Testimony: By-right approvals could lower the cost of housing

from Grassroot Institute of Hawaii, November 2, 2022

To: Maui County Council Affordable Housing Committee
      Gabe Johnson, Chair
      Michael Molina, Vice Chair

From: Grassroot Institute of Hawaii
            Joe Kent, Executive Vice President

RE: ESTABLISHING DESIGN STANDARDS FOR AFFORDABLE HOUSING PROJECTS LESS THAN 150 UNITS SO PROJECTS CAN BE APPROVED AS OF RIGHT (AH-4(8))

Comments Only

Dear Chair and Committee Members,

The Grassroot Institute of Hawaii would like to offer comments on by-right approval for housing projects.

We have written about the by-right approval process frequently over the past year,[1] and we very much welcome the Council’s willingness to consider it as a mechanism to combat Maui County’s high housing prices.

Our view is that instituting by-right approval for affordable housing projects would streamline the process for homebuilders and potentially yield big savings for Maui homebuyers and renters.

That’s because by-right approval is a process whereby a housing project can proceed without the vote of any government bodies, so long as it meets certain rules established well beforehand, usually by the county government.

Research has shown that political approvals slow down the building of homes in Hawaii, adding to their costs and sometimes discouraging their construction entirely.

According to economists at the University of Hawaii Economic Research Organization, Hawaii has the highest housing regulations in the country, and political approvals are among the reasons they mention for Hawaii’s tight housing supply.[2]

In contrast, by-right approvals can increase the housing supply.

The National Multifamily Housing Council, a national group focused on increasing access to multifamily housing, has written that by-right development “reduces both soft costs and land costs.[3]

“An efficient and predictable entitlement process,” NMHC says, “reduces carrying costs, consulting fees and other costs associated with approval processes, when compared to a lengthy discretionary review process.

“When costs decrease,” NMHC added, “developments require less financing and less rent to ensure project viability.”

In human terms, the benefits of by-right approval are very real. Lower rents would make it more affordable for Maui residents to stay on Maui.

For those worried that by-right approvals might marginalize community voices, there still would be many ways available, including the community plans and any environmental rules, for citizens to voice their concerns.

If the Council does move forward to create standards for by-right approval, please be aware that the new county law formerly known as Bill 107 could complicate the by-right process.

Bill 107 lowers the sales price of affordable housing units, which makes it more difficult for those projects to pencil out and incentivizes homebuilders to seek county funding, which creates yet another approval process.

Other than that, the point of by-right approval is to make the project-approval process fair. Once the Council, the county agencies and the community write the standards, affordable housing projects would simply need to comply with the rules to build.

Homebuilders thrive on certainty and fairness, and a solid, dependable by-right approval regime could yield big dividends to Maui homebuyers and the county as a whole.

Again, we applaud the Council for considering the by-right process, and if there is anything we can do to help in your deliberations, please feel free to reach out to us.

Thank you for the opportunity to testify,

Joe Kent
Executive Vice President
Grassroot Institute of Hawaii
_____________

[1] “Sen. Chang hears how ‘light touch density’ could solve Hawaii housing crisis,” Grassroot Institute of Hawaii, March 9, 2022; Jonathan Helton, “Best feature of Maui County Comprehensive Affordable Housing plan is at risk,” The Maui News, Jan. 9, 2022.

[2] Rachel Inafuku, Justin Tyndall and Carl Bonham, “Measuring the Burden of Housing Regulation in Hawaii,” University of Hawaii Economic Research Organization, April 14, 2022, p. 6. For more information on how political approvals can impede housing projects, see: Limin Fang, Nathan Stewart and Justin Tyndall, “Homeowner Politics and Housing Supply,” University of Hawaii Economic Research Organization, July 7, 2022, p. 25.

[3] “Tool: By-Right Development,” National Multifamily Housing Council, 2019, p. 72.