The affordable housing conversation happening now at the County Council is an interesting one. As is the case for most complex “omnibus” type legislative proposals, there are both good and bad changes being proposed, depending on your perspective.
Rather than attempt to debate or dissect the numerous moving parts of the measure, it seems appropriate and important to step back and focus on the big picture for a moment.
Is the primary intent of the Council to increase the availability of truly affordable housing for local residents? Or is their main intent to generate development and “revitalize” the town core in Lihu‘e and other areas?
Or to rephrase the question: Whose interests are being served? Is the Council most concerned with serving low- to middle-income working residents, or are they primarily focused on helping landowners, developers, and local business owners to increase their profits?
The answer no doubt from some proponents on the Council will be: “If we help the landowners and developers make increased profits, then low to middle income working residents will benefit as well.” The trickle down theory at work, or not, once again.
Others on the Council will of course believe that both interests can be served, concurrently. It’s true I believe that both interests can be served, but it all comes down to money.
This should not be a surprise to anyone, as money does in fact make the wheels go round.
Developers and landowners will not develop affordable housing unless the costs of doing so are subsidized. Either those costs are subsidized by the private “market units” developed within the project, and/or the subsidy is provided by government in the form of infrastructure, density or tax credits.
Without a subsidy, there will be no affordable housing built, period. Increasing the inventory of market priced units will not result in an increased supply of affordable units. While this theory might be taught in an introductory economics class or in an ALEC “how to help developers” seminar, it is not the reality here on this island in the middle of the Pacific.
Prior to entering the world of policy and politics, I was active in the real estate business for over 10 years. I know first hand that the long term demand for Kaua‘i real estate is insatiable. Certainly the demand for affordable homes which by definition are “below market,” is beyond insatiable.
No affordable housing will be built without a subsidy. By removing the requirement for developers to subsidize the 30% affordable unit requirement via their “market priced” homes, the Council will ensure that no affordable homes at all will be provided in the Lihu‘e, Koloa or Kalaheo town cores.
Rather than remove the requirement for the developer to subsidize the affordable units, the County could “add to the subsidy” by absorbing certain off-site infrastructure costs and/or via tax credits tied to the increased property tax value that would result from the development.
Unfortunately, the Council in the past already more than doubled the density in the Lihu‘e town core, but got nothing in return from the property owners, who themselves received a windfall in the form of increased property values. Consequently the “increased density subsidy” card has already been given away for free, in Lihu‘e anyway.
If the goal of the Council is to both support the revitalization of the various town cores and to ensure that those local people who actually work in those towns can afford to live there, they must not remove the 30% affordability requirement. Invest more public funds in infrastructure or tax credits if needed to further support or incentivize the construction, but please, do not remove that 30% requirement.
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Gary Hooser formerly served in the state Senate, where he was majority leader. He also served for eight years on the Kaua‘i County Council, and was the former director of the state Office of Environmental Quality Control. He serves presently in a volunteer capacity as board president of the Hawai‘i Alliance for Progressive Action and is executive director of the Pono Hawai‘i Initiative.
Basically this is a replay of the Big Box Ban.
Those who hit the lottery with fraudulent legislation are family members of the old council who were salivating on family profits through old homes from deceased or hand me downs properties.
The Big Save scandal that included a council member’s family to profit millions with their luxury food company each and every year until the feds got wind of the fraudulent bill.
We have seen this before with regards to the Wailua apartments after the property value skyrocketed, almost no person on Kauai could afford the rent there and the property owners knew that after 10 years it was going to soar because of fraudulent legislation.
The only people who was dumb enough to not know this or play dumb was the county if Kauai and it’s planning and legislative branch.
This whole “affordable housing” is a complete waste of money. The only people making money are the developers.
The out of state mainlanders buy up the properties. Locals still can’t afford these ridiculous prices.
Stop this farce.
So true Mr Hooser, this council is clearly catering to special interests instead of the people who elected them to serve and protect our local lifestyle
Hooser is a creature of the state. His go-to solution can be unfailingly summoned up as government force is the “way” and markets always fail. It’s a religious fanaticism of his. And sadly, it is one that has proved over and over again to be an abject failure.
Here’s another view below, Gary…learn from it and the historical data. I know its hard, but try. Same to all the political types that think only political decisions are valid.
