‘CPR king’ Abe Lee enables homeownership despite complicated legal framework

from Grassroot Institute, March 14, 2024

Imagine the frustration of being allowed by the state to build two homes on your property, but being prohibited by the county from creating two separate lots. 

Well, that’s the zoning code reality for many Honolulu homeowners, according to longtime Oahu real estate developer Abe Lee. 

On the latest episode of the “Hawaii Together” program, Lee told host Keliʻi Akina, president of the Grassroot Institute of Hawaii, that a state law allows homeowners to divide their ownership rights into separate “lots of record” for ownership purposes, but the County Department of Planning and Permitting will still only recognize the property as one lot with two houses.

For example, he said, the state recognizes a 500-unit high-rise as 500 separate deedable units, but the counties see it as one building with 500 kitchens. 

Lee said that’s why he has built his career on navigating that complicated system, developing projects in which two or more houses can be owned separately on a single property — called a condominium property regime or CPR — because it often is more doable than subdividing a parcel and building homes on each of the separately owned smaller new lots.

“If I had to subdivide this parcel, I gotta go get the two lots to be approved; the lot width has to be perfect; and, you know, dimensions have to be right,” Lee explained. 

Akina noted that Lee has been called “the CPR king” for his experience developing projects over the past 40 years that have enabled hundreds of Hawaii residents to become homeowners. 

Akina said that building more housing in Hawaii doesn’t have to mean “sprawling out to every nature preserve — it means building where we already have people,” and he called attention to measures moving through the state Legislature that would remove barriers for homeowners to build so-called accessory dwelling units on their properties.

TRANSCRIPT

2-26-24 Abe Lee with Keli‘i Akina on “Hawaii Together”

Keli‘i Akina: Aloha, everyone, and welcome to “Hawaii Together” on the ThinkTech Hawaii broadcast network. I’m your host, Keli‘i Akina, and president of the Grassroot Institute of Hawaii. 

I’ve talked a lot on this program about making it easier to build more housing in Hawaii’s existing urban areas. That doesn’t mean sprawling out to every nature preserve — it means building where we already have people. 

There are a lot of bills right now in the state Legislature and county councils that would help make that easier, and we’re pretty excited about that. But there are some ins and outs of the building process that need to be looked at more carefully. 

Today, we’re going to talk with someone who has the experience of doing just that. My guest is Abe Lee. He’s a licensed Realtor with more than 40 years of experience here in Hawaii. 

He frequently holds seminars teaching real estate and is the author of the book “How to Become a First Time Homebuyer.” 

Now, that would be of value to everybody in Hawaii, whether you own a home or not. because if you don’t own a home, you need one, and if you do own a home, you can teach people. 

He has been called the “CPR king” for his experience with developing projects with condominium property regimes, and we’re going to talk about those terms a bit today. 

But first, please welcome to the program, Abe Lee. Welcome, Abe. 

Abe Lee: Thank you very much, Keli‘i. It’s an honor to be here.

Akina: Well, it’s an honor to have you on the program. And you have helped so many people, I just want to thank you. 

And let’s just get started on a more personal level today. How did you get involved in real estate and home building? Was it something that your parents instilled in you? Is it something as a little child you dreamed about, or were there events in your life that shaped you into the path you’ve taken?

Lee: You know how happenstance happens in life? Yeah, and I have a degree in Asian studies from the University of Hawaii, which did not prepare me for business at all — except I sold fire extinguishers in Kahala, door-to-door as a college student. 

And one day this guy calls me up and says, “Hey, you sold my wife three fire extinguishers, and she says I should hire you.” 

So I said, “What do you do?” He goes, “I’m an insurance salesman, a general agent.” 

So I interviewed with him, and I thought life insurance is interesting. So I got a life insurance license — not with him — but with another company. 

And then while I was selling insurance, I said, “You know what? I’m making people wealthier when they die for their families. I’d like to do something with real estate so they can be wealthy when they’re alive, so I can catch both ends — before death and after death.” 

And so, I got a real estate license. 

Akina: Beautiful story. 

Lee: So I hooked up with a fellow named Bob Allen, who developed Century Center, Executive Centre and Century Square. And he was probably one of the most prolific developers in Hawaii at that time, in the 1970s-’80s. 

And I happened to [have] the biggest fortune of working for him in the real estate development sales for Executive Centre, and that’s what got my interest in developing.

Of course, I couldn’t borrow $80 million like Bob did, so I just started with two homes and what not, and 20 units that I converted from a one-owner building to a 20-unit apartment building that could be condominiumized and sold to individuals. And that’s what got me started in real estate development.

Akina: Well, that’s quite a story. Abe, I’ve looked at what you’ve done over the last 40 years, and I’m not sure whether you’re a Realtor or whether you’re a homebuilder or both. How would you describe yourself in terms of those roles? 

Lee: I’m not a homebuilder because I don’t have a contractor’s license, but I’ve hired a lot of — well not — but contractors to build houses for me on these infill projects. 

I built two homes on a lot where the zoning allowed it, which we’ll talk about later. But my biggest project from scratch was a 40-unit project in Mililani town, which is very unusual because Castle & Cooke dominated that area. 

But they had a property that they wanted to get rid of, which was at first a sales office; it became a church and became an eyesore; and then they put it out to bid. And I had a Japanese partner who paid cash for the property, and we just developed 40 townhouse units there. So I did it from two units up to 40, but not hundreds like these big developers 

Akina: Now, Abe, you have specialized in what is called “CPR projects.” I’d appreciate it if you could explain a little bit about what that means and why you decided to focus on that. 

