To: Council of the County of Maui
       Alice Lee, Chair
       Keani Rawlins-Fernandez, Vice-Chair

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

From Grassroot Institute, July 15, 2022

RE: Bill 107 (CD1) to establish a new method of determining the sales price of an affordable dwelling unit to include the total housing costs associated with home ownership such as principal, interest, taxes, homeowner’s insurance, private mortgage insurance and homeowner’s association dues.

Comments Only

Aloha, Chair and Council members.

My name is Joe Kent and I am the executive vice president of the Grassroot Institute of Hawaii, a 501(c)3 nonprofit policy research organization.

The institute is a taxpayer watchdog group that promotes the values of individual liberty, economic freedom and accountable government.

We have concerns that Bill 107 (CD1), though well-intentioned, could cause homebuilders to stop building affordable homes. This is because the bill would reduce the sale price of a home by approximately 20% to 22%, which would virtually wipe out any profit homebuilders currently enjoy and significantly reduce the financial incentive for homebuilders to invest in projects.

Affordable housing projects already sell at below-market prices and barely pencil out as it is. As a result, homebuilders recoup by adding to the prices of their higher-end homes,

Bill 107 makes the below-market prices for workforce homes even lower by requiring total housing costs to fit within 31% of gross household income. “Total housing costs” under this bill include not only the mortgage and interest, but also homeowner association fees, property tax, private mortgage insurance and home insurance. Those additional costs can vary, but on average, adding them to the total price that can be charged for workforce housing would lower the actual sales cost of the homes by 20 to 22%.

Reducing prices even further by simple decree would erase what little incentive homebuilders have to build affordable housing. The result will be no new affordable housing projects at all, which would hurt the very people this proposal is intended to help.

Instead of trying to lower prices by mandate, Maui County Council members should consider reforming the county’s regulations to allow more housing to be built, as outlined in the report “How to build affordable, thriving neighborhoods,” produced by the national State Policy Network.[1]

Here is a summary of proposals from that report most applicable to Maui:

>> Allow smaller housing. Let housing be as small as builders, buyers and renters want.

>> Allow smaller lots. Minimum lot sizes have no clear health or safety justification.

>> Allow residences in commercial districts. Allow office parks and malls to build housing. Allow vacant downtown storefronts to convert to residential use.

>> Allow taller buildings. Remove limits on height. Where fire department capabilities might be affected, ensure that new buildings can provide for their own fire response.

>> Allow subdivision of existing structures. Historically, one of the most important sources of low-cost housing has been single-family homes that were turned into boarding homes or subdivided into apartments.

>> Allow single-room occupancy buildings. Housing with shared bathroom and/or kitchen facilities benefits low-income residents, especially near dense employment districts.

>> Legalize the “Golden Girls.” Remove or loosen restrictions on the number of occupants or nonrelated persons allowed in a housing unit, except for fire code restrictions.

>> Waive some building code requirements for temporary homeless shelters. Imperfect housing for unsheltered homeless populations is better than the status quo.

>> Allow extra kitchens. Permit homeowners to add additional kitchens to adapt to their evolving needs.

>> Allow accessory apartments. Accessory dwelling units add more housing and often can make it possible for the homeowners to better afford their own housing costs.

>> Allow larger “house” on the same land. Reduce setback, floor area ratio and lot-coverage rules.

>> End single-family-only zoning. Many people cannot afford a large, detached house. Allow duplexes, triplexes or fourplexes in places zoned for only single-family houses.

>> Enact a “Permit Freedom Act” for building permits. Require clear permitting standards, defined response time and the option for independent judicial review.

>> Publish pre-approved plans. Pre-approve plans for common projects like ADUs or single-family homes, then permit expedited review for projects using these plans.

>> Reduce political approvals. If a project complies with existing zoning, it shouldn’t require more than a planning department approval and building permits to proceed.

>> Set up one-stop, parallel-process permitting. Let applicants submit all permitting documents in one place. Allow departmental reviews to happen at the same time.

>> Outsource building permit application review. Outsource plumbing, electrical, mechanical and structural code review when demand peaks.

We urge the Maui County Council to shelve any proposal that would stifle affordable housing in the islands, such as this current price-fixing proposal.

Instead, please consider the reform options listed above, which would be more likely to succeed in increasing housing supply and easing housing prices for Maui residents seeking a home.

Sincerely,

Joe Kent
Executive vice president
Grassroot Institute of Hawaii
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[1] “How to build affordable, thriving neighborhoods,” State Policy Network, Local Government Working Group, 2019.

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