RSW
“How Governments Outlaw Affordable Housing
It’s no secret that in coastal cities — plus some interior cities like Denver — rents and home prices are up significantly since 2009. In many areas, prices are above what they were at the peak of the last housing bubble. Year-over-year rent growth hits more than 10 percent in some places, while wages, needless to say, are hardly growing so fast.
Lower-income workers and younger workers are the ones hit the hardest. As a result of high housing costs, many so-called millennials are electing to simply live with their parents, and one Los Angeles study concluded that 42 percent of so-called millennials are living with their parents. Numbers were similar among metros in the northeast United States, as well.
Why Housing Costs Are So High
It’s impossible to say that any one reason is responsible for most or all of the relentless rising in home prices and rents in many areas.
Certainly, a major factor behind growth in home prices is asset price inflation fueled by inflationary monetary policy. As the money supply increases, certain assets will see increased demand among those who benefit from money-supply growth. These inflationary policies reward those who already own assets (i.e., current homeowners) at the expense of first-time homebuyers and renters who are locked out of homeownership by home price inflation. Not surprisingly, we’ve seen the homeownership rate fall to 50-year lows in recent years.
But there is also a much more basic reason for rising housing prices: there’s not enough supply where it’s needed most.
Much of the time, high housing costs come down to a very simple equation: rising demand coupled with stagnant supply leads to higher prices. In other words, if the population (and household formation) is growing quickly, then the housing supply must also grow quickly — or rents will rise.
Moreover, where the housing gets built is a key factor. We cannot speak of housing supply for an entire metropolitan area. Metro areas are composed of a wide variety of employment centers and neighborhoods. The mix of employers and workers varies from place to place depending on tolerable commute times, local industries, and geography.
In an unhampered market, of course, as rents rise, housing developers will respond by building more housing where it’s needed most — and thus potential prices are highest. Rents will then fall in those areas and developers will stop building housing — or build in other places — until rents rise again. Or, in response to rising rents, current homeowners will turn their homes into boarding houses. Others may build so-called mother-in-law suites over their garages. The number of ways to expand housing is actually quite long.
But, as everyone who’s ever tried to do any of these things knows, we most certainly do not live in an unhampered market. In fact, the production of housing is one of the most regulated and micro-managed industries in the industrialized world.
City planners control what sort of housing can be built — and where — through zoning and land-use laws. These central planners tell us where housing must be single-family or multi-family. They tell us if you’re allowed to rent out one of your bedrooms to a non-relative. They tell us if you can build an auxiliary housing unit on your property.
With so much government planning at work, the effect has been rising home prices and a higher cost of living. And again, those who suffer the most tend to be those with the lowest incomes.
This is then made even worse by “urban renewal” schemes in which privately owned low-cost housing is bulldozed by governments to make room for trendy shopping districts or for government-owned or subsidized housing.
The Rise of Zoning and Land-Use Laws
Prior to the rise of widespread zoning laws — which became especially popular after the Second World War — housing production was far more responsive to market demand. In areas where there was a housing shortage, many families rented out rooms to what was a booming industry of boarding houses in the nineteenth century and early twentieth century. Residential hotels were popular among the elderly and those living alone.
Over the past 100 years or so, thanks in part to control-freak Progressives who demanded “communistic” boarding houses be shut down, cities began to take over as planners who decided what sort of housing people were allowed to live in.
Over time, this newfangled method of central planning has become immensely popular, and we can no longer say that city planners and local governments are forcing their vision on a disgruntled and resistant public.
Government Controls on Housing Are Very Popular
Indeed, in many areas, it is the private-sector homeowners who most demand that every new townhouse, every new apartment building, and every new storefront be controlled, evaluated, and ultimately controlled by government bureaucrats.
Modern outer suburbs in most metro areas are notable for extremely detailed zoning. But even in traditionally more laissez faire inner areas (laissez-faire in terms of zoning) communities have been moving toward even more stringent zoning laws to prevent diversity and decentralization in land use.
We’ve all seen it at work over and over again in many of these older inner suburbs: A landowner realizes the housing demand has increased in the area and attempts to put a four-unit building where a single-family home once stood.
Naturally, this change will create more housing, bring down rents, and, of course, allow a private-property owner to exercise his rights as an owner.
But, in many cases, the private-property owner quickly finds he has no such rights.
