The County of Maui, led by Mayor Charmaine Tavares, is cracking down on illegal vacation rentals and forcing them to close unless they obtain a permit. Most of the businesses affected by the closures are located in the residential areas of Upcountry and on Maui’s North Shore, where hotels are few.

For the property owners, operating illegal vacation rentals is far more profitable than renting the units to long-term tenants. Maui is among the most expensive places in the U.S. to live, and with median house prices topping $600,000, many property owners need all the help they can get to pay the mortgage.

The County argues that illegal vacation rentals have helped to drive up the cost of homeownership and rents, along with the bubble market and waves of retiring baby boomers moving in. Many people have gotten into these huge mortgages that would otherwise not be affordable precisely because of the income from vacation rentals. Rates average about $200 per night. Multiply that by Maui’s average occupancy rate of 80%, and the return is much healthier than the $50 to $100 per night for long-term rentals.

Illegal vacation rental owners argue that the kind of tourist they host is exactly who residents want here–people with an interest in local culture and nature that travel in smaller groups. Their impact is less and their attitudes are better. They spend more money on local goods and services.

One well-established and popular vacation rental, the Olinda Country Cottages & Inn, closed its doors in November 2007 after being cited by the County for not having a permit. The Inn operated illegally for many years after not being able to obtain a permit, despite ongoing efforts. Owners feel targeted by the County and wonder why, especially when there are more serious problems facing Maui, including water shortages from overbuilding luxury vacation homes and golf courses on Maui’s South Shore.

It’s not clear if locals will benefit from the closures or not. So far few vacation rentals have been put back into the pool of long-term rentals. Rents are still sky-high, averaging $2,000 per month for a 2-bedroom/1-bath home Upcountry. Many locals have lost their jobs cleaning and caring for the vacation rentals. Overall visitor numbers to Maui are still up so any negative impact on local business is hard to gauge.

One art gallery owner in Paia, who preferred to remain anonymous, summed up the impact of the closures, “If people are spending more–$300 to $400–per night on a hotel room, they’re not buying as much in my gallery.”