What are Unintended Consequences of Taxing Vacation Rentals?

We were talking about the taxes and vacation rentals and how things are going up and Dylan made a very interesting point about the unintended consequences from those changes – you don’t always get what you think you will.

 

This short clip came from our Aloha Friday Hawaii Real Estate Show which goes live every other Friday on our Hawaii Real Estate YouTube channel or our Living in Hawaii Facebook page

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Transcript:

well it’s just one of those
unintended consequences things right
government always does things and it
doesn’t think about the unintended
consequences it really you know if you
look back on this right the
the hotel industry drove this right so
because we’re heavily unionized and
we’re always giving unions more benefits
it became more expensive for hotels to
operate which increased the cost of
hotel rooms and now if you’re trying to
get a hotel room even at a very average
um resort here you’re talking four or
five hundred bucks a night it’s crazy
just for a hotel room and when you add
in all the taxes and stuff that they’ve
added onto that so what did it do to
incentivize people to use their homes as
hotel rooms and so now we’re trying to
go after that and and you know what and
then what heidi’s talking about so now
we’re going to disincentivize doing um
make it so expensive to do that then now
people are from
somewhere else are going to buy those
properties instead because it’s more
economically beneficial for them to
become one of those people who owns a
house and rents it out in order to have
some place to stay so you know kind of
it just feeds this cycle of unintended
consequences and it never really solves
the problem and
um you know we just keep going around
and around and around and at some point
you know the thing that i worry about
macro economically in hawaii is that we
will price people out you know for many
years we were the only tropical
destination
that americans
you know what felt comfortable going to
and that is no longer the case right i
mean the world is very safe i mean kovit
kind of shut that down a little bit but
the world is very safe you can go to
thailand you can go to mexico you can go
to indonesia you can go to all kinds of
places now air travel is a lot cheaper
than it used to be you can go to bali
you know you can go to samoa you can go
to all of these different places and at
some point if it’s cheaper to buy a
plane ticket that’s twice as much
because when you get there your stay is
going to be a third the cost you’re
going to have you know a luxury villa
with a maid and a cook and all this kind
of stuff where it’s going to cost the
same to come to hawai’i in a hotel room
people are going to stop coming right
and and so at some point you kind of cut
your nose off this point your face so
it’s not smart policy in the long run
and we’re already seeing that you know i
mean there’s visitor accounts are down
but
revenue kind of stays the same because
you continue to increase the cost of you
know for the visitors that do come at
some point there’s going to be a
breaking point where that’s not going to
work anymore so