In an effort to address the County’s housing shortage, the County Council has created real property tax incentives to encourage property owners to rent long term to residents. Next year, condominium classification is being rescinded altogether and will be replaced with a long-term rental exemption program.
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In 2020, ordinance 5160 amended MCC 3.48.305 C. Starting this year, condominiums that are permitted to rent short term are classified as Short-Term Rental, even if they are not rented short term. The classification is based upon highest and best use and zoning.
Condominium units occupied by a lessee for a term of at least 6 consecutive months or more are classified as Non-Owner-Occupied for 2021 only. Condominium units with a home exemption will continue to be classified as Owner-Occupied.
In 2020, ordinance 5160 amended MCC 3.48.305. Starting this year, properties in Puamana are classified as Short-Term Rental, even if they are not rented short term. The classification is based upon highest and best use and uses allowed by zoning.
Properties with similar rights are now classified and taxed the same.
The County of Maui website has a link to research ordinances:
Q. It appears that this ordinance is penalizing me by classifying my unit as a short- term rental. Why are we being lumped in with others who use their units as short-term rentals? This tax change will double our property taxes.
A. Both ordinance 5159 and 5160 classify second homes that are not rented, but allow transient occupancy via zoning, as short-term rental. The classification is based upon the highest use allowed by zoning, which is typical for real property taxes. The change was made to improve parity within condominium properties and between condominium and non-condominium properties. Properties with similar rights are classified the same, unless they are rented long-term or are owner-occupied and have a home exemption. These two exceptions are intended to address the county's resident housing shortage.
Last year, 1,904 properties benefited from the condominium classification program that was amended by ordinances 5159 and 5160. Of those 1,904 properties, it is estimated that just over 400 properties are rented long-term.
The County of Maui is experiencing a resident housing shortage. Ordinances 5159 and 5160 replace the condominium classification program with a long-term rental classification and exemption over two fiscal years. The long-term rental exemption is intended to provide tax relief to those who rent long-term for 12 consecutive months by providing a $200,000 exemption for properties not in the owner-occupied class and a $100,000 exemption to those in the owner-occupied class.