Why is Rent Rising on Maui?

by lphawaii

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I’m paying $1000 a month to live in a tiny studio on the west side of Maui. This is comparable to rent in New York City, except that gas and groceries are cheaper in New York. Why is rent going up on Maui?

Ask most people and they’ll say, “It’s because of greed.  Landlords are just too greedy on Maui.” But landlords are greedy all over the world, and they have been since the dawn of time. It must be something else.

In 2006, the County Council of Maui enacted the “Workforce Housing Policy”, which was supposed to increase housing for residents, but did exactly the opposite. The law says that anyone who wants to build an apartment must make 50% of it affordable housing. Sounds good, doesn’t it?

But not if you are a developer. Under the 50% rule, it’s unprofitable for developers to build any apartments at all — especially if half their renters qualify as affordable. So developers just decide not to build any apartments at all.

A real estate expert on Maui said, “It’s a classic case of a well intended law meeting the law of unintended consequences. I’ve been told by developers that between the red tape and inconsistencies with the permitting process, and the ‘affordable housing’ requirements many of the developers have elected to build elsewhere.”

David Cailles, a law professor at UH Manoa said, “It makes more financial sense for a landowner to build relatively expensive condominium apartments for sale than apartments for rent . . . only the most expensive projects could afford such high percentages of workforce housing.”

Maybe that’s why developers seem to always build hotels and golf courses instead of place to live.

Another reason that apartments on Maui are so expensive are zoning laws. Apartments can only be built in apartment zones. It could take more than 10 years just to get approval for an apartment building on Maui — and after all that waiting, it might not be approved.

Getting rid of the zoning requirements, and especially the 50% “Workforce Housing Policy” would do wonders for lowering rents across Maui. Without all those restrictions, developers might find it profitable to build enough apartments to compete again. Rents would fall, and locals might actually have a place to live again.

The apartment complex that I live in houses 288 rentals on just a tiny 6 acres of land. For another 6 acres, that could be doubled, and rent would fall. This would only take up .00001% of Maui.

To summarize, rent is high on Maui because of strict zoning laws, and the “Workforce Housing Policy“.  Getting rid of these laws would result in lower rents, and higher apartment quality.

One landlord replied, “Great article.  I would also add that due to the high prices of mortgages, property taxes, condo association fees, repairs, upgrades and utilities, we as landlords have no choice but to rent out our properties as vacation rentals. Either that or go broke. I would like nothing better than to rent to one party for a long term rental. Unfortunately, market forces will not allow that to happen. It leaves the Maui residents in a lousy predicament.  
~An ethical and honest landlord.

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