House Maui initiative aims to identify and reduce homebuilding restraints

By Grassroot Institute of Hawaii, July 31, 2022

The housing situation on Maui is the worst in the state, according to Todd Apo, a former Honolulu City Council member who these days is vice president of community partnerships at the Hawaii Community Foundation.

Apo is also the point man for the foundation’s House Maui initiative, which aims to create a sustainable housing market for Maui’s local families by making sure that “government and philanthropic resources are all directed collectively.”

On the July 20 episode of “Hawaii Together,” hosted by Ted Kefalas, Grassroot Institute of Hawaii director of strategic campaigns, on ThinkTech Hawaii, Apo said the foundation decided to focus on Maui because “the data was showing us that Maui was where the situation was the worst.”

The cost of Maui homes just continued to go up, he said, “and we also were seeing there was a complete lack of the development of new supply. And so, when you have an issue, both on the demand and the supply side, it created, obviously, a really bad situation for Maui residents. That’s really what led us to say, ‘OK, our housing initiative is going to start on Maui.’” 

Asked what he considered to be the main barriers to more Maui housing, Apo said: “In today’s world, it’s just about everything: … land availability, the price of goods and services, supply-chain-line issues. But you also get into regulatory issues and what it takes to actually get land entitled to build, and then getting through the permitting process to build itself. It’s every step along the way.

“The actual building of a home isn’t that hard,” he added, “but the system has made it hard.”

Apo emphasized, however, that “as we go through this process of looking at how to improve the situation, … we can’t just sit there and say regulation is bad. It’s a matter of attacking it with a scalpel as opposed to a blunt hammer, and figuring out what regulations do we need, but [also] what are the ones that we can either eliminate or make more efficient?”

In general, he said, “I think we need to realize that there isn’t one right answer. And so we need to have a discussion, make a choice and find a way to make that choice be as best as possible for taking care of the considerations that need to be protected, but allowing housing to move forward.”

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TRANSCRIPT

7-19-22 Todd Apo with Ted Kefalas on “Hawaii Together”

Ted Kefalas: Aloha, and welcome to “Hawaii Together” on the ThinkTech Hawaii broadcast network. I’m Ted Kefalas, the director of strategic campaigns for the Grassroot Institute of Hawaii. and I’ll be standing in today for our regular host, Dr. Keli‘i Akina. 

Today we’re going to be talking about how to clear a lot of the roadblocks to housing on Maui. Our guest is Todd Apo, vice president of community partnerships and public affairs at the Hawaii Community Foundation. 

Todd’s been working on their initiative House Maui, which aims to create a sustainable housing market for Hope Maui’s local families. So thank you so much for being with us today, Todd.

Todd Apo: Thanks. Aloha. Glad to be here.

Kefalas: Before we jump in, I was hoping you could give us a little bit of information on your background. And how did you get involved with this whole housing issue on Maui?

Apo: Sure. You know, I started out as an attorney, and then got into real estate development and worked with the Ko Olina Resort development side of things, but we also had residential product going in there. Spent some time with Disney at the Aulani Resort, and then was doing development in Ward Village.

In the middle of that, I spent six years on the Honolulu City Council, and so have been able to get a look at some of these housing issues, both from the development side on the private sector, as well as the public sector side and the policy side.

So when I joined Hawaii Community Foundation about a year and a half ago, the House Maui initiative was getting itself started up, and I was able to jump in and, I think, bring some perspective and thinking around it. We moved through as a community foundation into this endeavor.

Kefalas: That’s great. And let’s talk about that House Maui initiative. What is it, and why did you guys choose to focus on Maui?

Apo: Yes. It really all started with the change framework that Hawaii Community Foundation has been working on for the past few years. And each letter of change is a different sector that we focus on within the community, and the C-sector is Community & [Economy]. And under there, we decided to focus on what we saw so many individuals and families facing here in Hawaii. 

And so if you looked into the ALICE report and where some of those numbers are, and the issues for those that were working but not being able to make enough to live here, we started to identify a housing cost burden. That led us to look at Maui.

As we looked at the data — which we tried to do through the change framework — the data was showing us that Maui was where the situation was the worst. Residents were being outbought by nonresidents in the housing market. The cost of those homes just continued to go up, and we also were seeing there was a complete lack of the development of new supply. And so, when you have an issue, both on the demand and the supply side, it created, obviously, a really bad situation for Maui residents. That’s really what led us to say, “OK, our housing initiative is going to start on Maui.” 

