After over a decade of collaboration between the community and the county, Maui County’s Planning Commission approved updates to the Special Management Area (SMA) and Shoreline Rules. The updates bring more balance and flexibility for homeowners, while also improving coastal resilience for the environment. On March 28, the Maui Planning Commission voted 8-0 to approve significant changes to the rules.

Maui County originally established SMA and Shoreline Rules in the early 1970s to create shoreline building setbacks in sensitive coastal areas. However, the existing setback formula only considered historical erosion rates and did not factor in worsening conditions due to sea level rise.

The updated SMA and Shoreline Rules reflect many years of work from the Maui County Planning Department, the Maui Planning Commission, and community working groups. The new rules incorporate the best available science on sea level rise to bolster coastal resilience. When the new rules take effect, the public will be able to access the shoreline map on the Planning department’s website. The department will also hold public outreach to inform and train residents on the changes.

Highlights of the New Rules

• Creates categorical exemptions, allowing people to bypass submitting an SMA assessment or permit application if proposed work has minimal to no environmental impact. For example, repairs and upgrades to the interior of homes, with a valuation of less than $500,000 in any 24-month period, within the special management area including the shoreline area are allowed, unless they are seeking expansion or intensifying the use.
• Removes the mandatory requirement of certified shoreline surveys, which cost thousands of dollars, and instead leaves the decision to the discretion of the department.
• Reduces the permitting burden for state-required conversion of cesspools.
• Requires hazard mitigation plans that consider realignment of structures away from the shoreline if existing structures are exposed to coastal hazards.

The new rules are more balanced and flexible for homeowners, while incorporating the best available science on sea level rise to bolster coastal resilience. This represents the second major update since 2003, with future reassessments based on erosion rates and the best science available planned every decade.

The SMA and Shoreline areas, managed by state and county laws, are the most sensitive parts of the coastal zone. The Special Management Area is the area of the island that is close to the shoreline, generally beginning at the shoreline and extending inland to the nearest highway. The Shoreline area is the land between the shoreline and the shoreline setback line.

The updated rules provide a foundation for further progress and a step forward in balancing the needs of homeowners and protecting the environment. The Hawaii Sea Level Rise Vulnerability and Adaptation Report, a guiding document for coastal planning around the state, urges people to plan for 3.2 feet of sea level rise now and adjust the projection upward in years to come. The updated SMA and Shoreline Rules represent a significant milestone for Maui County in addressing the challenges of coastal resilience and planning for the future.

This should also of course provide additional clarity for buyers interested in purchasing oceanfront land or remodeling or expanding on an existing oceanfront home.

Let’s be real. The increase in prices over the last couple of years combined with current interest rates makes the cost of home ownership as high as ever. New owners who are getting into the market are allocating a lot of their savings for down payment, and a significant chunk of income to their mortgage. With that in mind, it is important that you still keep some money in reserve for unexpected home expenses. The last thing we want to see is for your home ownership become a true financial hardship. Here are five big ticket expenses to look out for:

1. Roof repair: Hawaii’s climate is warm and humid, which can cause damage to the roof over time. The sun’s UV rays can cause the roof’s material to deteriorate, while heavy rains and winds can damage shingles or cause leaks. Regular roof maintenance and repair are crucial to preventing costly damage.
2. Appliance Repair and Replacement: In the last seven years, I’ve replaced one dishwasher, repaired a refrigerator and repaired our range twice. When the appliance repairman came to fix the refrigerator, he said appliances just flat out deteriorate faster on Maui. Maybe it is salt air, maybe it is something else. Just expect your appliances to wear out faster than you expect. As an added tip, some brands are harder to repair than others. The same repairman recommended GE and Kenmore.
3. Plumbing issues: Water damage from leaky pipes, clogged drains, or malfunctioning fixtures can lead to costly repairs. Regular plumbing maintenance and addressing issues promptly can prevent more extensive damage and expenses.
4. Septic and Cesspool Issues: Not all areas of Maui include sewer services. A number of homes on island rely upon septic systems or even older cesspools. These waste management systems require both maintenance and care when it comes to inputs. Poorly maintained septic systems can fail. Cesspools can fail due to improper maintenance or old age. Replacement of cess pools and septic systems is expensive!
5. Wood damage: The local climate can beat up on wood siding and trim. Our climate is conducive to dry rot. Homeowners should definitely monitor siding for dry rot particularly on the sides of the house exposed to the prevailing weather. It’s better to repair and replace dry rot before it spreads. Of course, Maui’s climate is also hospitable to termites. While many newer homes use termite treated lumber, it is still possible to get wood boring insects in trim and cabinetry. Inspection and even periodic tenting may be necessary.

