bill essentially creates a "long-term rental" tax classification and exemption.  

On January 1, 2022, lodging or dwelling units occupied by long-term tenants for periods of 12 consecutive months or more to the same tenant may be granted a long-term rental exemption.  Six-month and month-to-month leases do not qualify.  Properties without a home exemption will be eligible for a $200,000 long-term rental exemption.  Those that have a home exemption and qualify for a long-term rental exemption will be eligible for an additional $100,000 exemption and will be classified as Owner-Occupied.

To Apply, an owner must complete the Long Term Rental Exemption Form and a copy of the valid signed lease agreement by visiting www.mauipropertytax.com.  The deadline for filing is at the end of each calendar year.

A long-term rental is subject to GET (General Excise Tax) but is not subject to TAT (Transient Accommodations Tax)

Update July 26, 2022: The County Council met and passed the FIRST READING of Bill 93 (2022) to amend Sections 3.48.450 and 3.48.466, Maui County Code, to increase the homeowner exemptions for a principal home to $300,000, and for a long-term rental to $400,000, beginning January 1, 2023.

11. Any other comments?

When purchasing real estate, it is always advised to consult with the appropriate legal and tax professionals.  

If considering a property that would be used as a TVR and not living on island, it is recommended to speak with and interview licensed professional management companies.  There are sometimes on-site rental management offices, as well as independent real estate companies that specialize in the management of transient vacation rentals.

If you are considering purchasing a property here on Maui to use as a Transient Vacation Rental (TVR), you should be sure to check on the current state and county zoning laws, rules and regulations, and tax laws, as well as the Residential Landlord-Tenant Code.  Per the Maui County website, there are proposed legislative bills that may change the permitting process, requirements and areas.  Find more information on these resource sites:

HELPFUL RESOURCES:
Information in this post is taken from the Maui County website and the Maui County Municipal Code website. Landlord Tenant Code and Short Term Rentals/Taxation are addressed in chapters 237, 467, and 521 of the Hawaii Revised Statutes

• Maui County Codes: Chapter 19 Zoning Ordinances and Permitted Uses
• Maui Real Property Tax Assessments: search properties
• Maui County: Real Property Division
• Act 204
• Short Term Rental Permit Information
• Minatoya Opinion
• Brochure Renting Residential, April 2016
• Brochure Transient Accommodations April, 2016
• For Consumers booking a vacation rental:  "Per Maui County Website, there are more than 16,000 units (i.e., apartments, condos, houses) that are legally eligible to operate as short-term (less than six months) rentals without requiring a Bed & Breakfast Permit or Conditional Permit. These units are generally located in districts zoned for hotel use, but some are also located in apartment districts, or are covered by other pre-existing situations. The operation of short-term rentals in these zoning districts is consistent with current County of Maui zoning ordinances, Community Plans, General Plan, and State law. All short-term rentals are also required to pay State of Hawaii General Excise Tax (GET) and Transient Accommodation Tax (TAT). It is recommended that you inquire with the owner as to whether they are operating in compliance with all current laws."  Lists of Permitted B&B's, STRH's, TVR's can be found on the county website using the link above.

Disclaimer: Information is taken from the above listed resources on the date of this post, May 15, 2017 and updated in 2018 and again in June 13, 2022.  While every effort has been made to ensure the accuracy of this article, it is not intended to provide legal, zoning & property use, or tax advice as individual situations will differ and should be discussed with your property management company, tax professional and/or attorney.  Zoning and land use questions should be directed to the Maui County Department of Planning. Updates and amendments may be made to the county and state laws and rules and regulations cited above, so all information contained herein should be not be relied upon without independent verification and should be researched at the time of purchase.