Owning in a Burn Zone

by Tom Yamachika, President, Tax Foundation Hawaii

These days, there is much talk in the news about rebuilding the burn zone that was once Lahaina.  Can the former capital of the Kingdom of Hawaii be restored to its former 1800’s glory?  Should it be keeping a character as a picturesque but sleepy little fishing town?  Obviously, government will have a large role to play in the rebuilding, but it must not forget that people already own parts of the place. Although some master planning and zoning will probably survive scrutiny, officials should not be going hog-wild with restrictions on new development or risk claims that private property has been taken.

One property owner, a longtime developer, after attending a community meeting about what is to happen in Lahaina, had some fundamental issues with the discussion.  “We’re listening to these people talk about all their plans for the property — not their property — all the rules they wanted,” he said. “It’s absurd, the socialist mentality, they think they own the land.”

Some advocate for extensive restrictions on development and, perhaps, the adoption of appearance standards and regulations that you see in many planned unit developments now such as Mililani on Oahu. But Lahaina is quite different. People buying in to such a development know what the restrictions are before buying. If they don’t agree to the restrictions, they can buy somewhere else. Lahaina people have already bought in and have agreed to no community standards or restrictions.

On the other side of the coin, even the most ardent advocates for individual property rights have to admit that they are still governed by county ordinances, which can and do change over time.  And, of course, property within a town usually doesn’t exist in its own world.  It needs to be hooked up to water, sewer, power, and so forth.  There needs to be police and fire protection, paid for by tax dollars, so the government will need to have some say in how the final rebuilding of Lahaina will turn out.

Then there are the zoning and building codes.  People who built before a zoning or building code change are normally allowed to keep using their building as long as it is not substantially rebuilt. Now everything has to be rebuilt, so even existing owners can expect a need to comply with current codes. (Especially the fire code.) Because building codes have gotten more detailed and complex over time and the permitting process, which checks if proposed buildings or renovations comply with those codes, has gotten much longer and more drawn out, today’s buildings are more complicated and more expensive.  As a result, it’s not realistic to expect that the insurance coverage on a building in old Lahaina is going to be enough to fund construction of a new one complying with current codes. According to the National Association of Realtors, the average list price for a single-family home on Maui is $1.4 million, many times the price of a comparable house on the Mainland, and is a tough nut to crack for many people.

To keep the housing in Lahaina affordable, something has to give.  According to Carl Bonham of UHERO, Maui officials should be seriously thinking about allowing more density in the Lahaina of the future—with duplexes and apartment buildings, for example—so as to create affordable housing for the work force that’s necessary to sustain the town. (According to Bonham, the work force used to be able to rent some of the older units built before adoption of modern fire codes.)

So what is the future Lahaina going to be?  We definitely will need a careful, well thought out community design that older and newer property owners and renters can choose to participate in.