Home inspection during the purchase process can help identify potential issues and near term maintenance items. That said, no home inspection is perfect, and things like appliance issues can pop up pretty quickly. Other things like septic systems and cess pools are outside the scope of traditional home inspections. We advise clients to do a septic or cess pool inspection in addition to the regular home inspection. Regardless of the extent of your mitigate efforts, it is important to keep cash reserves for those unexpected maintenance issues.

Three months into the year and interest rates continue to fluctuate. In January it seemed like rates were heading downward steadily. February saw an increase in rates. The banking crisis earlier this month caused rates to adjust downward again. Last year, there was a lot of ink spilled and key strokes dedicated to predicting rates. Most predictions proved to be wrong. At this point, prognostication on rates seems like a fool’s errand. That said, I wanted to talk about one of the better bellwethers for mortgage rates, the ten year treasury bond.

In the financial world, a bellwether is an indicator of something bigger. For the bond market, the ten-year Treasury bond is the go-to indicator of how things are going. When investors are feeling good about the economy, they tend to buy more bonds, which drives down the yield (i.e., interest rate) on the ten-year Treasury bond. Conversely, when things are looking a bit shaky, investors tend to flock to the safety of Treasury bonds, which drives up the yield.

So, what does all of this have to do with mortgage rates? Well, the yield on the ten-year Treasury bond is a key indicator of where mortgage rates are headed. When the yield on the ten-year Treasury bond goes up, so do mortgage rates. When the yield goes down, mortgage rates tend to follow suit.

Think of it like a game of follow the leader, but with money. When the leader (the ten-year Treasury bond) goes up, the followers (mortgage rates) try to keep up. And when the leader goes down, the followers slow down too.

What Does This Mean for Buyers?

Consider this as more of how does this work vs a how to post. I’ve read in some places that following the ten year treasury closely may give buyers a sense of when to lock their mortgage rate. I have to say, I am a little skeptical about that. While the two are closely correlated, there may not be enough lag between the change in treasury bond yields and the change in mortgage rates. It’s a pretty busy world out there and unless you work in finance, you also may not have the time to closely monitor treasuries. This is where I would lean on a knowledgeable mortgage professional rather than tracking things yourself. Let your mortgage professional give you guidance on when to lock your rate.

The scarlet letter of Hawaii Real Estate isn’t A. It’s the letters LH. Seeing the land tenure leasehold on a listing causes many buyers, and agents for that matter, to bypass a property. Just as the puritans wrongly ostracized Hester Prynne, leasehold properties don’t deserve to be shunned. For the right buyers, leasehold ownership provides a great opportunity. This is particularly the case in an era when inventory and options remain limited.

Lower Acquisition Costs

First and foremost, it’s worth highlighting the biggest advantage of leasehold. Acquisition cost. Leasehold properties cost significantly less than comparable fee simple properties. Plain and simple, you get more bang for your buck. Higher monthly fees are the tradeoff for lower acquisition costs. In addition to the maintenance fee, leasehold properties come with a monthly lease fee. If you have less cash in reserve for your purchase, but strong monthly income, leasehold could be an interesting option.

A Few Other Things To Consider With Leasehold

There are some other factors that can enhance the appeal of a leasehold property.

• Does the property offer something unique? There are a handful of leasehold properties that offer something unique or at least less common in the Maui market. Alaeloa is a truly one of a kind development in the Napili area. The combination of low density, a beautiful shoreline and the mix of stand alone and duplexed beach cottages is unlike anything else on Maui. Maui Eldorado in Ka’anapali has its fantastic beach cabana. Kamaole Nalu is one of a handful of direct beachfront condos in South Kihei.

