What are the most significant problems facing Kauai that county government has the power to address via changes in public policy?
Most residents would probably say traffic, affordable housing and our ever expanding landfill. Others I am sure would add in stream diversions, coastal water pollution, and the protection of the cultural resources including the traditional practice of making pa’akai.
Today, my focus is on affordable housing.
The good news is that the Kauai County Council has taken some significant yet incremental steps toward increasing the availability of affordable housing. The passage of the additional rental unit law has the potential to facilitate the addition of meaningful numbers of new affordable rentals. The recent move to allow kitchens in guest houses, likewise will help increase the number of new rental units available to local residents.
It is noteworthy that both of these measures are simply changes in public policy and require no public funds to implement. It is also important that while new housing inventory will be created, the development will not result in increased sprawl into our valuable agricultural lands. An additional huge plus is that the financial benefits of the new rentals will go to local owner/builders and the construction labor and materials will come from local contractors and suppliers.
Because of these basic changes in public policy, the potential to dramatically increase our affordable housing inventory is significant.
But there is one remaining element that still needs to be put into place to bring this reality to fruition: Incentives
Aggressive financial incentives for those who begin building affordable ARUs within a defined time period (say during the next 36 months) and commit to keeping those units affordable — would “jump start” and motivate property owners to build affordable ARU’s in the immediate future.
Without strong incentives, the good intentions and foundational nature of these new measures, may very well not meet the need nor the potential.
The incentives need to be designed to encourage owners to build quickly, with perhaps extra incentives for the first X number of units built and rented.
Councilmembers Chock and Evslin have recently proposed the reduction or waiving of certain permitting fees for those property owners who construct an affordable ARU on their property. This is a good first step and they and the council should be commended for supporting this effort.
However, in order to seriously spur the new construction of affordable ARUs and motivate owners to build now, the incentives must be stronger and as enticing as possible.
The waiving of any increase in property tax that would normally occur from the increase in value that comes with all new construction, is one potential powerful option.
A new home costing $200,000 to construct would normally generate between $610 and $1,210 per year in additional property tax revenue (depending on applicable tax rate). A 10 or 20 year waiver would thus reduce the cost of constructing the ARU by 5 to 10% (over a 10-20 year time period).
Note: Because the property tax waiver discussed above only applies to the new construction of affordable ARUs, there is no out of pocket expense to the county. The county would continue to receive the normal tax revenue from the main residence and land. The only “lost” revenue is revenue that is not coming into the county now anyway.
If the property tax waiver was combined with additional fee waivers for the water meter, electrical hook-ups and other fees — it may be possible to achieve as much as a 20% benefit (of construction costs) to the owner/builder, which would then be at a level to truly motivate a surge in new affordable ARU development.
Affordability must be a prerequisite that owner/builders would agree to in order to qualify for the incentives AND it would be important to limit the benefits to the first XXX number (say 500) of affordable ARUs constructed so as to motivate owners to build
Some of course will say the incentives are too “rich” and while others will assert that they are not rich enough.
Erring on the side of making the incentives too “weak,” risks receiving minimal results in terms of moving the needle on affordable housing. Erring on the side of making the incentives “too strong” on the other hand, risks creating a construction boom and creating an abundance of affordable housing opportunities.
Nothing of course is free, but it’s important to remember that the proposed incentives are paid entirely from fees and taxes that would not be realized anyway, if not for the construction of the affordable ARU unit. As such, the incentives would have a zero impact on the county budget.
The above is intended to facilitate the broadening and continuation of a discussion our community and our county council has already begun.
Stay tuned for future columns reviewing potential public policy initiatives, that could be utilized in dealing with other significant county problems.
Gary Hooser formerly served in the state Senate, where he was majority leader. He also served for eight years on the Kauai County Council and was former director of the state Office of Environmental Quality Control. He serves presently in a volunteer capacity as board president of the Hawaii Alliance for Progressive Action (HAPA) and is executive director of the Pono Hawaii Initiative.