Proposed STR phaseout is legal, economic crisis waiting to happen
from Grassroot Institute of Hawaii, December 15, 2025
The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the Maui County Council on Dec. 15, 2025.
Dec. 15, 2025, 9 a.m.
Council Chamber, Kalana O Maui Building
To: Maui County Council
Alice Lee, Chair
Yuki Lei Sugimura, Vice Chair
From: Grassroot Institute of Hawaii
Joe Kent, Executive Vice President
RE: Bill 9 (2025) — RELATING TO TRANSIENT VACATION RENTALS IN APARTMENT DISTRICTS
Aloha Chair Lee, Vice Chair Sugimura and other members of the Council,
The Grassroot Institute of Hawaii opposes Bill 9, CD1, FD1 (2025), which would phase out 6,127 short-term rental units as a permitted use in apartment zoning districts. These units are on the so-called Minatoya list, a 1989 legal document later codified as a county ordinance that allowed certain STRs to operate.
Grassroot is concerned that phasing out these short-term rentals would cause job losses for Maui residents, impede entrepreneurship, reduce county tax revenues and result in expensive litigation against the county.
In addition, Grassroot believes there are other ways the county could increase the supply of affordable housing — ways that would actually work without causing enormous economic and social damage.
For these reasons, Grassroot urges the Council to defer Bill 9 (2025) indefinitely.
>> Job losses
Regarding our concern about likely job losses, removing approximately 25% of Maui’s visitor accommodations could have a profound effect on the thousands of Maui residents who provide cleaning and maintenance services to STRs, or operate rental car agencies and run restaurants, gift shops and tour services that depend on visitor spending to stay afloat.
The Economic Research Organization at the University of Hawai‘i has estimated that phasing out all of the units on the Minatoya list would cause the loss of 1,900 jobs — 3% of Maui’s total employment — due to a reduction in visitor arrivals of 32% that would cause visitor spending to fall by about $900 million[1] and reduce the county’s gross domestic product by 4%.[2]
Similarly, a 2024 study by economic consulting firm Kloninger & Sims likewise found that the proposed STR phaseout could result in 7,800 lost jobs and $1.3 billion in lost economic output.[3]
>> Impede entrepreneurship
Regarding the phaseout’s probable effect on business creation and entrepreneurship, STRs spread visitor traffic across the island rather than concentrating it in resort zones, which helps prevent overuse of a few visitor hotspots and encourages tourists to patronize businesses in less-touristy parts of Maui.
Such spreading of tourism opportunities across neighborhoods and communities benefits small cleaning businesses, handyworkers, tradespeople and independent property managers. Money stays in the community with housekeepers, landscapers and other business operations, rather than going to mainland hotel owners.
Phasing out more than 6,000 units would clearly reduce the ability for small Maui businesses to participate in the county’s top economic engine.
>> Reduce county tax revenues
Regarding the county’s tax situation, the UHERO study previously mentioned found that the proposed phaseout could cost the county up to $60 million annually by 2029 in lost property tax revenue because of its lowering effect on property values, and because some of the affected STRs would be converted to other tax classes that carry lower tax rates, such as owner-occupied and long-term rental.[4]
For context, $60 million represents about 9% of Maui’s property tax revenue for fiscal year 2026.[5]
To replace this revenue, county lawmakers might feel they have to increase property tax rates on other classes, which would mean that businesses, farms, homeowners and others would have to pay more in taxes.
Furthermore, UHERO noted that the county would see lower general excise and transient accommodation tax collections because of lower visitor spending. It estimated that GET revenues would fall by 10% and TAT revenues by 8%, resulting in $15 million less a year in county revenues.[6]
>> Expensive litigation against the county
As for the prospect of expensive litigation against the county, Act 17 (2024) removed the state law that prohibited counties from phasing out STRs, but that should not be regarded as the end of Maui County’s potential legal hurdles if it proceeds with this proposed STR phaseout.
