Kailua Kona, Hawaii, has seen significant changes in its housing landscape due to new county laws restricting short-term vacation rentals. Over 1,000 short-term rentals have been reintroduced into the long-term market, leading to a significant increase in housing availability and a plateau in prices, says Kailua Kona real estate agent Mike Despard. The new influx of rental properties has relieved residents needing help finding affordable housing in Kona’s previously constrained market. However, the transition has also sparked tensions around gentrification and raised questions about how much tourism is too much for this small community. This seismic shift has significantly transformed housing availability and affordability in this small beachside community:
New vacation rental rules enacted
Concerns started mounting from residents about the influx of transient guests and the reduction of long-term housing stock. In 2019, Hawaii County passed Bill 108, which placed strict limits on STRs in residential zones. The new rules dictated that STRs could only operate in areas zoned for commercial use. The goal was to encourage more long-term housing availability and stabilize rents, which had risen sharply. Supporters hoped reversing the STR trend would relieve residents struggling to keep up with the increasing cost of living.
Impacts on housing supply & affordability
The policy change did open up more homes for longer-term occupants. Over 500 unlawful STRs were shut down for zoning violations, freeing up coveted residential inventory. Some landlords converted previous vacation homes into year-long units to avoid fines under the crackdown. Rent prices also started moderating in 2020 as supply increased. The average 1-bedroom dropped nearly 20%, providing financial respite. Vacancy rates of long-term units doubled from 1% to 2%, marking the first meaningful improvement in years. However, the COVID-19 pandemic upended the market soon after. The halt in tourism significantly impacted the region’s overall economy. The real estate domino effect saw less housing built, placing pressure on rents again. Prices rebounded close to previous highs once travel resumed and the area re-opened for visitors.
Ongoing housing shortage despite restrictions
The policy aimed to increase affordable housing for locals in Kona, currently facing a shortage crisis. The area’s resident population continues growing while housing construction lags due to high land and building costs. Local incomes also need to match rising real estate prices and rents. Part of the failure relates to a need for more enforcement of existing illegal rentals.
Homes for sale in Kailua Kona
Kailua Kona, a popular seaside destination on Hawaii’s Big Island, is renowned for its sunny weather, stunning beaches, and relaxed lifestyle. Homes for sale in Kailua Kona range from modest 2-bedroom bungalows to luxury oceanfront estates. Many homes have lanais and backyards with tropical landscaping and fruit trees. Proximity to both Kona International Airport and Kailua Village, with its shops and restaurants, is appealing. Those seeking an easygoing lifestyle will find excellent housing options in Kailua Kona to enjoy the area’s natural beauty and amenities. The wide range of prices allows families and retirees to find suitable properties.
Kailua Kona real estate
As a popular tourist destination, Kailua Kona has seen increasing interest in its real estate over the past decade. Home prices have risen steadily, with the median sales price now over $800,000. Waterfront properties are highly coveted and can sell for over $1 million. While the high prices make owning a home here unattainable for many locals, the combination of spectacular natural beauty and outdoor lifestyle continues to draw buyers from the mainland U.S. and abroad.