Vacation rentals are gaining in popularity world-wide as vacationers discover the advantages to renting a condo vs staying in a hotel. However with this increased popularity there is also an increased amount of concern regarding vacation rentals and the impact they have on communities and neighborhoods.
Disclaimer: ALL five of our vacation rentals are legal. They are located in designated resort zones surrounded mainly by other vacation rentals. Each one is classified as a short-term rental by the County of Maui based on their zoning. These condos are located in areas frequented by tourists, the buildings generally too expensive to buy and maintain for long-term rentals. We pay the short-term rental property tax rate to County of Maui and collect and submit transient accommodations and general excise tax to the State of Hawaii as is required by law.
Does Maui have legal vacation rentals?
Maui County has two types of legal vacation rentals. Those in approved zones (hotel/business/historic) and then those that are outside of the designated zone and have applied for and received a special bed & breakfast (or TVR – transient vacation rental) permit. There are 400 of these permits available in Maui County. When you are renting one of these properties, they should be displaying both their permit# and their tax ID on all advertising. (Source: Maui County website and here)
How do I determine if my Maui vacation rental is legal?
If you are renting a place that is NOT in an apartment building, ask for the Maui County permit number. If they can’t produce one, don’t rent it.
If your vacation rental is in an apartment building or larger resort, there is a very handy website called MauiPropertyTax.com. On it you can search by address or owner’s name. Make sure you select the correct unit number. In the assessment page it will show you what the condo is classified as – it should say ‘short term rental’. Note, short term rentals pay a significantly higher property tax than owner-occupied or even long-term rentals (zoned ‘apartment’).
What happens if I rent an illegal vacation rental?
Best case scenario – nothing. You come on vacation, everything is fine.
Worst case scenario – you arrive and realize your vacation rental has been shut down and you have no place to stay. You are out thousands of dollars and scramble to find another rental. If this happens during high season (Christmas through early April, you may end up camping in your rental car).
What are other things owners need to do to have a legal vacation rental?
Besides zoning, there are other requirements by the State of Hawaii. Owners/property managers must collect a total of 14.4167% tax from their guests and submit to the State of Hawaii. Their GE/TA tax ID numbers must be listed on all advertising and rental agreements.
Legally we also must have an on-island contact person and our guests must have this person’s phone and email address so they can reach them when there is a problem. In our case, that on-island contact is me (Cara). When you rent with us, my email and cell phone number is included in both the rental agreement and check-in information. It is also posted in each condo. When we do travel, we always provide you with an alternate contact person (the cleaning company manager).
Current real-life State of Hawaii example of what can happen when you rent an illegal vacation rental
Let me preface this news story: each County in the State of Hawaii has its own vacation rental legislation. There are numerous counties: Maui County (encompasses Maui, Molokai, Lanai and Kahoolawe), Hawaii County (also known as ‘Big Island’), City of Honolulu (this is the island Oahu – home to Honolulu, Waikiki Beach etc), Kauai County.
The City of Honolulu (Island of Oahu) is currently in the news for clamping down on illegal vacation rentals. Part of the problem is that they have not issued vacation rental permits since 1989. Since then many illegal vacation rentals have proliferated unchecked as the island’s government has purposely ignored the problem. Effective August 2019 the City of Honolulu has decided to clamp down on illegal vacation rentals and issue fines. This is causing a lot of vacation rental chaos ON OAHU as owners, threatened by steep fines for rentals of less than 30 days, cancel existing bookings and pull listings.
Note, this enforcement action does NOT affect Maui vacation rentals. Different county, different rules. However, as the owner of five LEGALLY operated vacation rentals on Maui, I do support Counties’ enforcement of current rules. Illegal operators put legal operators at a disadvantage. I pay the higher property tax rate, insurance costs, collect and submit the 10.25% transient accommodation tax and 4.167% general excise tax as required to the State of Hawaii. Illegal operators do not do these things and have an unfair competitive advantage.