Want more housing? Try economic freedom

by Keli'i Akina, Ph.D., President / CEO, Grassroot Institute of Hawaii

How do you know if your state’s housing crisis is related to overregulation?

When it’s technically easier to build a house for Oprah than it is to build houses for average families.

That’s what my colleague Joe Kent made clear on Tuesday to a group of students visiting from Michigan’s Hope College about Hawaii’s housing and homelessness crises. 

During a presentation on the Hawaii Pacific University campus, Joe showed them a photo of a 500-square-foot, two-bedroom house in Honolulu that the real estate firm Zillow says is worth $1.32 million. For students expecting a spacious mansion, it was an eye-opening experience — one that helped explain Hawaii's exceptionally high rate of homelessness and its continuing exodus of residents to the mainland in search of affordable housing and greater economic opportunities.

Joe, who is executive vice president at the Grassroot Institute of Hawaii, noted that Hawaii is at the top of the national Wharton Index, which measures the extent of housing regulations in each state. That prompted one audience member to add that Hawaii is not just at the top — it is “way” at the top. 

Joe said it takes developers in Hawaii an average of 10 years just to navigate the layers of zoning and regulation needed to get permission to build. After those 10 years, you still haven’t laid a single brick or hammered a single nail.

Obviously, 10 years of waiting for permission is going to make homebuilding more expensive. Add in that only 5% of the entire state is designated “urban," or land on which you can build housing, and you have a terrible recipe for housing supply. 

Looking at maps of the state’s land-use designations, some of the students noted that the 5% figure is a generous estimate, given that industry, airports and hotels also require “urban” zoning. 

Joe said the irony of it all is that, “It’s actually easier to build a mansion in Hawaii than it is to build an affordable house."

Why? 

Because, said Joe, "a mansion fits neatly into the definition of agricultural zoning. One house on one acre, right?”

Showing another slide, Joe said: “You can see this is Oprah’s house on the island of Maui, and it’s one house on many, many, many acres. But it’s a mansion, very easy to build. You don’t have to have to go through any public testimony. You don’t have to go through any hearings. You don’t have to go to the state Land Use Commission or the County. You just build the house. Basically, very simple.”

In other words, Oprah doesn’t need to go through hearings to build a mansion, but a developer who wants to put up a neighborhood of affordable homes is easily stymied by Hawaii’s notoriously contentious public-hearing process.

As Joe explained: “On Maui … you [generally] cannot build a house, you can’t build a low-rise, you can’t build a high-rise. There is nowhere to live. There’s no place to buy. There’s no place to rent. It’s just all bought up, except for the fabulously wealthy. And that’s why you see so many celebrities there.”

Joe said part of the problem is the state’s Not-In-My-Backyard contingent. With NIMBYs so difficult to overcome, developers often see mansions as the fallback solution when their larger housing projects are denied.

A student observed that public meetings on new housing developments often are attended by homeowners concerned about their property values. Lower-income renters and others who want greater affordability often are absent because, ater all, how is someone who works multiple jobs going to be able to attend a zoning meeting?

The answer is that they can't. While Joe and the Grassroot Institute work to give such people a voice, what is really needed is a different approach to housing regulation in our state. 

Instead of piling on the regulations, we need to start stripping them away. A good first step would be to reform — or even maybe getting rid of — the state Land Use Commission, which now functions primarily as a state zoning commission.

We also could easily add just 1 or 2 percentage points to the amount of land designated urban to facilitate more homebuilding, increasing the total by 20% to 40%.

And we could liberalize zoning in the existing urban areas to allow for more duplexes and triplexes, as well as promote mixed-use development in general, whereby residential, commercial, cultural and other uses are blended and can thrive from the synergy.

Reversing the damage caused by excessive housing regulations will not be easy. It has taken decades for Hawaii’s housing crisis to develop and it will take years to undo. 

It also will require humility and a willingness to try something different. We know that overly strict land-use and building regulations are not working. I say it's time we gave greater economic freedom a chance.

E hana kākou! (Let’s work together!)

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BTW, if you would like to learn more about Hawaii's housing crisis, I will be moderating two luncheons later this month on "How to make housing affordable in Hawaii." The speakers at the June 16 Maui event will be attorney Jason Economou and homebuilder Lawrence Carnicelli, and at the June 17 Oahu event, homebuilder Stanford Carr and land-use expert David Arakawa. For more information, please go here.