Growth Management Violates Fair Housing Act
by Randal O’Toole, The Anti-Planner, March 24, 2016
A new report from Hawaii’s Grassroot Institute argues that Hawaii’s land-use laws must be repealed because they discriminate against low-income minorities. Hawaii was the first state to pass a land-use law in 1961, and not coincidentally it has the least affordable housing in the nation.
The 2014 American Community Survey found that median home prices in Hawaii were 6.7 times median family incomes, compared with the national average of 2.7. These high prices had pushed low-income minorities to leave the state: while urban Honolulu had grown by 12 percent between 2000 and 2010, the urban area’s black population declined by 4 percent.
Hawaii’s 1961 land-use law divided lands in the state into urban, agriculture, and conservation (later a fourth category, rural, was added). While the supposed purpose was to protect Hawaii’s agricultural sector, in fact it destroyed it because high housing prices increased labor costs and plantations and canneries can’t compete with those in places like Fiji and Costa Rica.
Advocates of housing affordability and property rights have unsuccessfully fought this law, but in 2015 the Supreme Court offered a new tool: disparate impact. This doctrine says that any policy that effectively discriminates against minorities, even if not intentional, violates the Fair Housing Act of 1968 unless there is a legitimate justification for that policy and there is no other way of achieving that policy’s goals that does not create housing barriers. Since many minorities, including blacks, Latinos, and Native Hawaiians, have lower than average incomes, policies that make housing less affordable may violate the law.
A disparate impact rule issued by the Department of Housing and Urban Development targets two potential violators of this doctrine: lenders who may restrict mortgages in some areas and state and local land-use laws that make housing less affordable. Either the federal government or local representatives of aggrieved minorities may challenge Hawaii’s land-use law, and the Grassroot Institute paper argues that the state has no legitimate justification for keeping the law on the books.
Even before the law was passed, Hawaiian housing was less affordable than housing in the rest of the country because a handful of people and companies owned most of the land in the state and dedicated it to farming. But in 1959 median home prices were only a little more than three times median family incomes. Today, many of the state’s large landowners would gladly develop and sell their land if only the state would allow them to do so.
Honolulu and Maui and Hawaii counties have responded to the state’s affordability crisis by passing inclusionary zoning laws. In Honolulu, for example, a builder who builds 100 market-rate homes must build 30 more to sell below market rates. It is a measure of how unaffordable Hawaiian housing is that 10 of those homes can be sold to people who earn up to 140 percent of median incomes. Since the median family income in Hawaiian metropolitan areas is $86,900, that means families who earn up to $121,660 a year are eligible for subsidized housing.
However, the Grassroot Institute paper argues that inclusionary zoning itself violates the Fair Housing Act. Although it makes a few units available for sale at low cost, builders must sell their other units at higher prices to compensate, and that makes the general level of housing prices less affordable to most buyers or renters.
The implications of this report extend far beyond Hawaii. California, Oregon, Washington, and several eastern states have passed land-use laws similar to Hawaii’s, while urban areas such as Denver and Boulder have written growth-management plans that made housing locally unaffordable. All of these laws and plans potentially violate the Fair Housing Act and should be repealed.
Solving Hawaii Housing Crisis Through Land Use Reform
PDF: Randal O’Toole’s report
Grassroot Report: How to Fix Hawaii's Housing Crisis