Vacation rentals are manageable
By F. Kenneth Stokes
After nearly two years of studying the transient vacation rental business in Hawai'i, I have yet to find many community planners who think that TVRs are a big problem, nor many politicians who think they are not.
Perhaps this is due to their differing opinions regarding how many vacation rentals are in business across the state and what share of housing they represent in different neighborhoods.
Having just concluded my own research on three islands and analyzed new data from the state Department of Business, Economic Development and Planning (see chart), I believe that we now have enough solid numbers to help answer these questions and better inform public opinion.
The simple fact is that there are not nearly as many vacation rentals as many folks have thought, and so far, there are only a few communities where the incursion of vacation rentals is creating problems.
This should be great news for those who care deeply about our towns and neighborhoods, and we might hope that this improved information will help alter the tone of our discourse on the vacation-rental challenge, and raise the odds for effective enforcement of refined regulations now under consideration on O'ahu, Maui and Kaua'i.
Accordingly, folks on all sides of the TVR debate might simply take a deep breath and agree to rethink their preconceptions and explore new avenues for resolving this issue.
Here are five key findings from my just-completed research:
One way to check the reliability of my TVR unit counts is to compare them with new DBEDT data on TVR patrons (see chart), which were not available when I was conducting my research. If we estimate how many TVR units would be needed to meet the demand from TVR patrons, the statewide total is nearly identical to my own count of roughly 4,200.
This finding should be especially helpful to the Maui discourse, where many residents and some politicians have been persuaded that the numbers are much higher. Maui has more than twice Kaua'i's visitors, yet I counted roughly the same number of TVRs on both islands.
The reason, we now know, is that Maui's TVR share of visitors is less than half — 3.6 percent versus 8.3 percent on Kaua'i.
Some readers will recall the headlines from last February citing "10,000 illegal units statewide." We now know this number is way out of line, largely because it counted many TVRs more than once. DBEDT is now working on a better counting method, and we can hope official statistics improve in the future.
Moreover, editorials across the state have suggested that TVRs are contributing to high home prices, yet it is the second-home buying spree that inflates prices. I estimate that only about 40 percent of second homes are TVRs, and no amount of TVR regulation can blunt this burgeoning demand.
Additionally, many local news stories have played up the threat to "neighborhood character," yet, even at oft-cited Kailua Beach, TVRs constitute only 10 percent of housing. Of course, some towns are much higher, and Hanalei on Kaua'i with a 40 percent TVR share has definitely lost some of its "character," while Sprecklesville on Maui already has an 18 percent share. Still, these and a handful of other towns are the exceptions, and this is also good news.
In a speech to the Hawai'i Economics Association, I used these results to draw three principal conclusions:
Each community can decide what works for them, and the tourism industry can get much more involved in ensuring that the TVR market reaps benefits for all.
In my view, optimal regulation of TVRs will involve collaboration with the industry to vastly improve our ability to analyze and monitor this segment of our tourism market and seek to induce voluntary compliance.
These conclusions are only possible after a fresh look at new numbers, and it is reasonable to expect more fresh ideas will emerge as this revised reality sinks in.
F. Kenneth Stokes is "green" economist with The Kauaian Institute.