Lively real estate show considers impact of ‘outsiders’ on Hawaii housing prices

by Grassroot Institute of Hawaii, August 23, 2022

The Grassroot Institute of Hawaii’s new report analyzing the impact of “outside” buyers on Hawaii’s housing market has triggered policy conversations across the state, among them an online panel discussion hosted by entrepreneur Peter Kay of LivingInHawaii.com, just days after the report was released.

“I can’t tell you how many times on my YouTube channel I get some comments from people saying, ‘Yeah, the reason why … local folks … are getting forced out of their homes is because mainland folks are coming in and taking their land or pushing them out and driving up prices,’” Kay said in his introduction. 

Grassroot Institute President and CEO Keli‘i Akina, the show’s featured guest, agreed.

“There’s a commonly held myth that out-of-state buyers are the ones who are causing our [home] prices to go up and our scarcity to increase,” he said. “But that’s really not the case. When we look at the data, which we like to do at Grassroot Institute, we find that outside buyers actually have been scapegoated.”

Akina noted that the share of outside home buyers in Hawaii trended downward between 2011 and 2020, while prices continued to rise. He said the institute’s report analyzed data from across the country and found no meaningful correlation between a state or county’s median home price and share of out-of-state buyers.

So, what is the cause?

“There’s a correlation between high regulation and high prices in housing,” Akina said. “That’s the real problem we’re facing in Hawaii. If we could solve that problem and reduce our regulations, we could open up a lot more housing opportunities.”

Akina suggested that the state could increase its housing inventory if it allowed more low-rise apartments, duplexes or fourplexes, rather than being zoned mostly for single-family homes. 

He also proposed a practice other markets are using, called by-right housing, that reduces the number of hearings a development has to go through. Other actions Hawaii could take include cutting back on permitting delays and requiring permits for fewer projects, he said.

Akina said the Institute’s motivation for producing the report wasn’t just to dispel myths, but hopefully to spark meaningful change. 

“We want to shift the conversation,” he said. “We want our policymakers to stop looking at scapegoats and instead to start looking at the real causes of our land scarcity.”

Also on the program, the Aloha Friday Real Estate Show, were regular guests Scott Startsman, Heidi Dollinger and Dylan Nonaka.

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TRANSCRIPT

8-19-22 Keli‘i Akina on Peter Kay’s “Aloha Friday Real Estate” radio show

Peter Kay: All right, folks, let’s move on. We’re going to bring on to our sort of fun topic for today. 

I’m a subscriber, it’s a free subscription, to [the] Grassroot Institute [of Hawaii’s] newsletter, and I got a really interesting report that they released, which was answering this question: “Are haoles driving up real estate prices?” 

Now, by “haoles” here, OK, I’m looking at the, not so much the skin-color version of haoles, which is also used; I’m looking at — this is a Hawaiian dictionary — I’m looking at haole in terms of foreigner in the strictest sense of the word. 

So, I want you all to understand what I mean when we say haole. We’re not saying about like typically white people; we’re talking about foreigners in the strict sense of the word, meaning non-Hawaii residents.

So, [a] big topic over here is that — you know, I can’t tell you how many times on my YouTube channel I get some comments from people saying, “Yeah, the reason why, you know, we’re — local folks — are getting forced out of their homes is because mainland folks are coming in and taking their land or pushing them out and driving up prices.” 

We hear this all the time. And not just on my YouTube channel; it’s also in the political phase, it’s kind of like all over the place. You’re hearing this everywhere.

And so, what we did today is we brought a special guest with us, an expert in the field. I want to — Hey, everybody, this is the first time we’re kind of doing this sort of thing, so it’s kind of fun. 

I want to introduce you all to our special guest, Keliʻi Akina, who is the president [and] CEO of Grassroot Institute. This is the organization that wrote this report, and I’m so stoked to have someone who can kind of talk to it.

First of all, Keliʻi, aloha and welcome. Say hello to everybody. Say hello, Keliʻi, to all that we got.

Keliʻi Akina: Well, aloha, Peter, great to be reconnecting with you. We go back many years. And Scott, Heidi and Dylan, it’s been fun listening to all of you banter together. You really know your stuff. Just really glad to be with all of you. 

