Government Failure Places Blame on Vacation Rental Owners

We are now 9 months post the horrific fire on Maui.  People are still living in hotels the government is paying $1,000 a day to house them in.  FEMA is paying millions of dollars for over 500 empty rental units they can’t seem to place people into.  Residents were first told that the disaster zone was toxic, forcing residents to delay going to their own property and suiting up in hazmat gear, but that was proven false.  And to date, not a single building permit has been issued to rebuild an individual home in the disaster area.  This is what failure of government looks like.

 

These are not partisan observations.  The failures listed above have been reported quite extensively by both the Star Advertiser and Civil Beat.  You would think that given the problems the residents of Lahaina still face; our elected officials would spend a little time looking in the mirror to figure out how to fix the deeper mess their actions to date have promoted.  But you would be wrong.  Instead, the collective wisdom of the Maui Mayor, the State Legislature, and the Governor have all decided that the solution to Maui’s woes lays at the feet of “greedy mainland and foreign owners” of Maui’s short-term vacation rental units.

 

Maui Mayor Bissen asked the legislature to give the counties greater authority to regulate short-term vacation rentals.  The legislature passed SB2919 this session and Governor Green happily signed the bill into law flanked by activists who have been living on the beach at Kaanapali for several months.

 

You be the judge if it’s arrogance, lack of knowledge of the law, or political theater, but every politician that supported SB2919 knows it’s going to get challenged in court, and both the State and the Counties are going to lose.  Oahu’s Mayor Rick Blangiardi faced the same uphill challenge and lost when he tried a backdoor ploy to ban STVR’s last year Oahu.

 

Hawaii’s Intermediate Court of Appeals in their decision to strike down Oahu’s attempted ban stated:

 

“[T]he right of a property owner to the continued existence of uses and structures which lawfully existed prior to the effective date of a zoning restriction is grounded in constitutional law.

“[D]ue process principles protect a property owner from having his or her vested property rights interfered with, and preexisting lawful uses of property are generally considered to be vested rights that zoning ordinances may not abrogate."

 

For all the legal nerds reading, this opinion comes directly from the 5^th Amendment to the US Constitution.  Most people are only familiar with the part about self-incrimination and “pleading the 5^th”, but the 5^th Amendment gives us citizens broad protections against the overreach of government.  One of those protections is the “Taking Clause”.  The government can’t take your property without reason and more importantly, just compensation.

 

No person shall be…deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

 

 

The courts in Hawaii have already ruled that the government just can’t one day decide that you can no longer use your property for the purposes it was allowed to be used when you obtained it, without any justification or compensating you for the loss in income or value.  Another excellent example of this is when public pressure forced Honolulu’s government to stop development across from Sandy Beach in East Oahu.  The property was downzoned from residential to preservation.  Us taxpayers were handed a bill from the Landowner Kamehameha Schools for their loss, and we had to pay.

 

Mayor Bissen is a lawyer and former judge.  The legislature is full of lawyers.  Why push through laws that will get tossed?  There are two very powerful lobbying groups holding the politicians’ feet to the fire.  First, the hotel lobby.  They want to get rid of their competition.  They’ve greased the wheels of government for decades and don’t feel they should have to share the tourism pot with anyone else.  The second group is the local activists that want to take from the rich and give to the poor.  Please don’t take that comment as being unsympathetic to the plight of those who lost everything on Maui.  They just want a place to live, and no one can blame them for that.  Their thinking is just skewed incorrectly.  You don’t use the government to take from one group and give to another.  Sadly, this group is being used by those in power to help the hotel lobby.  I have not seen an answer as to why if there’s over 500 vacant rentals FEMA is paying for, why this group is still living on the beach.

 

The last point as to why going after the short-term vacation rental owners is a dumb idea has to do with revenue.  Families that vacation in Hawaii that choose a fully equipped condo or house don’t want to stay in hotel rooms.  A recent survey reported that 30% of visitors would not come to Hawaii if all they could get were standard hotel rooms.  The University of Hawaii’s Economic Research Organization also warned lawmakers that eliminating STVR’s will negatively impact tax revenues.  All those units pay the Transient Accommodations Tax.  Flipping those units to long-term rentals or forcing owners to sell due to a loss in revenue would see a steep decline in the amount of TAT collected.

 

What Maui needs is honest effective leadership, and they need it now.  Political games and class warfare are too common in our Aloha State.  Our government needs to help Maui rebuild, not push us to turn on each other.

 

 

 

 

 

And now the week’s economic news…….

 

Jobless Claims Climb

With a lack of significant economic news, it was a very quiet week for mortgage markets. Investors essentially were on the sidelines waiting for the next big CPI inflation report on May 15. In the bigger picture, mortgage rates remain a little below their highest levels of the year.

 

It makes sense that investors are hesitant to take action right now since the economic outlook is particularly uncertain. While there is always a divergence in forecasts from leading economists, the current range is unusually large. The primary focus continues to be on inflation. After coming down sharply from its peak for roughly a year and a half, the data so far this year has indicated that further progress has stalled. The big question is whether the downward trend is indeed over or whether this is merely a temporary pause. Only time will tell.

 

Investors are similarly divided about the future path of consumer spending and the strength of the labor market. Despite major headwinds such as higher prices, consumer spending has remained surprisingly resilient, unexpectedly boosting GDP growth for several quarters. Now, however, cracks appear to be emerging, particularly for consumers at lower income levels who appear to be scaling back. The most recent reports on employment growth, job openings, and unemployment claims also suggest that the tight labor market may finally be easing a bit. As a result of the uncertainty, Fed officials have adopted a wait and see attitude before adjusting monetary policy, and investors have been reacting especially strongly to incoming economic data.

 

The Department of Labor releases the total number of new claims for unemployment insurance each week. The latest reading was 231,000, above the consensus forecast and the most since August 2023. This was down sharply from the inflated figures seen during the early months of the pandemic, but in line with the levels which were typical during 2019. Weekly jobless claims are important because they are one of the timeliest indicators of labor market trends.

 

 

 

 

 

 

 

 

Next Week

Investors will continue to watch for Fed officials to elaborate on their plans for future monetary policy. Wednesday will be the big day for economic reports with CPI and Retail Sales. The Consumer Price Index (CPI) is a widely followed monthly inflation indicator that looks at the price changes for a broad range of goods and services. Since consumer spending accounts for over two-thirds of U.S. economic activity, the retail sales data is a key measure of the health of the economy. In addition, Housing Starts and Import Prices will be released on Thursday.

 

 

 

 

 

 

 

 

 

Until next week…….