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Stanford Carr Development’s new condominium complex in Makaha advertises itself as a community of cottages and plantation homes that have all the amenities a resident could want.
“It’s not just a home, it’s a lifestyle,” the Cottages at Mauna Olu website says.
But it also has the potential to become a hub for short-term vacation rentals. The 26-acre parcel holds a rare resort zoning designation and is therefore one of the few areas on Oahu where the Department of Planning and Permitting allows short-term rentals.
Most of the 120-unit development is still under construction, but the owners of one of 20 completed units have already started advertising it on Airbnb for $500 and up per night.
“Come to the West Side and enjoy the authentic culture,” the ad says. “This 1900 sq ft home was JUST BUILT in a quiet and safe gated community.”
The idea of new residential construction being rented to tourists seems to fly in the face of efforts by the city to crack down on short-term rentals, which critics say have gobbled up desperately needed housing stock.
Twinkle Borge, the leader of the homeless community Puuhonua o Waianae, located at the boat harbor just three miles from the new construction, said she was angry to learn that short-term rentals will be permitted there.
“That’s not going to even be for the locals,” she said. “That’s not going to be for us.”
It’s allowed thanks to a 1989 decision by the Honolulu City Council to rezone the land from country to resort. At the time, two council members voted after disclosing potential conflicts of interest to the council chair, who cleared them to vote. No council since has voted to revert the zoning back.
Now, as Mayor Rick Blangiardi pushes new legislation to rein in short-term rentals, owners at the Cottages at Mauna Olu in Makaha have a unique opportunity to cash in on that zoning decision made decades ago.
The owners of the Airbnb listing – whose profiles say they’re from California – declined to comment for this story.
Two of the council members who approved the zoning change stood to benefit from the new designation, the Honolulu Advertiser’s investigative reporter Jim Dooley reported in 1990.
At the time, the land was owned by HonFed Bank. The institution wanted to rezone 23.5 acres for a 300-room conference facility and resort that could accommodate business groups gathering for seminars, according to the paper.
State Sen. Donna Mercado Kim – then a councilwoman in the powerful position of Zoning Committee chair – had been a member of the bank’s board for two years, Dooley reported.
After she disclosed that she had a potential conflict of interest, the council chair at the time, Arnold Morgado, gave her the OK to vote on the matter anyway, according to the Advertiser. His philosophy was to allow council members to “disclose and vote.”
Kim was appointed to the HonFed Bank board the same month the bank sought to change the Waianae Development Plan, the first step in rezoning, but she denied any connection.
Kim had no banking expertise and told the paper she didn’t know why the bank had asked her to join its board.
“She speculated jokingly that it was related to the fact that she had maintained a savings account at the institution since she was a teen,” Dooley reported.
Bank directors were paid $14,000 per year, $500 per board meeting, plus $200 to $400 for each committee meeting, the Advertiser reported. In addition, board members were eligible for below-market loans, which Kim took advantage of for her $91,800 mortgage, according to the paper.
In an interview last week, Kim maintained there was no conflict.
“No, because I disclosed it, and the chair of the council, he ruled that it wasn’t a conflict,” she said.
She said she voted for the measure because, as she recalls, Waianae wanted more economic development, and another nearby resort was having issues.
Former councilman John DeSoto faced a potential conflict of his own.
In the year before the rezoning vote, DeSoto bought property 200 yards from the parcel. He, too, said that he told the council chair, who gave the OK for him to vote, although Morgado said he had no memory of this.
DeSoto told the Advertiser he had spent time in the area as a kid and had always wanted to own land there. He denied that his purchase had anything to do with the rezoning.
In the end, the rezoning was passed unanimously in October 1989.
Four months later, Hawaii Aistar, a Japanese company, bought the land from HonFed for $13.25 million, the Advertiser reported.
“Hawaii Aistar intended to build a conference center on the parcel for its parent company in Japan,” Curtis Lum, a DPP spokesman, said. “The plans, however, fell through and the conference center was never built.”
After the sale, the assessed value of DeSoto’s property increased. In 1988, it was worth $109,869. It rose to $160,700 the following year, when the zoning was changed, and in 1990, it increased another $25,000, the Advertiser reported.