Let me just add one thing: I just heard about the title of your program today. I like to think that every time we use the word haole, we should always say, “beloved — beloved haole.”

Kay: Ah, beloved — there you go.That’s a nice little add-on. I think if people did that, that would be kind of cool. And hey, Keliʻi, you’re getting some alohas from folks, our listeners here, our great audience. 

Kelly is with us. Kelly is also a member of our Islander — she’s an alumni — of our Islander Ohana group. As Jessica gives the big aloha, I know that Jessica’s been looking forward to this topic.

All right, so let’s kind of hit this, gang. So, here’s kind of what’s been going on: What was interesting to me, Keliʻi, and I’d like to kind of get some back and forth on this, was that — I’ve got a couple slides here, gang, just to kind of lay out the lay of the land real quick. 

And now I really want to talk about [how] the data says “no” to the question, “Are haoles driving up prices?” Are beloved haoles [chuckles] driving up prices? No. Again, I’m using the word strictly in the foreign sense.

[Reading from slide] Haoles-to-local buyers — some interesting thing that stuck out about this report, and I’d like to get your feedback on this, Keliʻi, as far as like, what did you find that was most surprising about this report? 

No. 1: Haoles-to-local buyers percentages dropped, but prices went up from 2008 to 2021. And the other part, the other big takeaway I got from this report, was land-use restrictions correlate with high prices nationwide. So in other words, it was land-use restrictions more than anything else that correlated with high prices.

Now, here’s a couple of graphs here. This is going to be hard to see. So, if you look at this one on the right-hand side, it gives you, this is from the report, the trend of Hawaii home sales by percentage of the buyers. So, the blue line on top [is] local buyers, the orange line on the bottom [is] mainland buyers, and then the little gray line is foreign [buyers]. You see, there’s almost been no — they’ve been fairly steady percentages; they’ve been up or down a little bit.

But on the left-hand side, you can see the price of real estate in Hawaii over time. We’re much closer tracking to California. And on the bottom right, as I zoomed in to the same range of years from the graph above. So if you look at the graph below, prices are definitely going up. If you look at the graph above, the percentages are relatively stable. That was one thing that really kind of stuck out.

Maui is a big one. So Heidi, this is to you: Look at the difference of local buyers to mainland buyers, look at the differences in how the percentages have changed. This does not track, this does not track the price increases in Maui. So if there was a correlation — if, in fact, mainland buyers were driving out local buyers and driving up prices — you would see some kind of correlation between these two. So that was really surprising to me. 

So what then, and this was the thing that came out in the report, what then is it? Three words: land, use, regulation. 

If you look at the scatter graph over here of the plot, it’s a plot of median home prices by state and also by the land use regulations. You look at Hawaii, upper right-hand corner: highest price, most land-use regulations.

So, if you all have been watching this, if you all have been with the show, this is not too surprising to us. 

Keliʻi, what’s your take on this? I’d like to kind of hear the story of, you know, what did you get out of this report? What were some big takeaways that you, perhaps, were surprised by? Or what’s kind of been the response? Or what else would you like to comment on about this report?

Akina: Well, Peter, thank you. We were really having a lot of fun putting this together because it confirmed some intuitions that we had. 

You’re right: There’s a commonly held myth that out-of-state buyers are the ones who are causing our prices to go up and our scarcity to increase. But that’s really not the case. When we look at the data, which we like to do at Grassroot Institute, we find that outside buyers actually have been scapegoated. 

Here’s what we found: In 2020, the percentage of outside buyers was only 19%. And here’s the key insight: That means more than 80% of home purchasers were local buyers. In fact, we looked at the data over time. So between 2011 and 2020, the share of outside home buyers in Hawaii trended downward. 

And yet at the same time, prices kept increasing — and I’ll talk about that in a minute. But let me point out three things that are important to get from the study. 

No. 1: The percentage of out-of-state buyers has been declining for more than a decade. 

No. 2: The percentage of local buyers has been increasing for more than a decade.

So, when people drive by, let’s say, Kakaako and see the apartment buildings going up, it’s instinctive for many to say, “That must be foreign buyers.” But the data doesn’t show that. The data shows what developers have been telling us all along: that the majority of purchasers are local people. 

