Super, the incentive is money. As an example, a studio or small one bedroom that rents for $100 a night as a vacation rental, would get only $1,000 a month as a long-term rental. By the way, these rental prices are not set by rent controls, which you asked about before; it's just the market price. So, if the owner can keep a property booked with vacation rentals, there is the potential for three times as much rental revenue. And that's what inflates the property values, because the property as vacation rental can support a higher mortgage payment, and therefore a higher selling price.
Granted, this does not apply in all situations. For example, some rental properties have a desirable location or other attractive characteristics that put them out of the reach of typical long-term renters anyhow. However, the zoning ordinances prohibiting vacation rentals are not aimed at those kinds of properties. They are aimed at properties in residential neighborhoods that might be taken out of the long-term rental pool in order to accommodate vacation rentals instead - yes, this really has happened in many neighborhoods. This forces long-term renters to move elsewhere. But where? If the trend of proliferation of vacation rentals continues, there will be nowhere left for long-term renters to go.
Your solution of just building more housing is not workable for many reasons. For one thing, Maui has limited water supply, and development is limited by availability of water. Other considerations are limited roadways, limited energy supply, limited waste processing, and other infrastructure limitations that make added development problematic - especially on the North Shore. This is what creates a limitation on housing resources and a conflict between competing interests of vacation rentals and long-term residents.
Besides, one can easily make the case that developing the North Shore to create more housing and accommodate a higher population density would eliminate some of its current characteristics like rural charm, low population density, local color, which are precisely what make it so attractive...
There is no easy answer to the problems that Maui is facing. The current administration and County council are wisely leaning in the direction of sustainable growth and sustainable development with a more diversified (i.e. less tourism-dependent) economy - and they have the broad support of their constituents to do so. Housing, and the vacation rental issue, are just one facet of the overall sustainability framework - others I've alluded to are water, energy, infrastructure. Of course some vocal minorities are vehemently opposed. That's not surprising, as there is an inherent conflict between sustainability on the one hand, and making money at any cost on the other.
How this all plays out is anyone's guess. The County Council is currently considering new proposals from the administration which update the vacation rental ordinances, and should be voting on passing them into law in the near future. My prediction is that all sides will get a little of what they want, but not everyone will get all that they want. The new regulations will be less restrictive and less onerous, however they will still place significant limitations on vacation rentals. Stay tuned.