Can we please try some housing policies that work, like the ‘Tokyo model’?

by Keli'i Akina, Ph.D., President/CEO Grassroot Institute, March 13, 2022

If we want housing for our children and grandchildren, we need to liberalize our state and local land-use and zoning regulations.

When you’re a hammer, the saying goes, everything looks like a nail. And when you’re a fan of big government, regulation is the go-to solution to every problem.

That may be why so many of our policymakers try to address Hawaii’s housing crisis via big-government solutions — like taxes on empty homes, government-funded housing projects and regulations to limit or mandate certain kinds of development.

Extensive research, however, shows that big government is the reason for Hawaii’s housing shortage to begin with. So can we please try something else?

The reality is that if we want to turn things around, we shouldn’t be trying to import policies from areas with high housing costs, like San Francisco, or countries that have vastly different social and government structures, like Singapore. Instead, we should be looking at places that have managed to keep housing affordable, like Tokyo, where housing prices have been relatively flat for two decades.

On my latest “Hawaii Together” program on the ThinkTech Hawaii network, I discussed the “Tokyo model” for housing and what it could mean for Hawaii with Edward Pinto, head of the American Enterprise Institute Housing Center. Pinto has spent decades studying housing and development, and he easily pinpointed the origin of Hawaii’s high housing prices.

According to Pinto, Hawaii had robust housing construction up until about 1972 or 1973, but then it collapsed and it has never recovered.

Reasons for that, he said, include the state Land Use Commission, established in 1961, and Hawaii Environmental Policy Act of 1974, both of which are heavily involved in land-use management.

“It all comes down to land use and making things illegal,” said Pinto. “Basically, … reasonable density — we call it light-touch density — has been made illegal [in Hawaii]. Having two units on a lot is illegal. And all of these things just drive up the land cost.”

As a result, Pinto said, Hawaii has one of the most expensive housing markets in the world, just behind San Francisco and just ahead of London.

In a guest appearance on Sen. Stanley Chang’s “Our Homes” podcast, Pinto said a growing body of research shows that “subsidized housing, inclusionary housing, rent control and land-use policies that constrain supply end up creating scarcity and raising costs. … The reason that these policies have failed is that they don’t tackle the root cause, but rather the symptom.”

Chang is a well-known advocate of the so-called Singapore model of housing, which is the basis for his ALOHA homes bill that he has introduced in the Hawaii Legislature for several years now. Pinto said that he doubts that model could be reproduced in Hawaii, for several important reasons.

“For example,” he said, “Singapore, after its independence, had really a clean slate. Singapore back in the 1960s consisted mostly of shanty towns, and the government today owns 90% of the land and it can acquire private land at low costs.

“Furthermore, Singapore also has a highly effective public leadership cadre and it really has only one form of government that is not as responsive to voters necessarily, which allows it to overcome many barriers to increasing supply.

“So the downsides for applying such a model to Hawaii,” he said, “could be that this Singapore model may not necessarily be scalable. And if you end up with a failure, it could come at a heavy cost, because you could end up with public housing, as is very common in the mainland, where you have basically increased racial and income segregation, you have also trapped many residents in housing and it has reduced social mobility.”

Finally, he said, “generally, these projects, if the government gets involved, tend to be very expensive and they tend to exceed the budget.”

For Hawaii, Pinto said a better option would be the sort of “light-touch density” zoning that has helped Tokyo produce adequate affordable housing.

The secret to Tokyo’s success? Property rights.

After World War II, Pinto explained, Japan’s new constitution provided for strong property rights. By the 1980s, this included the right to develop your property as you wished, so long as it wasn’t a nuisance.

“You could build duplexes, quadruplexes, triplexes, high-rise buildings. As a result,” Pinto said, “Tokyo has built more housing in a period than the entire state of California by a multiple.”

This has enabled Tokyo to meet the needs of its population, in terms of keeping housing affordable for both renters and homeowners.

Pinto said light-touch density relies partly on “by-right” zoning, which allows projects that meet all zoning requirements to proceed without going through a discretionary approval process. This, in effect, legalizes small, fast, economical, adaptable and simple additions to housing supply while still accounting for health and safety.

Pinto estimated that if Hawaii were to adopt such policies, Oahu alone could add 26,000 homes over the next 10 years.

On Chang’s “Our Homes” podcast, Pinto’s colleague at the Housing Center, Tobias Peter, said it also would be helpful for Hawaii to make more land available for residential use. Specifically, as the Grassroot Institute of Hawaii has noted, with only 5% of Hawaii land available for residential construction, an increase of only 1 or 2 percentage points would translate to a 20% or 40% increase, respectively, in the land available for housing.

I realize, of course, that there is no such thing as a quick fix to Hawaii’s housing crisis. It is a problem that has been decades in the making, and it is being made worse through fashionable policies like inclusionary zoning.

I also have no doubt that the people who want to use the government to solve the problem are well-meaning. But the data is clear: If we want our children and grandchildren to be able to find affordable homes in Hawaii, we need to liberalize our state and local land-use and zoning regulations.