• Does it have a longer lease term? A longer term lease is particularly appealing. It takes away uncertainty about the future of your property and it opens financing options. If it is in excess of 35 years, it allows for a conventional 30 year mortgage. More than twenty years left on a lease means you can get a fifteen year mortgages. You need five more years on the lease than the term of the mortgage to get financing. Once a lease term shrinks to less than 20 years, both the smaller pool of buyers and increased uncertainty may impact resale value.

• Can it be converted to fee simple? In some cases, the lessor shows a willingness to convert the property to fee simple. That could enhance the condos value over the long term. The caveat here is that fee conversion costs money. In almost all cases, the financial outlay for lessees is significant. Typically, somewhere in the six figures significant.

Discover New Options

Again, leasehold isn’t for everyone and not all leasehold is the same. It requires some extra due diligence and there is a reason that leasehold properties come with their own unique disclosures. That said, there are some great leasehold properties on Maui and that list extends beyond the three developments referenced above. Don’t stigmatize a condo just because of its land tenure. Any condo on island whether its leasehold or fee simple is going to have its strengths and its weaknesses. If you evaluate the condo development on the plusses and minuses as a whole, you might just find leasehold fits your needs. We look forward to assisting you with the evaluation process.

Updated County Tax Rates for the New Fiscal Year and New Tax Classifications

On May 13, the Maui County Council approved new property tax rates for the upcoming fiscal year. There are a some particularly notable changes. The new rates decrease tax rates for owner occupied properties and apartments while significantly increasing rates on non owner occupied properties. Rates for the Short-Term Rental, Agricultural, Industrial and commercial classification also changed.

Another notable change for the coming fiscal year is the creation of a new long-term rental category. This is a lower tax rate category meant to incentivize more long term rentals. The county council created this classification last fall but this is the first fiscal year it will be in effect. Owners who qualify for this classification also get an exemption that reduces their assessed value by $200,000.

One last note, there was some modification to the tier system first implemented in the 2020/2021 fiscal year. For certain categories of property, this system created three different tiers of tax rates based on the assessed value of properties. The tier system was implemented for the homeowner, short-term rental and non-owner occupied classifications. The new long-term rental category is also part of the the tier system.

Previously, tier 1 was for properties assessed up to $800,000. Tier 1 is now for properties up to $1,000,000. Tier 2 was for places assessed between $800,001 to $1,500,000. The new tier 2 is $1,000,001 to $3,000,000 for owner occupied, short-term rental and long-term rental. The new tier 2 for non owner-occupied is $1,000,001 to $4,500,000. The old tier 3 was for properties assessed for more than $1,500,000. The new tier 3 is more than $3,000,000 for owner-occupied, short-term rental and long-term rental. The tier 3 for non owner occupied properties is more than $4,500,000.

2022/2023 Maui County Property Tax Rates

Here are the updated rates for this coming fiscal year. If there is any change in rates, last years rates are noted for reference. All rates shown below are per $1,000 of assessed value.

Owner Occupied

• Tier 1: up to $1,000,000 Formerly $2.41 now $2.00
• Tier 2: $1,000,001 to $3,000,000 Formerly $2.51 now $2.10
• Tier 3: more than $3,000,000 Unchanged $2.71

Non Owner Occupied

• Tier 1: up to $1,000,000 Formerly $5.45 now $5.85
• Tier 2: $1,000,001 to $4,500,000 Formerly $6.05 now $8.00
• Tier 3: more than $4,500,000 Formerly $8.00 now $12.50

Apartment

• Formerly $5.55 now $3.50

Hotel and Resort

• Unchanged $11.75

Timeshare

• Unchanged $14.60

Short-Term Rental

• Tier 1: up to $1,000,000 Formerly $11.11 now $11.85
• Tier 2: $1,000,001 to $3,000,000 Formerly $11.15 now $11.85
• Tier 3: more than $3,000,000 Formerly $11.20 now $11.85

Long-Term Rental

• Tier 1: up to $1,000,000 New Class $3.00
• Tier 2: $1,000,001 to $3,000,000 New Class $5.00
• Tier 3: more than $3,000,000 New Class $8.00

Agricultural

• Formerly $5.94 now $5.74

Conservation

• Unchanged $6.43

Commercial

• Formerly $6.29 now $6.05

Industrial

• Formerly $7.20 now $7.05

Commercial Residential

• Unchanged $4.50

About Maui Property Taxes

The new rates go into effect at the start of the new fiscal year on July 1st, 2022. Property taxes are due in two separate installments. The first installment is due in August 2022 with the second installment in February 2023. Owners should have received notification of their new assessed values in March of 2022.

