Honolulu doesn’t just coincidentally have some of the highest-priced median homes, condos and rents in the country.
A panoply of intertwined public policies, rules and regulations have helped to drive prices up and, recent data suggests, they continue to do so.
“Honolulu is totally over-regulated,” said developer and affordable housing advocate Chuck Wathen.
When it comes to the land around us, Honolulu is far more regulated than the many major metropolitan areas measured in the Wharton Residential Land-Use Regulatory Index. The index produced by economists at the University of Pennsylvania’s Wharton School attempts to measure the impact of land-use regulations.
If responding to the housing crisis is truly a priority, we may need to rethink those regulations, according to several people involved in the Houseless in Honolulu summit that will take place at the Dole Cannery on Tuesday. The one-day event is expected to bring together scholars, economists, developers, housing experts, union members and executives to discuss the far-reaching effects of the housing crisis and come up with actionable solutions.
They contend we face a simple choice. We must either facilitate the construction of tens of thousands of housing units — especially the more affordable rentals and for-sale homes that are in sync with local salaries — or we should be ready for ever-increasing rents and mortgages.
A Sept. 8 draft report produced by the City and County of Honolulu, “Housing Oahu: Affordability Housing Study,” calculates that by 2016 Oahu will need more than 24,000 additional housing units to address pent-up demand and the formation of new households. About 18,000 of those units will be needed for households that earn $76,650 or less, the report says.
An average of about 2,080 residential building permits were issued each year for the last half-decade, according to the report. Many of the homes, though, were built for high-income households — including some off-island buyers — and don’t even address the growing demand among the island’s middle class and low-income residents.
As Wathen puts it, “You can’t solve today’s housing problem without trying to solve tomorrow’s more serious housing problem.”
Real estate analyst Ricky Cassiday noted that the three largest supply-side factors driving the high cost of housing are the prices of land and labor, plus regulation.
“Any time you make housing more regulated and harder to do, you take away society’s ability to house itself,” said Cassiday.
Regulations and zoning can boost the price of housing in different ways. If the process prevents new construction, there is the cost of the time and energy a builder or developer put into seeking permission they don’t get.
Also, as anyone who has ever endured a lengthy home-permitting process knows, waiting to build often comes with its own price tag. Even if you aren’t familiar with that process, you might still have paid for it since such costs generally get passed on to homebuyers and, eventually, renters.
“Any time you make housing more regulated and harder to do, you take away society’s ability to house itself.” — Real estate analyst Ricky Cassiday
For Cassiday, if Honolulu took the housing crisis seriously, it would change all sorts of “dumb rules” that prevent land from serving some sort of purpose — whether food production, housing or other.
One big area that he and others cite is land zoned for agriculture that, in many cases, isn’t being used for agriculture and likely never will be again. The type of soil, difficult-to-farm slopes and the troublesome economics of farming on Oahu are key reasons why, although some of the land is already being used for other purposes, like solar farms.
The state Office of Planning estimated early this year that about 67,000 acres of agricultural land remain on Oahu with a farm-friendly slope of 20 percent or less, which amounts to about 17.5 percent of the island.
But an analysis of agricultural land on Oahu by the social investment firm Ulupono Initiative calculated that there are fewer than 5,000 acres of good quality, irrigated farmland that are not already in use. That is less than one-tenth of the land zoned for agriculture.
One solution, for some experts, is to rezone the land for a substantial number of homes.
David Callies, a William S. Richardson School of Law professor, noted that Hawaii is the only state that has zoned all of its land — most state governments don’t zone land at all — and then there are additional layers of county and coastal controls on Oahu.
It is generally much harder to rezone land, he suggested, than it is to zone it the first time.
Compared to national averages, strikingly little of the land statewide, and even on Oahu, is zoned to allow for the construction of the necessary amounts of dense housing, said Callies, who noted that the state Land Use Commission classifies just 4 percent of land as “urban.”
On Oahu, various experts estimate that the current amount of land zoned as residential is 10 to 20 percent, which is still low, especially given the need for more housing and the expected demographic growth of the coming decades.
None of this is to suggest that you won’t see houses elsewhere. Farms, for example, can include a large “farm dwelling.” But land officially designated as residential is, by definition, where high-density living is permitted. And dense housing, experts say, is crucial to responding to Oahu’s housing crisis.
A pair of controversial projects on rezoned agricultural land will inject a lot of new and, often, fairly affordable housing into the market. But the slow pace of the projects — and the ire they have raised — highlight the sensitivity of doing so.
D.R. Horton’s 11,750-home Hoopili development has become possible as a result of the reclassification of 1,500 acres of agricultural land between Ewa and Kapolei. That reclassification — which is slated to consist of mid-rises, townhouses and other multi-family units, and single-family homes — sparked a legal challenge by the Sierra Club that went all the way to the Hawaii Supreme Court.
The project — which will, if it is completed, result in the addition of thousands of moderately-priced homes — has been in the works for a remarkably long time. The Ewa Development Plan referenced the development in 1997.