In the end, we’re hoping that we can get to all the counties, if we can create the right model, but that’s where we started. 

And so House Maui and this whole initiative focuses around three pillars, as we see it: Aligning resources; empowering and engaging individuals and families; and then organizing and advocating. 

The goal in each of those is we wanted to make sure that government resources and philanthropic resources are all directed collectively to have impact.

“Educate and empower” is really about working with families. We opened up a financial opportunity center so that families could get the counseling help from a financial standpoint, the career help, to be ready to either own or rent a home when those became available. 

Then, in “organize and engage,” steps we’ll be working on next but you’re seeing us start to be a little bit more visible in the public about it, talking to policymakers, looking at what can happen from a policy side, and I know some of the discussion we’ll get into today about regulation that can help the whole housing market within the county.

That’s really, hopefully in a bit of a nutshell, sort of where the House Maui initiative is, and how we’re trying to lead through that.

Kefalas: No, absolutely. And housing, as you know, is a huge issue, especially coming up with the elections. I think everybody is talking about the housing issue and what we can do to address that here in Hawaii. 

And so, along those lines, you touched on them briefly earlier, but just to go a little bit more in depth, what do you think are really the main barriers to creating that housing, whether it’s on Maui or Hawaii as a whole?

Apo: You know, in today’s world, it’s just about everything. That’s what makes it so hard. It’s everything from land cost, land availability, the price of goods and services, supply-chain-line issues. But you also get into regulatory issues and what it takes to actually get land entitled to build, and then getting through the permitting process to build itself. It’s every step along the way. And, it makes it tough to think about how do we get to this overall solution that’s going to get 1) more homes built and 2) get people into them. 

Also, because there are so many different pieces, you can start picking them off and identifying those. As you mentioned, the election is bringing up a lot of the discussion around this. 

The regulatory side and the regulatory burden that exists is, I think, an area where we’re all — from the philanthropic side, from the homeowner side, from the policymaker side — trying to figure out what are the best ways we can fix that. How can we reduce the time and cost to get homes developed? 

One thing that we started talking about is building a home; the actual building isn’t that hard, but the system has made it hard. So it’s another piece. 

As we think about that statement, we start thinking about what are the systematic changes that we can be involved in and help make in order to improve the housing situation.

So there’s a lot of things that can deal with the symptoms, but until we get some systematic changes, we’re not going to get to a long-term solution of housing for Maui County or anywhere else.

Kefalas: Right. And just to kind of piggyback on that, I think I’ve seen studies in the past from UHERO [University of Hawaii Economic Research Organization] that actually say Hawaii has some of the highest regulatory barriers in the country. So, just looking at those regulations, are there any in particular that you think may be some of the biggest problems to our housing supply issue here?

Apo: Yeah, you know, so when you step down into that regulatory piece of the puzzle, it’s equally complex, if you start to break it down. So there’s a reason for regulation. 

And so as we go through this process of looking at how to improve the situation, we have to recognize we can’t just sit there and say regulation is bad. It’s a matter of attacking it with a scalpel as opposed to a blunt hammer, and figuring out what regulations do we need but [also] what are the ones that we can either eliminate or make more efficient?

And I think the counties are looking really hard at that. Obviously, Honolulu’s DPP [Department of Planning and Permitting] has been in the news about how they’re working to improve their system. I know Hawaii County just instituted, I believe last year, a new computer system to help through that process. 

So just that permitting process side, the approval side, the hope that technology can help some of that efficiency need is there.

But I think, more to your question, there are some larger entitlement regulatory processes that can be duplicated at times. It can be slow at times. And those are the things that we really need to improve and streamline with the recognition that this is to provide housing.

To jump off on a little bit of a tangent, but I think as we look at how much are we going to prioritize housing and how much are we going to really place it ahead of other concerns that come up, right? When a new development’s coming up, you hear the issues of traffic and overcrowding and school capacity and those types of things. But if we let those things stop homes, especially the affordable housing developments, we’re keeping families from having a place to live. 

Kefalas: Right.

Apo: And I think we need to provide that housing solution and make sure we’re dealing with the other issues as much as we can. But we can’t let those other issues basically trump allowing someone to have a home for themselves and their family.

