- Special Projects
Gov. David Ige won re-election amidst immense public pressure to act on the skyrocketing costs of housing in the Aloha State. Not surprisingly, in his State of the State address last week to the 30th Legislature, the governor promised to make affordable housing a top priority this year.
Hawaii’s per capita personal income is $52,787 and average household income is $77,765, according to the Department of Business, Economic Development and Tourism. This already ranks us considerably higher than most states, but still falls short of what’s necessary for housing.
An annual income of $57,071 is necessary just to afford a one-bedroom home and $107,805 is needed for a three-bedroom home in Hawaii, according to the National Low Income Housing Coalition. These figures do not factor in the additional income over and above these housing costs necessary to live in Hawaii like food, clothing and health care.
Ige pulled no punches in his response to the crisis, saying the government needed “to use public resources and public authority to break the cycle of speculation and profit-taking that has turned affordable housing into an unreachable goal for our people.”
Promising “thousands of new affordable housing units to be built on state lands on all islands,” he offered what sounded like a gigantic public works project to create condominiums with 99-year leases.
In political science, we wonks like to use the programmatic term “unintended consequences of purposive social action” to describe policy quagmires, an erudite way of saying that the road to hell is typically paved with good government intentions. The governor’s proposal certainly is appealing in that it offers to bring quick relief, but the real question is whether it will actually address the problem or make the crisis worse.
Most Hawaii residents, already used to large-scale state interventions in the marketplace, barely blinked at what could potentially be an extremely pricey promise for an already tax-strapped state. When it comes to building large structures, additional infrastructure in the form of sewers, utilities and streets are needed as well, none of which come cheap.
Newly hired committee staff at the Capitol are often told an apocryphal tale that the reason paperless policies are important is because while the Legislature is in session, the price of paper increases in Honolulu. That amusing cliché, however, carries a valuable supply-and-demand economics lesson: Ige’s condo project is almost certain to require immense amounts of construction materials and labor, which could cause ripples of price increases through Hawaii’s market.
“The state has a nasty habit of implementing initiatives before planning them.” — Makiki resident Christopher Lum Lee
There’s also the issue of procurement and the slippery slope of money influencing policy. Whoever gets contracts to build or maintain these housing facilities is going to be getting a lot of taxpayer money for a very long time, since “affordability” will likely require some kind of public-private partnership or ongoing tax subsidy.
House Bill 963 and Senate Bill 1190 appear to lay the initial groundwork by authorizing the Hawaii Housing Finance & Development Corporation “to enter into ninety-nine-year leases of units in residential condominiums located on state lands.”
If I were a young person looking for a career in Ige’s “2037” vision, I’d choose banking, law or real estate — the three industries most likely to profit from the housing plan.
As former Secretary of Defense Donald Rumsfeld once joked, “if you can’t solve a problem, make it bigger.”
Nevertheless, it’s very possible that if executed and administered properly, the big housing plan could work well. Newly elected state Sen. Kurt Fevella, an Ewa Republican, says that the proposal has the potential to benefit everyone so long as procurement is done in a way that selects not merely the lowest bidder, but the most competent contractor capable of getting the job done on time.
Fevella says that state projects experience cost overruns because in some cases, the lowest bidder doesn’t actually have the finances, resources or expertise to fulfill what they promised.
“It’s the change orders which result in delays, and eventually, cost overruns,” Fevella says.
As with all real estate, location is also critical to success, Fevella says, adding, “So long as it’s not out in the boondocks, especially on the neighbor islands, it should work.”
Others are also cautiously optimistic.
“I support the proposal, however I am weary because the state has a nasty habit of implementing initiatives before planning them,” said Christopher Lum Lee of Makiki, who works for the City and County of Honolulu but was speaking as a private citizen.
“I think the young middle class could benefit from this, but there would be conditions such as upkeep and basic amenities,” Lum Lee says. “For this to entice young middle class to be owners, the state must commit to maintenance and upkeep, and not let it slip through the cracks like other things we’re seeing today.”
Mililani resident Zuri Aki, a public policy advocate for the Office of Hawaiian Affairs who also spoke as a private citizen, says important questions need to be explored.
“What AMI (area median income) must the lessee fall within?” he asks. “I believe the greatest demand for affordable housing within the state hovers around 60 percent and maybe stretches to 80 percent. For Hawaiians it is likely to be 60 percent and below.
“However, we see ‘affordable housing’ projects that go up to 140 percent AMI and when we’re talking about public housing and multi-generational leases for an individual making a six-figure salary, we’re starting to erode that principle against using public land for private benefit.”
Aki says there are young people who would love having an affordable condo, but he cautions, “I don’t foresee state condos being large enough to allow young folks to settle in together and have a decent-sized family.”
Ige’s proposal is big and bold, but making it work will require intensive discussion and careful review. At the very minimum, Hawaii residents need to know that affordable housing might be an expensive taxpayer project. And a dramatic housing initiative may not be politically possible this year, especially with other competing priorities like raising the minimum wage.
Want an affordable condo? Hurry up and wait. If I know the Legislature, sticker shock has the tendency to turn big projects into big feasibility studies.
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