Hawaiʻi’s Housing Crisis: How Short-Term Rentals Are Harming the Local Economy

Waikīkī Beach, Hawaiʻi

When vacation homes become investment machines, Hawaiʻi’s residents lose.

The picture of Hawaiʻi for many is crystal-clear waters, swaying palms, and island hospitality. But beneath the postcard veneer lies a crisis: local residents increasingly priced out of homes, entire neighborhoods turned into tourist units, and fiscal pressures mounting on island economies built on the business of vacation stays. One of the major drivers? Short-term vacation rentals (STRs).

At Hawaiʻi Appleseed Center for Law & Economic Justice’s report Hawaiʻi Vacation Rentals: Impact on Housing & Hawaiʻi’s Economy, researchers conclude:

“Although Hawaiʻi derives some benefits from VRUs (vacation rental units) through increased tourism spending and tax collection, the benefits are far outweighed by the costs” (Geminiani & DeLuca, 2018).

They note that the average vacation rental brings in about 3.5 times more revenue than a long-term rental, incentivizing conversion of housing stock away from residents.

The Housing Supply Drain

Here’s a key statistic: according to University of Hawaiʻi Economic Research Organization (UHERO), of Hawaiʻi’s roughly 565,000 total housing units, about 30,000 are listed as short-term rentals — meaning ~5% of the housing stock has been diverted into vacation accommodations.In a state with tight supply and high barriers to new housing, that stolen capacity matters.

What does that mean in practice?

• With fewer homes available for residents, rents and home prices are pushed higher. UHERO states:

  “If all STRs were eliminated on Oʻahu, home prices could drop by as much as 6% and rents may fall by as much as 8%” (Inafuku & Tyndall, 2023).

• A large proportion of STRs are owned by out-of-state investors: one data point says 52% of all STRs in Hawaiʻi are owned by non-state residents, and 27% of owners own 20+ units. (Cristobal, 2024)

That means profits flow off-island while locals lose housing access.

Economic and Social Impacts

Beyond housing costs, the spread of STRs has broader implications:

• Communities lose the diversity of residents; neighborhoods turn transient and less stable.

• Local businesses suffer from fewer year-round residents; workforce housing is harder to secure.

• Fiscal dynamics shift: while STRs generate tax revenue, some argue the revenue doesn’t capture all costs (infrastructure, social services, community disruption). UHERO emphasizes that a ban on STRs could still lead to job losses and revenue declines.

• In fact, UHERO’s report on Maui County’s proposed phase-out of vacation rentals warns: losing TVRs (Transient Vacation Rental) could reduce visitor spending by about $900 million annually (~15%), cut nearly 1,900 jobs (~3% of payroll), and shrink real GDP by ~4%.

So while converting rentals to long-term housing is alluring, it comes with real trade-offs for tourism-dependent economies.

The Policy Response

Hawaiʻi is responding. In May 2024, the state passed legislation (SB 2919) giving counties more power to regulate or ban short-term rentals in certain zones. In one case, a bill in Maui County aimed at phasing out thousands of TVRs sparked debate about balancing housing supply versus tourism job loss. (Pactol, 2025).Registration of vacation rentals in Honolulu’s permitted resort areas has more than doubled since rules tightened, showing increased regulatory pressure.

Why This Matters for Sustainable Travel (and for NOMAD)

For travelers, especially those who care about community and impact, this is important:

• When tourism demand incentivizes large-scale STR conversion, local housing suffers.

• When local residents are forced out, the culture and authenticity of a place erode, something that home-exchange models (like NOMAD) strive to avoid by supporting community integration rather than extraction.

• By choosing responsible travel, visiting homes rather than sterile tourist units, staying longer, participating in neighborhoods, we help shift demand away from unsustainable STR models.

A Call to Conscious Travel

Hawaiʻi’s situation is a cautionary tale. The island state’s allure draws visitors by the millions, but the cost for locals is rising rents, shrinking housing supply, and economic models increasingly dependent on short-term stays owned by outs-of-state investors.

We, as travelers and home-swappers, have a choice. We can reinforce the cycle of “tourism takes → local loses,” or we can support models of travel that share, integrate, and contribute.

If you’re going to Hawaiʻi, look for hosts who live there, swap homes responsibly, stay longer, engage with the community, and leave minimal disruption behind.By doing so, you’re not just visiting Hawaiʻi, you’re honoring it.

Join NOMAD Travel Groups to access our listings in Hawaiʻi! Happy traveling! 🌍

References:

Cristobal, E. (2024, February 28). The debrief: How short-term vacation rentals impact Hawaii’s housing market. https://www.hawaiinewsnow.com. https://www.hawaiinewsnow.com/2024/02/20/debrief-how-short-term-vacation-rentals-impact-hawaiis-housing-market/Geminiani, V., & DeLuca, M. (2018, March). Hawaiʻi vacation rentals: Impact on housing and economy. Hawaiʻi Appleseed. https://hiappleseed.org/publications/hawaii-vacation-rental-impact-studyInafuku, R., & Tyndall, J. (2023, April). Short-term Vacation Rentals and Housing Costs in Hawaiʻi. UHERO. https://uhero.hawaii.edu/short-term-vacation-rentals-and-housing-costs-in-hawai%CA%BBi/Pactol, C. C. (2025, April 2). Phasing out Maui short-term rentals would increase housing but hit economy, Uhero Report says. Hawai’i Public Radio. https://www.hawaiipublicradio.org/local-news/2025-04-01/phasing-out-maui-short-term-rentals-increase-housing-hit-economy-uhero?