Homeowner and Long Term Rental Exemptions

The deadline to file for the homeowner or long term rental exemptions and classifications passed. If you file by the end of 2022, you would be eligible for the exemption and tax rate for the 2023/24 fiscal year. Here is the link to the Long Term Rental Exemption and the Home Owner Exemption forms. The eligibility for the homeowner exemption can be confusing. It is worth reading the county Exemption FAQ to better understand eligibility requirements. Check out the county’s explanation for different property type classifications if there is any confusion on what category your current property or future property might fit into. Contact The Maui Real Estate Team for assistance buying or selling Maui property.

Rising gas prices. A more chaotic climate. Improved health and wellness. There are a lot of reasons why driving less has more appeal these days. Maui is a pretty rural place. As a result, it is not exactly an easy place to live car free. That said, there are parts of the island where there are more conveniences and amenities accessible by foot or by bike. We recently created a handful of Walkable community pages on MauiRealEstate.com that highlight areas within a higher concentration of amenities within walking distance. This is a quick overview of those new pages on the site and a few communities that are worth an honorable mention.

Featured Walkable Areas of Maui

• Walkable Paia : For a small town, Paia has a lot going on. It has restaurants, a great grocery store, a Bank of Hawaii Branch, a yoga studio, massage studios, coffee shops, a post office, the beach and more all in and around town. If you live in the neighborhoods to the East and North of town, almost all of this is accessible via your own two feet. As an added bonus, the North Shore bike path runs to the West of town, through Spreckelsville and into Kahului. Paia is the one area of the island where you really could go for longer stretches without driving.
• Walkable Wailuku : Downtown Wailuku is the seat of Maui County Government. It is also home to federal and state agencies, medical facilities, law offices and other professional services. The homes and condos in the downtown area give options to those who work downtown that want to avoid commuting by car. Add in restaurants, the Iao Theater, shops, a library and other amenities and there are plenty of things accessible by foot. While you will still find yourself driving to some amenities, your odometer is less likely to get a workout.
• Walkable Makawao : Upcountry Maui may not be the first place you think of when it comes to walkability. That said, downtown Makawao is another small town with a lot going on. There are restaurants, a public library, Eddie Tam Park, a post office, shops, coffee, yoga and more. There are quite a few neighborhoods within walking distance of these attractions. Again, this is a place where it may be difficult to completely avoid car dependence, but you could get away with driving less when you live close to Makawao.
• Walkable Lahaina : Front Street is a renowned tourist destination. That said, residents living in the neighborhoods close to Front Street are located close to restaurants, shops, grocery stores, the beach, surfing and more. Put on your walking shoes or grab your cruiser bike. This is an area where you can leave your car parked in the driveway more often than not.

Honorable Mention

The Kulamalu area of Pukalani wouldn’t have received a mention 10 years ago. While there was a Long’s Drugs and a Fitness Center, this was a convenient but car dependent community. Then came the Saturday’s Farmer’s Market, followed by Food Trucks. A new brewery and a great pizza place in the last year are two great new additions. The Cottages at Kulamalu and Kulamalu Hilltop are now two neighborhoods where owners now have some great amenities within walking distance.

There are parts of Kihei where you may not need a car as much depending on your lifestyle. Areas of South Kihei and Central Kihei offer restaurants, shops, grocery stores and beaches within walking distance.

Contact The Maui Real Estate Team

Contact The Maui Real Estate Team if you are looking for a home that decreases your car dependence. We would welcome the chance to help you find a home or condo that might help change your lifestyle.