Hawaii courts have specifically noted that preexisting uses are vested rights protected by the due process provisions in both the Hawaii and U.S. constitutions, and thus cannot be abrogated by later zoning ordinances.[7]
In addition, the U.S. Supreme Court has indicated its willingness to uphold property rights against government regulations. In Tyler v. Hennepin County[8] and Timbs v. Indiana,[9] the Court sided with property owners on Fifth Amendment and Eighth Amendment grounds, respectively.
This is not a simple issue, and any court battle likely would be both lengthy and costly for the county. If the goal is to address concerns about the lack of affordable housing in Maui, there are more effective ways to approach the problem that would not embroil the county in complex, lengthy and likely very expensive litigation.
>> There are other ways to increase the housing supply
The easiest and most efficient way to address Maui County’s need for more housing would be to remove the county’s many land-use, building and other regulations that have hindered homebuilding.
Several bills now before Council — including Bill 103 (2024) and Bill 122 (2025) — would expand housing options for Maui residents and result in the construction of smaller, more affordable units.
Grassroot believes these strategies would be better for Maui residents than the proposed STR phaseout, which would certainly result in the loss of thousands of jobs, harm entrepreneurship and cost Maui County and county taxpayers dearly.
Thank you for the opportunity to testify.
Joe Kent
Executive Vice President
Grassroot Institute of Hawaii
_____________
[1] Carl Bonham, Steven Bond-Smith, Peter Fuleky, et al., “An Economic Analysis of the Proposal to Phase Out Transient Vacation Rentals in Maui County Apartment Districts,” March 31, 2025, p. 1.
[2] Carl Bonham, Steven Bond-Smith, Peter Fuleky, et al., “An Economic Analysis of the Proposal to Phase Out Transient Vacation Rentals in Maui County Apartment Districts,” March 31, 2025, p. 1.
[3] “State of Hawai‘i and Maui Economic and Fiscal Impacts of the Short-Term Rental Industry,” prepared by Kloninger & Sims Consulting LLC for the Travel Technology Association, June 12, 2024, pp. 5-6.
[4] “An Economic Analysis of the Proposal to Phase Out Transient Vacation Rentals in Maui County Apartment Districts,” p. 1.
[5] “COUNTY of MAUI REAL PROPERTY TAX VALUATION for FISCAL YEAR 2025 – 2026,” Technical Branch, Real Property Assessment Division, Department of Budget and Fiscal Services, City and County of Honolulu, August 2025.
[6] “An Economic Analysis of the Proposal to Phase Out Transient Vacation Rentals in Maui County Apartment Districts,” p. 1.
[7] “Waikiki Marketplace v. Zon. Bd. of Appeals,” 86 Haw. 343 (Haw. Ct. App. 1997), Nov. 25, 1997.
[8] “Tyler v. Hennepin County, Minnesota, et al.” Supreme Court of the United States, May 25, 2023.
[9] “Timbs v. Indiana,” Supreme Court of the United States, Feb. 20, 2019.
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Grassroot testimonies submitted in mid-December 2025
Below are testimonies submitted during mid-December 2025 by the Grassroot Institute of Hawaii for consideration by the Hawai‘i and Maui county councils and the Honolulu Planning Commission.
HAWAI‘I COUNTY
>> Bill 103 (2025) — “Limit tax hikes for senior owners as agricultural land values increase”
MAUI COUNTY
>> Bill 9 (2025) — “Proposed STR phaseout is legal, economic crisis waiting to happen”
>> Bill 146 (2025) — “Amend when tax exemption for newly acquired home takes effect”
>> Bill 171, CD1 (2025) — “Extend Lahaina property tax waivers to prevent costs for unusable land”
>> Bill 171, CD1 (2025) — “Extension of property tax waiver vital fo rebuilding of Lahaina”
>> Bill 181 (2025) — “Increase property tax exemption for owners of long-term rentals”
>> Bill 183 (2025) —“Allow all burned Lahaina structures to be rebuilt to pre-fire heights”
>> Re: Resolution 25-222 — “Joint development agreements could provide housing flexibility”
HONOLULU PLANNING COMMISSION
>> RE: Resolution 25-105 — “Increase apartment floor-area ratios to boost housing stock”