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The proposal comes after repeated attempts to solve Hawaii's housing and over-tourism issue.

Hawaiian Governor Josh Green proposed a number of reforms concerning taxes for tourists and vacation rentals in his State of the State address Monday.

Green proposed a new $25 fee on tourists to address fossil fuel reliance and reiterated his pledge to initiate a potential moratorium on short-term rentals in West Maui by March 1, unless properties are volunteered for families displaced by a fire. 

“Our state is such a desirable destination, and such a profitable investment for many, that people from around the world have purchased property to hold as investments or rent as short-term rentals to visitors — making on average four times what they would if the property was simply rented to a local family,” Green said in this address. “Right now, 52% of all short-term rentals in Hawaii are owned by non-state residents, and 27% of short-term rental owners own 20 or more units.”

Wildfire Survivors’ Rehabilitation

In December, Green had asked that 3,000 condos and homes operating as short-term rentals be converted into long-term housing for those displaced by this summer’s wildfire in Lahaina.

“I will sign into law any bill the Legislature sends me that will help move short-term rentals and vacant investment properties owned by non-residents into our local housing market — to increase supply and bring down prices for our families,” Green said.

Hawaii imposes the highest taxes on hotels and vacation rentals in the country — a cumulative rate of around 18% in 2023. The state legislature introduced House Bill 820, which suggested a combined tax rate of 33% specifically for short-term rentals. However, this bill has been temporarily postponed.

In November, Maui mayor Richard Bissen pitched tax incentives to turn short-term rentals into long-term housing. Bissen’s incentives would lead to an estimated total savings of $17,775 for properties with market value of $1 million that are leased to displaced families from January 1 to December 31, 2024.

Tourist Taxes

Green’s address on Monday covered two funding proposals to address climate change and fire control. Both of these involve raising accommodation taxes and implementing a $50 “Green Fee” on out-of-state visitors. 

“This ($25) modest fee — far less than the resort fees or other taxes visitors have paid for
years — will generate more than $68 million every year from visitors,” Green said. The fee would be applicable to visitors checking into a hotel or vacation rental.

The Green Fee, if passed, is expected to generate revenue and regulate tourism, with Green estimating it could bring in up to $600 million annually. The bill awaits legislative approval, having faced challenges in previous sessions.

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Photo credit: Property listed in Hawaii on Hilton Grand Vacations. Source: Hilton Grand Vacations

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