Kefalas: Sure. And a lot of that stems from not-in-my-backyard type of people, and luckily the state Legislature, we saw that the HB1837, the “Yes In My Backyard,” actually got through, and granted, it only creates a study and a working group for right now, but we think it’s an important first step and from the sounds of it, it sounds like you feel a little similar to that. 

You know, many projects along the lines of what you were talking about earlier, it doesn’t really take a long time to build a home. It actually is a lot of the permitting and a lot of the regulatory aspects of it.

A lot of these projects require multiple political approvals at the state and county level. Like you said, they can be a little duplicative at times. 

Does this trip up good housing projects? And how can this process be made a little easier?

Apo: Yeah, it definitely trips them up. That statement that “time is money” is really true in development. I know it’s hard to see, for the general public, of what those delay impacts are, but they can not only ultimately make the housing costs more, they at times cause a development not to move forward.

The amount of predevelopment work that goes into, as you mentioned, some of these duplicative state/county/local processes takes a lot of time. It creates risk for the developer. It makes it harder to put together the financial plans and backing that it takes to ultimately get to construction.

And so, as mentioned earlier, this is one of, I think, the key areas where we need to look at: How do you improve and make more efficient the process from an overall standpoint. We’ve all seen bills going through the Leg over the past couple of years to try to look at that.

And so, as you mentioned — the Yes In My Backyard bill getting through, and it’s a first step — we need to keep pushing to try to move some of these things forward. I think that’s bounced around is who should look at the impact of creating housing. Is it at the county level? Is it at the state level? And again, having sat on the County Council, I want to say it’s very much a local issue. But you also can’t sit here and say, “Well, there’s no statewide issue in this,” and so it’s that balance that …

I think we need to realize that there isn’t one right answer. And so we need to have a discussion, make a choice and find a way to make that choice be as best as possible for taking care of the considerations that need to be protected, but allowing housing to move forward.

Kefalas: Absolutely. And we’re glad that you guys are taking up the mantle on that, and we’re glad that you’re pushing that conversation. 

You know, just with the entire state, we talked about Maui a little bit earlier, but going a little bit more in-depth into that, we found that only 5% of the land on Maui is zoned urban, which is where most housing can be built, obviously. 

What do you think needs to be changed to ensure that this 5% number or the zoning is not an impediment to building houses and that we can continue to, like you said, build these houses, increase our supply and get our residents and our locals housed and a roof over their head?

Apo: Yeah. It’s the place where, as you mentioned, it’s 5%, it really feels like a low number. That said, I think, as we’ve looked at it, there are still a good number of locations for potential housing developments on Maui, even with that 5% in the area to do residential development. 

So on one side, it’s making sure that where you can build you’re allowed to, that can get going, and that’s the regulation side we just talked about.

On the other hand, Maui, and I think every county, needs to continue to look at where are the other places that we should be moving into housing development. Oahu went through that decades ago in deciding that West Oahu was going to be a place that would move from agricultural to residential development. 

We know it’s never easy and we don’t want that so-called urban sprawl going everywhere. But we also can’t hold back the need for housing by artificially not being willing to have those discussions, make some of those changes and finding the right places to open up for housing development.

And the key part of that is — I’ll go back to our House Maui initiative — the first pillar of House Maui is aligning resources. And one of the main areas that we talked about there is government taking on the infrastructure responsibility for housing. 

And so, what we had started to see over the past probably 10 to 15 years, was that the offsite infrastructure costs — meaning regional roads, sewer lines and those types of things — were falling under development. That was causing housing costs to continue to go up or again, as you mentioned earlier, not happen at all.

We’ve seen some success where the government at the county-state-/federal level is willing to put in the money for infrastructure development — sewer lines, sewer plants, roadways — taking that burden off of the development. 

We’re actually in Maui seeing a development that has increased the number of affordable housing units that will be built, because the county and state are willing to build a road extension that was originally falling on the developer’s cost. 

And so that’s the way that as you open up new lands to the potential for homes, you need to bring in the development, the infrastructure development.

One other note: Another great example of that is Kakaako on Oahu. The developments that are happening there with Kamehameha schools in Ward Village are because the state, through HCDA [Hawaii Community Development Authority], put in the infrastructure into that area, that’s allowing those things to happen. It took longer than perhaps desired, but it’s allowing homes to be built.

Kefalas: Wow. That’s very interesting. 

Now, obviously, with the public sector doing the infrastructure and things like that, taking it from the developer, do you see any sort of additional time maybe that takes to add to the project, for example, if they need to expand the sewer lines, would it take longer for the public sector to do it than the developer?