Now, this is very important to note: Our study pointed out that across the country, there’s no meaningful correlation between a state or county’s median home prices and the share of out-of-state buyers. And because there’s no correlation, you can’t make the claim that out-of-state buyers are actually driving up the prices of homes in Hawaii or causing the scarcity.

Now, what I want to do, Peter, is point out why we did this study. It wasn’t just to get to the esoteric point of challenging this myth; it was so that our policymakers will actually stop blaming the scapegoat of out-of-state buyers and start looking at the real causes. As you point out, land-use regulation is really the real cause. It’s one of the many causes, and I’d love to chat about that a little more, but let me give it back to you now. 

It’s very important to realize that the answer to the question, “Why are Hawaii’s housing prices so high, and why is there such a scarcity?” has virtually nothing to do with out-of-state buyers.

Kay: You know, I think, I — so, it’s something that, I mean, we never chatted about that topic directly. But if you go, if people go back over the archives, which are all there, you’ll hear Dylan and Scott and Heidi chiming in all day long that, you know, it’s always about supply and demand. But I think, and this is what I was so happy about, Keliʻi, was that you folks, you know, talked on this. 

This has been a taboo topic that’s been very, very popularized. You see it all over the place. And in that report, you guys had all kinds of examples about quotes from politicians, you know, public figures, et cetera, about, you know, it’s these foreign buyers, these outside — these out-of-state buyers who are kind of driving up prices, and that is just not the case.

Now, we’ve got a couple of questions that popped [up]. 

First of all, one thing I failed to do is, I didn’t kind of give any kind of a bio of you, Keliʻi, and I apologize for that. You are the president and CEO of Grassroot Institute. People, folks, if you haven’t guessed by Keliʻi’s name, he’s also a native Hawaiian. If I’m not [mistaken], are you still serving on OHA’s board, Office of Hawaiian Affairs? 

Akina: That’s right, Peter. Although I’m not here today in that capacity, I’m in my second term as a trustee-at-large of the office of Hawaiian Affairs.

Kay: OK, so, gang, so we’re not just going to have anybody here, right? So this [isn’t], you know, [a] guy off the street who’s kind of ranting and raving about the thing. This is, you know, Grassroot Institute goes way back. 

You guys, I characterize you guys as sort of a nonpartisan, libertarian-leaning, freedom lea— you know, free markets, kind of a libertarian kind of think tank that’s been around in Hawaii for a long time. How would you characterize Grassroot Institute?

Akina: Well, Peter, you’re right, we are a think tank, but we’re more than that. We also want to offer solutions, and we work toward good policy in the areas of the economy, housing and other needs of the people of Hawaii. 

We’re independent. We don’t take contributions from any political parties. We don’t take contributions from the government. We let the data speak for itself. What we’re really doing is looking for a way to find solutions to the difficulties that we face here in Hawaii.

Kay: Yeah, and so it’s been great to see your guys’ policy, and I’m really thankful that we’ve got someone, a group like yours, to do that. So, thank you, Keliʻi. I wanted to give everyone some context on kind of who we were talking to and what kind of authority. 

I’ve got a couple of quick questions that I wanted to point out from everybody here. 

Well, first of all, Keliʻi, Auntie Joyce [Shiarella] loves the “beloved” edition. I thought it’s — I love it too, it’s awesome. So, you got a big shout out, a big thumbs up from Auntie Joyce, who is one of our most dedicated listeners, audience members. Will [Scher] says, Will gives his aloha, as does Norm [Falconer], so it’s kind of fun to see all the love over here that’s coming in.

Mark Whitehill has got a question for us. Mark is a member of our Islander Ohana; he’s an alumni of our Islander Ohana group: “Great info. I’m curious: How does the percentage of out-of-state buyers in Hawaii compare with other states?” Keliʻi, can you speak to that at all?

Akina: Yes. Our study actually goes to the data of all other states. We were very thorough in this because we wanted to make sure that we weren’t just talking about Hawaii. And so, I would refer you to the Grassroot Institute website to actually see that data: grassrootinstitute.org. But in general, it shows that Hawaii has one of the higher percentages of out-of-state buyers. 

The key thing to point out is that as we look at markets across the country that have high percentages of out-of-state buyers, it shows no correlation to the actual scarcity or the pricing.