The neighbors, who don’t want to live near a row of townhouses or have more cars parked on the street will protest to the city government, demand a zoning hearing, and fight to ensure that only a single-family unit is allowed on the lot. In many cases, they’ll use the increasingly-popular tactic of “downzoning” in which people who earlier bought property with the hope of developing it later will be robbed of their property rights. They’ll be told: “sorry, that thing we once said you could do with your property — you can’t do that anymore.” This is done so that the community’s other residents can maintain the status quo in that neighborhood until the end of time.
At the same time, employment continues to expand in nearby commercial areas, so employees — instead of living in inner suburbs — must move further and further outside the urban area and commute on taxpayer-funded roads.
Nor is this problem limited to what many view as primarily residential areas. Even on major thoroughfares, nearby residents will protest new apartment buildings because they are believed to be unsightly, or will create more local traffic, are are simply something different they don’t like.
The “solution” in this case is to shift traffic somewhere else — to the suburban freeways, for example — and shift the cost to statewide taxpayers who now must foot the bill for extending infrastructure ever further outward.
In all these cases, one group of voters uses the power of government to force costs onto some other group of voters in some other area — and onto the workers who must live further and further from employment. This is all done to save the “character” of the neighborhood. But it’s really done because many homeowners have no qualms about using the power of the state to prevent other property owners from using their own property as they see fit.
The Band-Aid: Subsidized Housing and Inclusionary Zoning
Often, many residents who fight tooth and nail to prevent any increases in housing density or creation of more housing are the same people who say that “something must be done” to make housing more affordable.
Having caused the shortage of housing in places where people actually want to live, our “progressive” advocate for low density and exclusionary zoning may then attempt to sooth his conscience by advocating for a small number of subsidized housing units nearby. Or, he may demand “inclusionary zoning” which mandates that developers set aside a certain percentage of all new units as “affordable” units with legally-imposed limits on how high prices can go.
This, of course, does precious little to solve the problem. The subsidized units that get built are usually very small in number, and only get built after years of winding their way through the zoning and approval process. The inclusionary zoning tactic is even worse because the mandate for low-rent units discourage developers from building anything at all in that jurisdiction.
Thus, new production of housing continues to fall behind regional population growth, and rents and home prices continue to rise.
We Need More Housing of All Types
The solution to this is more housing. Not more “affordable” housing and not necessarily more “high density” housing. Housing, after all, is extremely heterogeneous. Indeed, two identical houses built a block apart are not the same — thanks to differences in location. But types of housing vary widely in nature. There are high-rise apartment buildings, single-family homes, duplexes, boarding houses, and townhouses.
Which is the best type of housing to build in any given location? Thanks to the immense diversity of renters, homeowners, locations, neighborhoods, and unit types, no person can say. In fact, it’s impossible to know the answer without allowing property owners and consumers to function within the marketplace. Property owners will attempt to build housing where they feel it will best satisfy market desires. Consumers will attempt to move where housing best suits their desired lifestyle.
City planners would have us believe they can figure this all out ahead of time.
They can’t.
Nor should we trouble ourselves with mandating that builders create housing that caters to low-income houses. The problem isn’t too little low-income housing, per se. The problem is too little housing overall.
After all, for every new unit built — even if it’s a luxury unit — the housing supply increases, prices will fall ever so slightly, all else being equal. Over time, the cumulative effect of new units built for a wide variety of price levels will be to bring housing prices down overall. As new luxury units are built, the wealthiest renters and homeowners will tend to move into newer and fancier units. The older now-less-demanded units will fall in price making them more affordable to lower-income buyers and renters.
Today’s luxury units are tomorrow’s affordable housing.
Unfortunately, thanks to the continuing role of government in housing production, attempting to meet the needs of renters and buyers continues to be an exhausting quest to deal with an endless assortment of ordinances, mandates, regulations, and plans. The current planners don’t want more housing. The government planners only want a certain type of housing. Meanwhile, the renters live in smaller and smaller units, and drive further and further.
But there’s one thing of which we can be sure. “Capitalism” will be blamed for it all.”
Author:
Ryan McMaken (@ryanmcmaken) is a senior editor at the Mises Institute. Send him your article submissions for the Mises Wire and The Austrian, but read article guidelines first. Ryan has degrees in economics and political science from the University of Colorado and was a housing economist for the State of Colorado.