A smaller project in Koa Ridge is a 576-acre planned community where 3,500 homes are slated to be built on former pineapple fields off the H-2 freeway near Mililani. Castle & Cooke has worked for more than a dozen years to get the project approved and the company expects to finally break ground in 2016.
Beyond these projects, how should Hawaii continue to respond to forecasts that it will need tens of thousands of additional homes? Callies suggested that it would take too long, in terms of the regulatory process, to replicate such development models to respond to the state’s demographic evolution.
““We don’t want to allow the development community to use the housing crisis as some sort of Trojan horse to allow development.” — Marti Townsend, the director of the Hawaii branch of the Sierra Club
Instead, he said, the fast-developing Kakaako neighborhood could offer up a more suitable model. It uses a fast-track permitting process that makes it possible to get an ambitious project moving in under a year, he said.
Construction in the Kakaako neighborhood, where 18 projects have been permitted as of September, is expected to result in at least 4,500 new housing units, although many of them are high-end or luxury apartments that don’t address the housing crisis.
Aside from the big-money apartments and penthouses to sell, Callies said that part of the reason why Kakaako is such a magnet for developers is that the ground rules are clear and far simpler than elsewhere. Basically, proposals enjoy relatively quick responses from officials, which allows developers to move forward with a project or just move on.
The professor suggested that a Kakaako-style process could be used to spur more development in what may well be the site of Oahu’s next slew of new housing projects, along the 20-mile rail transit corridor.
In the draft housing report, Honolulu estimates that its housing strategy will add nearly 4,000 affordable housing units over a five-year period, and that with state support and successful development around rail lines on state lands, the five-year total could grow by another 8,000.
The draft report suggests that a total of 55,150 housing units could ultimately be built over a 25 to 30 year period along the rail line over the coming decades, although it acknowledges the fluidity of that estimate.
Placing people in an area where housing doesn’t currently exist — and near public transportation — Callies argued, is one of the most obvious choices, if Honolulu really wants to catch up on housing.
More development on this island of nearly 1 million residents is, of course, a very sensitive issue, particularly when it involves enlarging Honolulu’s urban footprint on the land.
Marti Townsend, the director of the Hawaii branch of the Sierra Club, said that Oahu needs more housing, but not just anywhere and especially not on agricultural lands.
“We don’t want to allow the development community to use the housing crisis as some sort of Trojan horse to allow development,” she said.
“To build higher density and create more units, and create more units per square foot, we all have to compromise our former philosophies to accommodate that kind of growth.” — Dennis Oshiro, HI HomeOwnership Center
Honolulu should, Townsend said, add more rentals aimed at middle- and working-class residents in urban areas and it should crack down on illegal vacation rentals to encourage homeowners to rent in a longer-term way to locals.
“If we were using all of our urban space to help people (in need of housing), I might be more open to using agricultural lands for those purposes,” she said.
Townsend has little sympathy for arguments that developers should pave over farmland because it isn’t fertile or ideally sloped. “Farmers have said to me, it isn’t about the quality of the agricultural land, it is about the quality of the farmers,” she said. What’s necessary, she added, is open land, access to that land and the ability to water it.
She challenges the motivations of people who are trying to rezone agricultural land.
“When a developer says this agricultural land is not valuable and it should be developed, they are really saying: ‘I want to make more money.’ But you know what: you don’t have a right to make more money. Paving over all of our life-sustaining lands is not really a smart decision. … Once it gets paved, it is never going to go back.”
Dennis Oshiro, the executive director at HI HomeOwnership Center, a nonprofit organization that works to boost home-ownership rates, said that while he is sympathetic to some arguments against density and enlarging Honolulu’s urban footprint, he has concluded that Honolulu needs to increase the housing inventory one way or another.
“I feel for the conservationists and the agriculture. But to build higher density and create more units, and create more units per square foot, we all have to compromise our former philosophies to accommodate that kind of growth.”
Regulations exist for a reason, generally to preserve something — safety, the environment, traditions or a way of life.
Residents of pleasant neighborhoods often push, directly or through their complaints, for more regulation, and they have an understandable aversion to projects that might worsen traffic on roads they use or make their neighborhoods feel more crowded.
The problem, from the perspective of efforts to build a lot more below-market housing, is that regulations don’t always work as intended, while also adding costs. And even when they miss the mark or become outdated, policymakers only rarely take a close second look to examine their impact.
Over the last four decades, Wathen said, one bill after another was passed that wasn’t so impactful, but collectively policymakers created a huge number of impediments that add costs in a stunningly expensive real estate and rental market.
At this point, removing those obstacles one by one is such an enormous task that Wathen suggested superseding them with new overriding regulations.
There are no indications that will happen anytime soon.
However, Honolulu’s draft housing report from September does call for the modernization of the city and county’s approach to the production of more homes, including updating “ordinances, zoning and parking,” revising construction standards and building codes, and streamlining the permit process.
It also calls for making it easier to build near rail stations on what was once “agricultural” land.
The Ulupono Initiative was founded by Pierre and Pam Omidyar. Pierre Omidyar is the CEO and publisher of Civil Beat.
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