Bill 9 Signed into Law: What Comes Next?

On December 15th, the Maui County Council passed Bill 9 on its second and final reading. Within hours, Mayor Bissen signed the bill into law. The new law will phase out short-term rentals in apartment-zoned condominiums around the island. The question now is what comes next? A portion of the Maui County Council recommended that the bill’s passage be accompanied by additional legislation to soften the economic blow. We also know that litigation against the bill was a strong possibility from the very moment the bill was proposed.

This post looks at efforts to modify and overturn the legislation. It also looks at the condos currently slated to be affected by the bill and which of those have been identified for a potential reprieve.

Will Maui County Create H3 and H4 Zoning?

Earlier this fall, the county council appointed a four member Temporary Investigative Group (TIG). Among the group’s tasks was to further assess the economic impacts of Bill 9 and the suitability of the affected condos for long-term rentals. The TIG’s biggest suggestion was to create two new zoning classifications, H3 and H-4. These two new types of hotel zoning would mirror A1 and A2 zoning with one critical provision: they would allow short-term rentals.

The group also looked at the apartment-zoned condos to assess which ones would be better suited to remain short-term rentals. Condo developments that were deemed “unattainable to Maui residents” (unaffordable), located in areas with higher exposure to sea level rise, and condos with high numbers of timeshare units were deemed prime candidates for the H3-H4 zoning. The TIG report included an exhibit listing these properties.

After the report was issued, South Maui Council member Tom Cook proposed a vote to incorporate the TIG report’s recommendations into Bill 9 or to delay the implementation of Bill 9 until the new zoning reforms could pass. Those votes did not advance, and the bill passed without any of the recommendations. Instead, promises were made to begin discussions on H3 and H4 zoning immediately after the bill’s passage, with all four members of the TIG expressing their support for the new zoning.

On December 19th, just four days after Bill 9 became law, the county council started discussions on Resolution 25-230. This resolution would refer a bill to the planning commission to create the new H3 and H4 zoning. However, the county council could not muster enough votes to advance the resolution. The council was still short one member, since Kauanoe Batangan, the late Tasha Kama’s replacement, had yet to be sworn in. Tamara Paltin, the West Maui representative and member of the TIG, also shifted her stance and would not support the resolution unless additional requirements were placed on condos with the H3-H4 zoning.

On January 7th, the county council took up Resolution 25-230 again with more positive results. While there was discussion of adding amendments to the Resolution, the council ultimately decided to pass a clean resolution. The council referred the resolution to the Maui, Molokai, and Lanai Planning Commissions by an 8-1 vote, with Molokai Council Member Keani Rawlins-Fernandez the lone dissenting vote.

This is just the first step of the process for creating H3 and H4 zoning, and for the Bill 9-impacted condos to obtain new zoning. If the new zoning is created, the condos will, in turn, need to apply for it. We will continue to monitor this subject as discussions on the new zoning move to the Planning Commissions.

Will Lawsuits Derail Bill 9?

From the moment Bill 9 was first proposed, attorneys and impacted condo owners immediately threatened litigation. It seems those were not idle threats, with two suits filed less than two weeks after the Bill became law.

A group of owners at Ka’anapali Royal filed the first suit. Their case was filed in the Second Circuit Court of the State of Hawaii. This suit files for temporary and permanent injunctive relief. The attorneys for the Plaintiffs argue that the county is taking “property rights without just compensation.” The suit states that the county has always allowed rentals since the condo was originally built 45 years ago. It points to the original condo documents filed with the State, which state that “Apartments shall be occupied and used only as permanent or temporary residences or lodging.”

The second suit filed was a class action suit against the county, also filed in the Second Circuit. The plaintiffs in the case are from five separate South Maui condos. The suit seeks similar relief to that in the first suit. It also shows that the county has allowed short-term rentals at all of these properties since they were built, and that the new law constitutes “taking” without compensation.

Needless to say, these are unlikely to be the last lawsuits filed against the County of Maui. Mayor Richard Bissen, a former judge, acknowledged the possibility of lawsuits since he first proposed Bill 9. The Mayor has remained confident that past court precedent will protect the law. The Corporate Council for the County of Maui also provided guidance throughout the legislative process.