Well…the “let them buy and build whatever” plan hasn’t been working in Honolulu. Google “Grant Shen” for one horror story of a monster home developed in Manoa. Or just google “monster home” and “Hawaii” to see how far some people will go in destroying a neighborhood in order to put some coins in their own purse. The only recourse for the original neighborhoods has been for planning officials to enforce city zoning.
Gary, you and every other real estate sales person are culpable in the mess we’re in. The industry has shamelessly marketed Kauai homes to off-island customers, which has resulted in lots of non-residents buying up houses, moving here and/or renting them out at ridiculous prices and thereby making it impossible for locals – born and raised here – to buy their own homes.
Even without industry marketing new residents are coming. The question is really how can “locals” survive in this new environment. Kauai’s population will grow, rapidly. We need to consider higher density zoning, lots of it, in the most desirable areas where locals WANT to live, not preserve these areas for the rich. “How government outlaws affordable housing” makes sense to me.
TGI publishes comments “to enhance the visitor experience” DOFAW Loop road bridge build, now flood destroyed, and the newest fraud and collusion is the closure of Polihale “indefinitely”. Also, “USAF settles” on Kauai with their military funded, proposed billion dollar 12-story Mana ballistic missile Launch/Intercept facility, that cannot have civilians in the region thus locals blamed and “indefinite” kicks in. How about enhancing visitor experience bridge build Hanakapiai? The Red chopper contracted to exchange tools awa portapotties from the area dumping shishi and toilet paper as porta is launched twirling at the end of the rope x5 trips to Ke’e and back. Kauai has sixty one years of fake statehood and another 60+ years in the oppressed and terroristic u.s. hood, where nobody gets out alive, and in these cases, #realtrump upgraded GITMO+tribunal=Rabbit Hole fodder, last wish, either individual or group puka applies throughout Hawaii-nei! Raise your hand if you want a tracking wrist band. HKGA has arrived on time and is “locked and loaded”. We not going anywhere and are finally on track! All those self-serving self-proclaimed Atooi kings who alongside tribals, have been in the corrupted hood and will be soon gone. Birth certificates checked and outsiders dismissed with all their Toys and all vehicles that are not from here, as in license plates that boast another tourist turned transplant!
Gary, isn’t the big picture the County’s policy of only allowing Agricultural land that is next to Urban be converted to residential? (Doesn’t the reasoning go, they’re preserving the rural lifestyle for the people? How do you enjoy the open space if you don’t have a home?) Yet around the urban area of Lihue, there is only one landowner. Any agricultural zoned land that has been developed in Lihue in the past 60 years has been done predominantly by a single entity land holder. And that landholder didn’t sell raw agricultural land to other parties and let them develop it. No, they got the upzoning themselves that allowed a higher use which created more value in the land, and then sold the improved land for someone else to develop. I believe there was a fair amount of agricultural land converted to commercial and residential use during your tenure to that one landowner.
You mention the Council giving things away and getting nothing in return, what did the
County get when they let Lihue landowner convert all the agricultural land to commercial
and residential? Isn’t it that the County didn’t even put time deadlines on use of the development rights. That being the case, the land owners were allowed to hold the zoning
permits for many years and take advantage of the market appreciation before they sold to
the end developers. Isn’t the purpose of giving zoning changes for residential because there’s an immediate need and so conditions are required for timely development? If the residential zoned permits would have been required to be develop within 3 to 5 years, a lot
of local people would have had the opportunity to participate at much lower prices. Shouldn’t that be one of the benefits of living here? You get to participate in the growth of the Island. Land shouldn’t be reserved for higher bidders. later on. The County should not be in the business of helping the main landholder maximize it’s profit.
I don’t get how the numbers don’t work out for this landowner to develop affordable or
moderate priced housing. They have tens of thousands of acres and are getting less than $100 per acre per year leasing for cattle. If the Council promoted upzoning the land and gave them some residential zoning permits, the developers will defintely make more of a return than if that land was to stay in agriculture in perpetuity. The Council has to ask, what is all this land being held for? And what power does the County really have if they can’t affect a positive outcome with the abundance of land surrounding Lihue for the benefit
of the low and middle income worker. If the Lihue landowner isn’t going to take responsibility and address the need for housing, then the County policy of only converting residential zoned land around urban areas needs to be looked at, because it doesn’t work.