There are places that have high out-of, high percentages of out-of-state buyers where the prices are through the roof, like New York City. But there are other places across the country where you have high percentages of out-of-state buyers and the prices are low. You also have places like Washington, D.C., where you have a lower percentage of out-of-state buyers, but you have high prices. So, that’s the key point to keep in mind. But that’s a good question, I’m glad that that was asked.

Kay: Yeah, thanks, Mark. I appreciate that.

Dylan Nonaka: I’d like to add, Peter, you know, just from a common…

Kay: Go ahead.

Nonaka: You know, you know me, I love to look at stuff, I’m not that smart, so I look at [unintelligible 00:42:25] and apply common sense, right?

Kay: Yeah, you’re not that smart at all, Dylan. Yeah, yeah, you’re not that smart. [laughing]

Nonaka: You know, if you just intuitively think, “OK, where are people going, right?” You hear a lot of people moving to Vegas, moving to Idaho, moving to Texas, you know these markets where there is affordable housing, right? So I would expect that there would be a lot of out of-state buyers per capita going to those areas, and they would have — and that’s because prices are lower, right? So why would people be going to a high-priced place, right? So, it’s just kind of, there’s a lot of counter-intuitiveness in this, so you kind of just generalize it and say, “Hey, somebody is coming here, the prices are going to be high.”

Akina: You know, Dylan is absolutely right. Everybody knows people who’ve got one story or another to tell about this, and so a lot of times we base our conclusions on anecdotes. But we have to go to the data. That’s absolutely important. 

And the reason that we’ve gone to the data is not so much just to dispel this myth of the out-of-state buyer; it’s because we want to shift the conversation. We want our policymakers to stop looking at scapegoats and instead to start looking at the real causes of our land scarcity. And as you pointed out, land-use regulations is a big one. 

We were really pleased when UHERO, the UH Economic Research Organization, came out with its recent study, which showed that Hawaii has some of the highest land regulation in the entire nation. In fact, we’ve got the county, Hawaii County, that has more regulations with regard to housing than any other in the United States.

Now, that’s something that there’s a correlation between high regulation and high prices in housing, as well as scarcity. That’s the real problem we’re facing in Hawaii. If we could solve that problem and reduce our regulations, we could open up a lot more housing opportunities. 

For example, just really quickly, [our] study links to other studies we’ve done at Grassroot and points out we could have a lot more housing available if we allowed more low-rise apartments. You see, most of Hawaii’s buildable land is zoned at the county level for single-family homes, so there’s little room for duplexes or fourplexes or low-rise apartments. We should change that. 

Or perhaps we should start using a practice that other markets are using called by-right housing. In other words, if you manage to show the government authorities that your house is sound, it’s gone through an architect, it’s jumped through the hoops — there’s a pre-established checklist — then you can go ahead and build without having to go through hearings. But the problem is that so many developments have to go through hearings that it virtually shuts down development in many areas.

Another thing we can do is cut back on our permitting delays. We could also require permits for a lot fewer projects. In many markets across the country, you don’t need permits for re-roofing your house or fixing it after a flood or putting in flooring or air conditioning and so forth. 

I could go on, and I know our time is limited today, so I’ll just refer to one of our studies online, which is “Build Up or Build Out?” There are lots of solutions we should be looking at instead of naming scapegoats for the scarcity of housing in Hawaii.

Kay: Yeah, I think the scapegoating is — and that’s why I really, I’m really so, and I want to thank you again for coming and spending your time to come out and share this report. It was, really, the scapegoating issue that I really enjoyed about it and wanted to share about. We’re going to get to some questions from Scott and Heidi and then everybody else. 

Real quick, Patrick says, “Please define out-of-state buyer — someone whose main home is out of state or a transplant?” 

If I’m not mistaken, and please correct me if I’m wrong, Keliʻi, is that they took a very liberal look because it’s hard to kind of — there are a lot of cases which are borderline cases. The idea would be if you’re out-of-state and buying a home here, you’re considered a out-of-state buyer. That was the objective criteria that was used, right, Keliʻi?

Akina: That’s absolutely right. You stated it well. And in the interest of time, I just want to refer our listener to the study itself online at grassrootinstitute.org.

Kay: grassrootinstitute.org. Gang, I’ve also got it linked extensively on the one article I published on the website that went out in the newsletter. You can go there, but grassrootinstitute.org [is] where you’ll find that and other reports, and I wanted to definitely do the best I can to promote that. 