Civil Beat was unable to reach DeSoto for comment.
The Cottages at Mauna Olu are in the back of Makaha Valley, down a private, tree-lined road guarded at the end by a security guard. The development is situated inland from the Makaha Valley Country Club and the only other resort-zoned property in the area, the defunct Makaha Valley Resort, where at one time Tiger Woods was designing a golf course with Pacific Links International.
Otherwise, the area is largely residential, and Lauren Swift, a 32-year-old resident, wants to keep it that way. Projects like this one fuel displacement, she said.
“Makaha is being turned into Hawaii Kai,” said Swift, who works in a nearby shave ice shop. “It’s supposed to be the uncharted side of the island. It makes it harder for us, young adults, to actually buy properties. Most of us have to leave because of stuff like this.”
Johanna Mikasobe, who manages a local convenience store, said more tourists in the area might be good for business, but bad for the community.
“I don’t like it,” she said. “We’re already struggling. People are struggling.”
The short-term rentals that are already present on the Makaha shoreline are enough, Mikasobe said.
Carr says it was his intention to build homes for locals because of the island’s housing needs and the rural character of the property.
“We could’ve built a 300-room conference center, hotel,” he said. “But we felt single-family homes is the more appropriate use … That’s what we need. More housing.”
Even if the homes were only occupied by locals, though, Mikasobe said they can’t afford it. The home prices, as advertised on Zillow, start at $700,000 for a three-bedroom, two-bathroom unit, and $900,000 for a four-bedroom, four-bathroom unit. Carr acknowledged that the ability to rent the units short-term adds value to the properties, driving up their price.
Carr said he sympathizes with people who are frustrated with bed-and-breakfast homes and transient vacation rentals in residential areas.
“You can understand why residents in certain neighborhoods throw their arms in the air and just don’t want it,” he said.
However, Carr defended the right of the owners in his development to operate them. Taking that right away would be considered downzoning and an unconstitutional “taking,” he said, and it would invite legal challenges.
“You can’t take away resort zoning once you got resort zoning,” he said. And that allows short-term rentals.
Department of Planning and Permitting Director Dean Uchida agreed.
“If it’s resort-zoned, then it’s an appropriate use of the resort zone,” he said. He added that under the proposed Bill 41, anyone operating short-term rentals would have to register with DPP and pay higher property taxes.
However, Kim said that just because land is zoned a certain way today doesn’t mean it has to stay that way forever. In fact, she introduced a City Council resolution in the 1990s that featured a “use it or lose it” provision.
“If you didn’t develop the property, and there was no activity on the property, you would lose the zoning,” she said.
The resolution passed in 1995, council records show.
Kim said the City Council could have down-zoned the Makaha property after it was clear the conference center wasn’t going to be built, or there could’ve been a covenant in which Carr pledged to keep the development purely residential.
“I don’t think the underlying zoning that was (put in place) 30 years ago really has bearing at this point,” she said.
Kim, who said she opposes short-term rentals in residential neighborhoods, said the case underscores the necessity of enforcing a “use it or lose it” rule.
“Because you don’t know what’s going to happen in the future, and how things change,” she said. “The zoning should always reflect what the uses are, and if we don’t know, then it should revert back to what it was. Again, that is something for which you need to hold the current and future councils accountable.”
Even now, Kim said rezoning the property is possible.
“You’ve got to pay for it if, in fact, you take away something already granted to them, but it can be done,” she said.
Carr said he hasn’t advertised the cottages as short-term rental investment opportunities.
“We are not promoting it,” he said. “We are not advertising it. By you doing a story, you’re going to stir up a hornet’s nest. I’m trying to keep it quiet.”
While the development’s website makes no mention of short-term rentals, the real estate company Carr hired has made it a selling point.
Pacific Island Realty sales agent Travis Palmer, who is representing the project, highlighted that the zoning designation “allows for short term rental” in a write-up on HawaiiIslandHomes.com.
Even if it’s allowed, Carr said he doesn’t believe his development will become a short-term rental hub. He said neighbors would frown upon people operating short-term rentals there.
“So I think peer pressure alone will prohibit some people from doing that, because they don’t want to be the bad apple in the neighborhood,” he said.
The whole development should be complete by September of next year, Carr said.
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