Maui B&Bs face ‘crisis’

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Maui's bed and breakfast industry is in turmoil in the wake of a decision this summer to strictly enforce the county's permitting system.

Maui for years has required bed and breakfasts to have county permits, but a lengthy application process and lack of enforcement has led to a proliferation of unlicensed operations.

That changed this summer. Operators with pending permits are being allowed to honor reservations through the end of the year, but the others have been told to shut down or face daily fines.

By drastically reducing the pool of available vacation rentals in the region, critics say that the county is dealing a heavy blow to a cottage visitor industry that has been in existence for decades.

"I would describe the impact as a crisis," said David Dantes, president of the Maui Vacation Rentals Association.

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GARY T. KUBOTA / GKUBOTA@STARBULLETIN.COM Maui resident Claudia Ledesma said the county isn't being fair in its enforcement of tourist rentals such as hers in Haiku. The county told her family, along with more than 50 other vacation rental operators, that she could not continue renting without a permit.

Claudia Ledesma, owner of Hale Mauka Makai, worked for a decade to build steady occupancy at her North Shore Maui vacation rental. But recently she has watched that business dry up since the county told her to stop taking reservations.

"I don't get any inquiries any more at all," said Ledesma, whose family depends on room revenues to subsidize operations at their palm tree farm.

The county told the Ledesma family in July along with more than 50 other operators of vacation rentals in Maui that the new administration would not allow them to continue operating without permits.

Those with pending permits were allowed to honor reservations through the end of the year, but the others were ordered to cease operations immediately, said Jeff Hunt, director of planning for Maui County.

"The county council saw this as an opportunity to take a fresh look at an existing problem," Hunt said.

The abrupt enforcement has created controversy in Maui. Some residents and county officials believe that county laws should be enforced and that without regulation the proliferation of illegal vacation rentals will cause negative impacts in the community.

Critics of illegal vacation rentals have complained that they bring increased noise and traffic into neighborhoods, strain infrastructure, cause difficulties for the planning and tax departments, keep neighborhoods from fulfilling their planned use, and expose the county to liability. Some have also said that they also cut into the county's supply of affordable long-term housing.

But others claim that the county's abrupt enforcement could have broad negative impacts on the economy.

Tourism is Maui's main economic engine and historically illegal rentals have supplied a large portion of the island's visitor accommodations. Visitors who stay in the illegal rentals patronize local businesses and create jobs in the region.

By drastically reducing the pool of available vacation rentals in the region -- even temporarily -- critics have said that the county is in essence destroying a cottage visitor industry that has been in existence for decades.

"I would describe the impact as a crisis," said David Dantes, president of the Maui Vacation Rentals Association, which represents more than 100 vacation rental owners.

Since the county began enforcing the rules in July, many small businesses and families have struggled, Dantes said.

"In the month of July, one family was put out of business for every business day of the month," he said. "People employed by these small businesses have lost their jobs. Some owners feel that they will be forced to sell their homes."

In the wake of the struggles, the association is considering taking legal action against the county, Dantes said.

Many small business owners were caught unawares when the council had decided to reverse a 2001 agreement between former Mayor James "Kimo" Apana and the Maui Vacation Rentals Association to suspend enforcement of the outdated regulations until the council could complete a new vacation rental ordinance, Dantes said.

The impacts haven't been limited to Maui vacation rentals, other visitor industry businesses from food and beverage to entertainment to housekeeping and travel planning have felt the burn, too.

Donna Stafford, owner of Chameleon Travel LLC, said that she saw business revenues drop to $4 in July after Maui County began enforcing the decades-old legislation.

"I used to have over 60 or 70 accommodations on the North Shore that I used to send people too, but now I'm down to about eight," Stafford said, adding that business has slowed so much since the enforcement that she has even had to lay off contract workers.

Maui has long required that vacation rentals go before the county counsel to obtain a permit, but the process was arduous for both applicants and county officials. County councils under the previous two mayors discussed streamlining the process and removing some of the barriers to entry for small business owners, but never got around to enacting changes.

But while strict regulations were on the books, they were seldom enforced and that created a laissez faire environment.

"We have chosen to enforce the existing laws. They've been on the books a long time," Hunt said. "The past two administrations choose not to enforce them and there has been a proliferation of vacation rentals."

With virtually no barriers to entry or cost, the number of illegal vacation rentals on Maui is estimated to have grown to 1,200, Hunt said. From 2000 to 2005, the number is estimated to have grown by around 14 percent a year, he said.

"Our county plan doesn't even allow for that many vacation rentals," he said.

The county planning department is working on a draft bill to be presented to the county council on Oct. 9 that will expedite the permitting process for bed and breakfasts and will restrict vacation rentals to resort areas and business districts, Hunt said. If the bill becomes a law, it will expand the zones where bed and breakfasts are allowed and will remove the provision to apply through a conditional permit process for transient vacation rentals, he said.

The new bill would streamline the process so that applications could be processed in a timelier manner, Hunt said.

"I think we could get them done within six to eight months," he said.

That would be an improvement over the lengthy and costly procedure that Marty Herling, owner of the Banyan Tree House, and the 69 or so permitted vacation rental operators underwent in prior years.

"It was a time-consuming process for me, but all the steps that I needed to take were appropriate," Herling said.

Herling suggests that the county council give more authority to the planning commission to authorize permits for vacation rentals and bed and breakfasts.

"Because they literally don't have the time to deal with all the applicants and that's going to cause a process that is very lengthy," he said.

Hunt agreed that the past process wasn't workable and said that the existing process needs tweaking.

"We are working to find a solution that balances community and business interests," Hunt said.

In the meantime, folks like the Ledesma family have fallen through the cracks of an evolving system.

"We were actually discouraged from obtaining a permit. The planning department told us to wait," Ledesma said.

The Ledesma family waited for a time, but decided to apply for a permit when it became clear to them that prevailing opinions were turning under new Mayor Charmaine Tavares' term.

"We hired a consultant to rush through the application process and we turned in our permit application in February," Ledesma said, adding that the county has yet to disclose the status of their pending application.

"We did everything right, but we are still being penalized," she said, adding that the fine for disobeying the county law is up to $1,000 a day.

The county still has 66 permit applications for 197 vacation rentals outstanding and it's almost certain that most of them won't get processed before their January closure deadline, Hunt said. Most vacation rentals have cooperated with county orders, he said.

"We've only had to fine one of them," he said.