Auntie Joan [Valentine] likes the great addition [“beloved”], so Joan, I’m glad that you enjoy that. And Uncle Ray [Dix] is here with us, [he says] “Aloha from Kailua.” Welcome, Ray. And Mark [Whitehill] is enjoying it and [saying] “Interesting.”

Hey, our internal — Jessica says, “Love your solution of low-rise apartments, duplexes, et cetera. What can we do to change public perception that these types of homes are going to ruin my neighborhood?” 

Man, that’s the question, Jessica. Hold that thought, everybody, because I want to get some feedback. Heidi, Scott or Dylan, you guys have any feedback, you want to chime in, questions for Keliʻi — anything you want to add to this? I want to bring you guys into the conversation. Scott, go ahead.

Scott Startsman: Yeah, I mean, one of the biggest things, the land-use restriction that, if you look back at, you know, statehood was 1959. In the 1960s and ’70s here on Oahu, we were creating on average 14,000 new units per year for those two decades, and now we’re right around 4,000, and the reason for it is land-use restriction. 

And we swung the pendulum from one side all the way to the opposite side to where we’re not building enough housing to satisfy the demand that’s there, and then you get this supply-demand thing. But, so 14,000 units to 4,000 a year, that’s a huge swing, and that right there just shows, and it came from the restrictions on land use.

Kay: Yeah, that definitely speaks to that. Heidi, you have any comments you want to chime in, ask or be a part of?

Heidi Dollinger: Yeah, thank you so much for being here. I thought the study was very interesting, and it is important because, I mean, the general feeling among most people that I speak to here is blaming the out-of-state buyer for the real estate prices. So, it’s just an interesting perspective. 

I actually did have the same question as Patrick because even living on Maui 20 years, sometimes three generations, doesn’t qualify a person as local. So I was just kind of curious, I mean, if you move to Hawaii, rent for one or two years, are you considered local or not? 

I mean, there’s definitely an integration of people from all different places here on Maui, and, I mean, the whole local economy, I mean, that is a much larger topic than I think we can address today, but it’s, anyway, super interesting. And yeah, thank you for your insight. And looking at the data is important, so [I] appreciate it.

Akina: Thanks, Heidi. The only thing I’d add is that the out-of-state purchases on Maui are largely on the oceanfront, like in Kihei and so forth. They tend to be condos and so forth. The real problem on Maui is the lack of homes for locals in the inland, and that’s what we need to resolve.

Kay: Yeah. Thank you, Keliʻi. I love that. That’s that. And Heidi, you know, I really enjoyed, actually, I was looking at that part of the report — the out-of-state part — and it was like, it was very, very straightforward because they pulled this data from the Bureau of Conveyances and the filings and the transactions that actually get filed. 

And so, how do you objectively define an out-of, a foreign, an outsider if your address is not Hawaii? We don’t care whether you’re a fifth generation or you’re the kid that was born and raised in Maui and went to the mainland to go to college and now you’re — if your address, if the buyer’s address is out of state, you’re an out-of-state buyer. 

Dylan, is there anything you want to add to this?

Nonaka: I guess I hate to break it to Keliʻi, it’s like no news for us, you know.

[laughter]

Kay: No news for us, yeah, really, right? Yeah.

Akina: Absolutely.

Nonaka: But you know, like I’ve said on this show many times before, right: Less than 4% of the Big Island is zoned to build anything on. So if we increased 1 [perrcentage point], by 1 [percentage point], we’d have a [25]% increase in buildable land that would, you know, [in] one fell swoop solve our affordable housing crisis — it’s that easy. But land-use restrictions restrict us from doing anything. 

And the public does the same thing. You know, we just had an election. The same people who cause the same problems still get elected, so it’s like the people — you can’t complain about the way things are and then continue to put the same people in office that are going to continue to do it the way that they’ve been doing it. So, yeah, unfortunately.

Akina: Dylan, you’re absolutely right in what you said earlier that we have another problem. And perhaps, Peter, we could talk about it on another show. And that is that we’ve created an artificial scarcity of land. 

Because of our regulations, we actually develop on only 5% of the landmass in the state. We don’t develop on 95%. And if we just added another percentage point from the five, we could have 20% development without harming agriculture or the aquifer at all. But that’s another story. 