Apo: It depends on the situation. So yes, the goal is to get that public sector infrastructure work happening ahead of the curve. 

Kefalas: Sure.

Apo: And that’s why, as we talk about opening up new lands for potential residential development, you have that opportunity to stay ahead of the game. 

When you’re doing what we’ll call infill areas — places that are really already designated, there’s already roads and sewers around, but need improvements — while it can sometimes take the public sector longer to do that, the resource magnitude that the public sector can bring is significant enough to change the affordable housing counts in a way that it may be worth some of that time.

Kefalas: Sure.

Apo: Again, that’s the worst case, is if it takes longer. But we’ve seen on Maui — because this hasn’t existed, this area hasn’t existed — developers are putting in their own water systems because the county isn’t ready to provide it, and wastewater as well. 

We’re trying to be a part of getting that county side running a little bit faster in order to keep up with the development, and again, take these costs off of the developer and therefore allow them to build homes at a cheaper cost and therefore sell them at a cheaper cost.

Kefalas: Right. Understandable. Well, let’s talk more laser-focused on Maui here for a second. Recently, the state Commission on Water Resource Management designated West Maui as a surface water and ground water management area. For the viewers at home, could you help explain what this decision means, and what really is going to be the fallout for home builders, if any?

Apo: This is a really interesting one for us in that … so what it does, it puts a state entity as an additional regulatory process and permit is required before a development can basically get approval for its water to move forward. And so, when you put on a pure housing lens, it sounds really scary. 

But, you know, we are working on another initiative that we work on in the Hawaii Community Foundation, is the Fresh Water Initiative, and that really starts to get into how do we recharge the water system? How do we make sure that fresh water is available down the road?

The upside is we’re not seeing a situation where there’s a lack of fresh water, but obviously, the long-term planned management of that is important. And so theoretically, what this overlay does with CWRM, the Commission of Water Resource [Management], it helps plan and protect for the long-term water use. 

And so, as you balance those two things together, it’s one of those areas where we can recognize there’s a need for fresh water management, no question. This regulatory additional overlay is risky, right? 

And so, let’s just go back to what I said earlier. It’s not that regulation is bad, but we need to make sure that it runs efficiently, takes care of what needs to be protected, but allows housing to move forward at a reasonable rate.

And one of the things, as we’re going through that, is that recognition that a large part of Oahu is all covered by a similar overlay from CWRM, and as we’ve said in some of the hearings, it hasn’t stopped development. 

So back to your question, what does this mean for housing? Yes, it means there’s an extra step. What it means for us — the broader us right now — is we need to work with the commission going forward to make sure that that system is efficient, that we get them information ahead of time about what’s going on about the various impacts,  so that when those permit applications, they have what they need to review the situation and make decisions quickly, but also, so they’re able to, ahead of time, let potential developers and landowners know where there are issues. 

If we can do that efficiently together, it’s a regulation that can work OK from a housing perspective. And as we’ve recognized, it’s balancing two very important factors for our community.

Kefalas: Sure, well, staying in Maui, today the Council is, I believe, considering Bill 107 that would effectively set the price of affordable homes 20% to 25% lower than the affordable prices currently. Could you go through and let us know what are the pros and cons to this policy as well? I mean, we’ve seen … you mentioned about the CWRM and West Maui earlier, but it seems like there’s a lot going on in Maui in terms of housing.

Apo: You know, it is, and I was actually over there on Friday and testified before the Council on this bill. 

The upside — and you’ve got to give them recognition — is that the Council has taken on this issue and has moved a number of bills through the Council. Have to admit, we haven’t agreed with all of them, but the fact that it’s being looked at and being worked on is a great credit to the Council. 

So this bill, on its surface, it sounds great. But the bottom line is it’s looking to lower the price of affordable homes, what they can be sold to to Maui residents.

But as you pointed out, it creates a calculation that drops the price by say, 25%. And the reality is nobody can build a home for that price and therefore, on its face, no development of affordable homes is going to happen, because you’re going to have to sell it for less than you can build it for. 

So, if that were the whole picture, that’d be a problem. As again, we’ve been working with the Council and the county on these things. The Council wants to provide subsidies to make up that difference in cost so developers can still develop, make the profit that they need to, and sell the homes at a lower price.