Needless to say, we aren’t legal experts and don’t want to engage in armchair legal punditry. We can say this law will be heavily litigated, with the volume of suits adding friction that may ultimately delay its implementation if not prevent it outright. We will post updates on any major court decisions on the blog.

What Condos Will be Impacted by Bill 9 and Which Could Get a Reprieve?

So this brings us to the last question: which condos on Maui are impacted by Bill 9? Also, which condos were identified as potential candidates for a reprieve under H3 and H4 zoning? The tables below list which condos on Maui are apartment-zoned and facing the sunset of short-term rentals. We also include in the table whether the condos were included in the TIG reports, Exhibit 2, which suggests they would be well-suited for conversion to the proposed H3-H4.

Lahaina Condos Impacted by Bill 9

All of the apartment-zoned condos in Lahaina are scheduled to phase out short-term rentals by January 1, 2029.

None of the condos in Lahaina are included in Exhibit 2 of the TIG report. It is also worth noting that Spinaker was destroyed in the Lahaina Fire and has yet to be rebuilt

Ka’anapali Condos with Apartment Zoning

Like their neighbors in Lahaina, these condos are scheduled to phase out short-term rentals by January 1, 2029.

All of the condos in Ka’anapali were on the TIG Exhibit 2 list for potential rezoning, if the new zoning is created. As mentioned previously, owners in Ka’anapali Royal were the first to file a lawsuit challenging Bill 9.

Apartment Zoned Honokowai Condos Facing a Short-Term Rental Phase Out

Most of the short-term rental condos in Honokowai are zoned apartment. As things stand, they will need to phase out short-term rentals by January 1, 2029.

Ten of nineteen condos in Honokowai made the TIG Exhibit 2 list.

Condos in Kahana Impacted by Bill 9

Three apartment-zoned condos currently allow short-term rentals in Kahana. As things stand, they would need to phase out short-term rentals by January 1, 2029.

Kahana Outrigger is the only condo of the three that made it to the TIG Exhibit 2 List.

Kapalua Condos Impacted by Bill 9

Three of the Kapalua condo developments that currently allow short-term rentals are zoned apartment. As things stand, they need to phase out vacation rentals by January 1, 2029.

It was a surprise to many that only Kapalua Bay Villas made it onto the TIG Exhibit 2 List. The Ridge and Golf Villas were the only condos on the Mintoya list located in one of Maui’s three resort areas excluded from Exhibit 2.

Ma’alaea Short Term Rental Condos With Apartment Zoning

All condos that are short-term rented in Ma’alaea are zoned Apartment. Consequently, all are slated to phase out short-term rentals by January 1, 2031.

Five of the nine condos in Ma’alaea made it onto the TIG Exhibit 2 List.

Kihei Condos Impacted by Bill 9

Kihei will face some of the more significant impacts of Bill 9, with 26 condos subject to a phase-out of short-term rentals by January 1, 2031.

Eight of the twenty-six condos were on the TIG Exhibit 2 List. They are primarily located in South Kihei. The five largest vacation rental condo developments are all on the TIG Exhibit 2 list.

Wailea Condos Facing a Bill 9 Phase Out

As things stand, four condos in Wailea would need to phase out short-term rentals by January 1, 2025.

All Wailea condos facing a Bill 9 phase-out are on the TIG Exhibit 2 List.

Stay Tuned for Bill 9 and H3, and H4 Zoning Updates

We will continue to provide updates on Bill 9-related news on this blog. While more lawsuits may be announced, it may be a while before these cases reach a courtroom. On the H3 and H4 zoning, the various planning commissions likely won’t start discussions on the proposed new zoning categories until at least late February.

If you are interested in how the legislation is impacting the condo market, check out our Maui Market Updates. These posts look at overall Maui condo market conditions, with some specific references to the condos facing direct Bill 9 impacts. Contact the Maui Real Estate Team with any questions about Maui Condos. We would be happy to answer questions, offer our insights, and provide assistance.