So, add that to the real causes, and we have more than enough reason to stop blaming the scapegoat of our beloved haole, as you put it.

[laughter]

Kay: Our beloved — as you put it — you put it as “beloved,” which I loved it. That’s a great one. Keliʻi, do you have a few minutes? I — there’s one more kind of discussion question I wanted to pose, but if you, do you have to go, or can you stay for a few? Just let me know.

Akina: I can stay, but I want to get this one shout out in. The team at the Grassroot Institute is just fabulous in terms of its commitment to work and its skill, and a young research associate of ours, Jensen Ahokovi, did the lion’s share of the work in this project. He did a great job. I just want to thank him.

Kay: Big shout out to Jensen. Big mahalo, Jensen. I really appreciate you did your homework on that report, and it was really kind of — and it was readable, too. It wasn’t that long. I mean, you know, it’s the old, “Oh my god, am I going to read this report?” Yeah, I downloaded the PDF. It’s pretty straightforward. And by the way, a friend of mine is watching — Rockland. Rockland Freitas. Go to grass…

Akina: Hey, Rocky.

Kay: OK, there you go. Keliʻi knows you. Rocky, go to grassrootinstitute.org, and the report’s like right there off the homepage. Download the PDF. It’s actually a pretty easy read. 

So look, so well, I’ve got a big — OK, it’s too big of a question. I think it’s too big. So we’re going to, here’s what we’re going to do: We’re going to do a cliffhanger on the question. The cliffhanger on the question is, because we have to move on and Keliʻi has got to get back to his duties, which I’m sure are multiple. 

The cultural question — we’re going to do a cliffhanger for a future show, which is, and it really relates to Jessica’s question, which is, what is it — there’s a cultural thing going on, a culture, and we’ve talked about this a bunch of times, Keliʻi, Dylan has brought this up, which is, you know, you ask people if they want lower, more affordable housing — everybody wants more affordable housing. 

All the political class is talking about affordable housing. A bunch of [political] races, you know, “I’m going to focus on affordable housing.” They all want that. But then when we say, “OK, great, we’re going to build some houses,” we get that comment that, that I brought up earlier from the guy in the neighborhood saying, “Not in my backyard. No, no, no, no, no. I don’t….”

If you ask me, so the paradox, right, the paradox is: We all want more affordable housing, but nobody wants more development, right? We don’t — that’s the paradox. That’s a cliffhanger. We’re not going to talk about that now, I’m going to cliffhanger it. 

Keliʻi, thank you so much for coming. I know that everyone appreciates it. Everybody, give a quick shout out to Keliʻi and his gang — Jensen, who wrote the report — let them know how much you appreciate their efforts. Keliʻi, any final words and we’ll — say your final words to everybody and then we’ll…

Nonaka: Before Keliʻi signs off, I’d like to add, you know, Grassroot Institute is a nonprofit organization, so if you appreciate the stuff that they’re doing, you know, go to their website, you can make your contribution. They have events, but that’s how stuff like this gets funded because they don’t take any government money, so I’d like to make that shout-out. 

Kay: Well said, well said. Pitch for the financial support.

Akina: Thank you, Dylan. Are you looking for a job as a PR director?

[laughter]

Nonaka: You can’t afford me.

[laughter]

Akina: If you do your job well, we can afford you.

Kay: There you go. Perfect response. This is great. I love it. Keliʻi, is there any final words you would like to share before we say goodbye?

Akina: Yes, Peter. [It was] just wonderful to be with you and the gang today. You’ve got a great show, and I just want to say aloha. Today is Statehood Day — Let’s celebrate this wonderful coming together of the Hawaiian culture, the Hawaiian people and the United States of America. Aloha.

Kay: Oh, coincidentally today is Statehood Day. That’s another topic to discuss — the one holiday nobody in Hawaii likes to talk about is Statehood. That’s another, that’s another whole other cultural topic. 

Keliʻi, thanks again. Scott, Dylan, Heidi, say goodbye to Keliʻi, and we’re going to resume our normal stuff.

Startsman: Thank you.

Akina: Aloha.

Kay: Aloha. We’ll see you later, Keliʻi. Thanks for coming.