Obviously, that starts to get complex in how that works within the overall system, how you give the developer enough assurance that that subsidy is going to be there that allows them to move forward with their development at a point where they’re having to put in hundreds of thousands of dollars into predevelopment work. 

So that’s what at least I testified, when I testified last week, tried to talk to with the Council, t say, let’s take the next couple of weeks as it moves from first reading to second reading, to talk about where the solutions are mechanically and processwise, to make sure that this will work.

The upside is we’re all working for the same goal, which is to provide Maui residents who need affordable housing, homes that they can afford. We just want to make sure that as these policies are created and the county has a good level of subsidy money available, that it can be done in the best way. 

It’s back to being most efficient, most effective, not creating risk, unintended consequences for the results. So I’m looking forward to the next couple of weeks to diving into that with hopes that we can get some real good solutions.

Kefalas: Absolutely. And just to kind of piggyback on that, you had mentioned subsidies. And earlier in the program you had mentioned about the county working on infrastructure and helping the developer out there. Do you think that there’s any issue with paying for the infrastructure? Is there enough money, I guess, really, to pay for all of the infrastructure needs — you know the roads, the sewage, all of this, in addition to handing out a subsidy to a developer?

Apo: You know the upside — and this comes a bit from having been on the Council here in Honolulu for six years — is those two things, grants for making homes affordable and grants to individuals, and then the infrastructure, are two different parts of the budget. 

The infrastructure side comes from the CIP budget, which allows the county to borrow money and pay that back long-term. And that can allow the county to have much more resources available for that effort. 

On the other side, so more from the operating budget side, right? And this is where the real property tax really feeds that side of the budget, the county has dedicated a decent chunk of that for these types of subsidy programs.

So there is very much the opportunity for both of those engines to be working at the same time and have significant resources for it. 

And again, that’s where we’re trying to come in and help play, or at least talk through some of that role, because there’s a lot of different players that can get involved and figure out how to best use those funds. 

The last thing I’ll add on that is, when you think about that infrastructure side, it’s not just the county bonding side for CIP, its capital improvement projects. But right now, you’ve got some state monies as well as the federal infrastructure bill. 

So as the counties and state start to understand a little bit more about how those federal resources can be used, we think they can be put into infrastructure work for affordable housing that can be… It’s one of these unique situations coming out of COVID, given the federal legislation. We want to make sure we’re ready to take advantage of that, as the state of Hawaii and all the individual counties.

Kefalas: Sure. Now, we’re reaching the end of our program here. I wanted to give you, Todd, an opportunity. You mentioned that you didn’t agree with Maui County Council on everything that they’re doing to address housing. Is there anything that you guys specifically, any reforms specifically, that you guys are focusing on, on Maui or any of the other islands, that you want to just briefly touch on?

Apo: I think the thing I’d want to touch on is less about a specific solution right now, but the point being that it’s really going to take collective action by everyone. And it’s not just the policymakers and those of us that may normally be involved in showing up at Council hearings or having those discussions. Everyone in the community is going to need to play a part, because there’s tough decisions out there that need to be made that we talked about it, whether it’s changing regulatory processes, figuring out how to involve the community voice in a way that’s reasonable, that takes into account the various sides of the consideration, but ultimately get to decisions so that housing can be built in the right way.

And so it goes to really our third pillar of our initiative around “organize and engage.” We want to make everyone in the community know that they need to be willing to voice their opinion. But we realize we need to do is to help get out the information to educate around how we can get to affordable housing solutions. 

It’s something we’ve always seen. It’s always easy to fight something and say no to something. It takes a lot of work to support something in the right way and get it to the right decision. And our policymakers need to be supported in that effort. 

So that’s really where I’m thinking our effort is going over the next probably 12 to 18 months, is developing that platform and system so that people can get organized, get engaged, advocate as a community for affordable housing and hopefully bring along these solutions.

And again, we’re starting in Maui County, but they’re needed across the state, so just looking forward to continuing that effort and seeing the results. 

Last thing I’ll say — because development work is not quick, it’s not Amazon, it doesn’t show up in three days — it’ll take some time to see the results and people also need to be willing to stick in with that and keep working until we get to those results.

Kefalas: Sure. Well, Todd, thank you so much for taking the time to speak with me today and for the work that you guys are doing when it comes to housing on Maui. 

Of course, we want to thank the audience for joining us for another episode of “Hawaii Together.” I’m Ted Kefalas standing in for Dr. Keli’i Akina. Until next time, aloha.