Anyone wanting a glimpse back to the economic halcyon days before COVID-19 effectively shut down Hawaii, wiping out 113,000 jobs between March and April, can simply go down to Victoria Ward Park in Kakaako.
The big grassy space bordered by fledgling coconut palms abuts two looming condo shells brimming with the sort of activity that was the status quo in a place that was hosting some 250,000 tourists per day. The Howard Hughes Corp.’s Aalii and Koula projects, now under construction, are employing about 1,300 workers, says Race Randle, the company’s senior vice president of development.
They’re all union jobs, too, he says – the kinds that can support a solid life even in high-cost Hawaii.
“We’ve been blessed that we have this momentum,” he said. “We’re allowed to move forward. And people want to live here.”
The Howard Hughes projects are hardly outliers in Hawaii’s economic landscape. The construction industry has remained strong during the COVID-19 crisis compared to the hospitality industry.
There were 37,900 construction jobs in Hawaii in December compared to 37,800 in March, according to the University of Hawaii Economic Research Organization. And there was relatively little fluctuation in the months between. By contrast, Hawaii had 70,000 hotel and restaurant jobs in December compared to 112,200 in March, and the number of jobs fluctuated significantly, dipping as low as 43,500 in May.
Gov. David Ige pointed this out in his State of the State speech in January, calling construction “a bright spot” and promising $1.1 billion in state capital improvement projects in 2022, another $1.1 billion from federal transportation projects like airports and harbors and another $10 billion from the private sector.
Part of that is coming from Howard Hughes. So far, the Dallas-based builder of master-planned communities has invested about $1.6 billion in its ongoing work to rebuild the Diamond Head end of Kakaako, which it calls Ward Village.
That includes money spent on condo towers, infrastructure and improving the Kewalo Harbor, which Howard Hughes now manages. And there’s more to come. The company is spending another $1 billion on Aalii and Koula and projects it will invest another $1.5 billion on three projects on the drawing board: Victoria Place, Ulana and The Park Ward Village.
A seemingly never-ending stream of buyers has meant Howard Hughes has been able to sell units almost as fast it can build them. Selling condos in Kakaako has gotten even easier recently, Randle said, as a critical mass of residents and a variety of retailers and restaurants has taken root in the neighborhood, giving the area some sense of vitality even during the pandemic.
Other factors are driving demand for new homes, as well, said Cheryl Walthall, executive director of the General Contractors Association of Hawaii, an industry trade group. Historically low interest rates are making it less expensive to borrow money.
Plus, the pandemic has changed the way people work and think about home. Many people want more space, she said, which often means a home and a yard rather than a condominium.
The upshot: after suffering a bump in March, the industry, which was designated essential and not subject to stay-at-home orders, quickly got back to work amid strong demand.
“The industry adapted really quickly, adjusted to the safety measures that needed to take place and just carried on,” she said.
Despite a housing shortage, home builders in Hawaii have long been hindered by two things that have helped create a scarcity of housing.
First, there are county permitting processes, which are often described as frustratingly slow, especially for builders trying to get a routine permit that requires little more than a rubber stamp.
Second, builders face a labyrinthine regime of federal, state and county laws that can take years to navigate.
The lengthy process to get the various approvals, known as entitlements in land use parlance, invariably drives up costs to builders and eventually the public, Walthall said.
“All the time and expense to go through that is put back into the cost of houses,” she said.
Honolulu Mayor Rick Blangiardi has brought in a former building industry executive, Dean Uchida, to run the Honolulu Department of Planning and Permitting. Uchida has vowed to make sure routine permits don’t get bogged down in red tape. In addition, he said, the administration is looking to modernize the process with a new computer system, likely modeled after one used in another city to save on costs.
“The No. 1 priority at DPP is to fix the building permit process,” Uchida said in an interview.
Uchida has ample practical and political experience in the building industry. He’s a former vice president with the Hawaii unit of D.R. Horton, the nation’s largest homebuilder, known for its Hoopili project on Oahu. And he’s been executive director of Hawaii’s Land Use Research Foundation, a lobbying outfit for developers known for butting heads with environmentalists over policy matters.
All that sits well with people like Walthall, who see Uchida as an ally who will get things done, especially when it comes to streamlining the process for getting building permits and other entitlements.
“If we can tackle those two things, a lot of people will be happy,” she said.
Uchida sees it as a matter of making homes available to working people who want to buy them. That can mean allowing more density so people can redevelop and build more housing in urban areas. It also means developing more outside of the urban core, the type of homes for which there’s increasing demand as companies warm to the idea of letting employees work from home.
He pointed to his former employer, D.R. Horton, and Hawaii home builder Castle and Cooke as examples of companies that cannot keep up with demand.
Unlike luxury condo towers near the ocean, which often attract second home buyers and investors from abroad, the master planned communities like Hoopili and Castle and Cooke’s Koa Ridge development are generally for residents, working people trying to buy a home.
“You’re not selling million-dollar homes in those master-planned communities,” he said.
Desire for new homes is so high that the companies hold lotteries to determine who can buy homes in their developments, Uchida said. And for every one home sold, the companies have 10 who enter the lottery, he said.
“That’s nine people without a home after the sale,” he said. “That’s a lot of demand.”
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