In our quest to learn from communities impacted by short-term rentals (STRs), we found Kauai, Hawaii. With most of the island in conservation, Kauai is a tropical paradise. It has a population of about 60,000 locals, 20,000 seasonal residents and 30,000 visitors (on any given day).
Kauai has long faced familiar pressures: a real estate market that attracts investments from all over, a housing crisis for residents, traffic congestion, water quality problems affecting freshwater and reefs, infrastructure that can’t keep up with rapid development, and so on.
In 2008, coincidently the year Airbnb was founded, residents of Kauai decided they had enough reasons to regulate short-term rentals:1
- The “uncontrolled proliferation” of STRs was contributing to the lack of housing affordable to locals and negative repercussions to specific residential neighborhoods.
- Vacation rentals built were displacing traditional neighborhoods where people of low- and moderate-income had lived.
- From 1990 to 2000, out of 7,405 household units built, 47% were for vacation or seasonal use, 38% for local owners, and 15% available for local families to rent.
After significant community input, Kauai adopted a unique approach towards controlling the growth of STRs. The goal was to restore a balance between local residences and single-family vacation rentals. The island designated a few small Visitor Destination Areas (VDAs) where resort activity was already concentrated and allowed all properties within to operate short-term rentals. In contrast, short-term rentals outside VDAs have strict limitations.
Kauai’s experience offers valuable insight. Single-family houses licensed for short-term rent coexist with properties that aren’t permitted. Over time, this has resulted in market price differences. Outside the VDAs, properties holding a rental license are 20-25% more expensive than others. It’s especially true for entry- to mid-level homes. A strong indication that STRs have a significant impact on house prices.
There’s another difference. In Kauai, property taxes for short-term rentals run like businesses are taxed 3x higher than local homeowners. They are effectively classified as commercial properties.
Kauai’s approach to STRs has proven successful. A solution for Nantucket would undoubtedly look very different. Still, looking at other communities helps us think outside the box and spark conversation.
1 County of Kauai, Kauai County Comprehensive Zoning Update, July 2005.