It’s my understanding that you’ve created more than 150 CPR projects, which totaled to about 500 new homes here in Hawaii for our residents. 

Lee: Thank you — yes, correct. Not new [homes] maybe, but what I call retrofit existing homes, and convert the usage from one owner owning 20 homes, or 20 units, and converting it to CPR, so now we have 20 separate owners. So basically we’ve created affordable housing for 20 owners, whereas there was one rich person that owned the whole building. So I’d like to see that we can redo or do the infill projects like that. 

Akina: It sounds fascinating, but before we go any further, could you explain what CPR is?

Lee: Sure. OK, CPR stands for condominium property regime — doesn’t make any sense. Well, before then, it was called HPR, which was called horizontal property regime, which made less sense.

So, in the 1960s, the Legislature in Hawaii created a law under HRS. Hawaii Revised Statutes. 514A to allow by magic, by law, that you could split out ownership by not subdividing but by condominiumizing — which is really a very different kind of concept, and Hawaii was one of the leaders in the CPR process.

So it went from HPR to CPR. And now it’s under Hawaii Revised Statutes 514B, which is a remake of the old law into a new law, and that happened in 2006 

Akina: Abe, where is your most recent CPR project? And tell us a little bit about that. 

Lee: Sure. We did ten homes on William Henry Road [in Kaneohe], and it was owned by a local family, and the second generation of children were getting older, and they had 10 homes on one lot.

It was 77,000 square feet of what we call R7.5-zoned land, which is residential [and] minimum lot size is 7,500 square feet. 

They came on the market, and I made an offer, and they rejected me at first. Then we negotiated, and they accepted. 

So now we’re able to take these 10 homes that [were] owned by one family, and we’re able to convert it into condominium homes and sell it to 10 different owners. And we sold those at $600,000 a house, which is kind of high, but the market rate and the appraised value was $650,000.

So we gave each of the buyers a $50,000 discount, and they had equity immediately upon signing with us. Now we have 10 individual homeowners instead of one family owning all 10 homes. 

Akina: That’s wonderful, and it’s an opportunity that you’ve created for people that otherwise might not have come to them. 

Now, there’s a bill that’s going through our Legislature right now; it’s HB1630. I don’t know if you’ve heard about that or not, or had a chance to review it. 

Basically, what it would do is allow property owners to subdivide their properties without a lengthy hearing, and we talked a little bit about that earlier. 

What’s the difference between subdivision and CPR-dividing a property? 

Lee: OK, sure. When you subdivide a piece of property — let’s say in Honolulu, just because I’m most familiar with Honolulu — let’s say you have a 10,000-square-foot lot, it’s R5 zone. It’s residential, minimum lot size is 5,000 [square feet]. 

So by the zoning code, you’re allowed to have two homes on the property. If the lot is wide enough — like 60 feet wide, I’m sorry, 62 feet wide — then you create a 12-foot driveway to go back to the back of the lot, and that’d be what they call a flag lot. 

The front lot would be 50 feet wide, whatever, and so now you can have two 5,000-square-foot lots, and the city allows you to subdivide the two lots into two separate owners and two separate tax map keys. 

So it’s subdivided legally at the City and County level, and also register or record the documents at the [state] Bureau of Conveyance. 

Well, let’s say the lot is 50 feet wide, and it’s 200 feet deep. Well, you don’t have enough width to have the 12-foot driveway, and the 38-foot-width frontage is not sufficient. So the city would say you can’t subdivide, but the zoning code allows two homes to be built — with or without the narrow driveway. 

So now, zoning code allows the two homes, but the zoning code will not allow the lot to be subdivided, but the zoning code will allow two homes to be built. 

Now the question is: “OK, I’ve got these two homes, but I want to transfer the title to my children, or to my cousin, or to a stranger” — you can’t do that. 

But [in] comes the magic of CPR. And the CPR says, under state law, will let you split these ownership rights and have two separate, quote, “lots of record,” but it’d be a CPR unit 1 and 2. 

So on the tax map key, it’d have one tax map parcel number, but it’d have two numbers for CPR, which would be 0001 and 0002. 

Now, for some of you not familiar with TMK [tax map key] law, [you say] “Oh, you’re speaking Greek to me.” But just know all a CPR is, is a way to transfer title to property — that the counties allow you to build, but they won’t let you split out the ownership and transfer title.

But the CPR — through the magic of Hawaii Revised Statutes 514B — allows you to transfer title. So all it is, is a transferring-a-title vehicle, which is very, you go, “It’s that simple?” That’s how it is. 

Akina: You say, Abe, that it’s that simple. In reality, is it simple? Is that what people encounter — ease of being able to do this transfer — or are there obstacles that come in the way? 

Lee: Yeah, maybe I’m making it too simple. But if you think about — if I had to subdivide this parcel, I gotta go get the two lots to be approved; the lot width has to be perfect; and, you know, dimensions have to be right. 

A lot of properties in Hawaii on Oahu are 50 feet wide; they’re not 62 feet wide. So by virtue of the lot being too narrow, you can’t subdivide — but you can have permits to build two homes. 

Well, by magic of 514B, now you can transfer title to the two homes. And the lot is a little narrower, and you share the same driveway to the back; but this allows you to put two homes on a lot by the city zoning policy, but it also allows you to separate out ownership. 

So the children could get a mortgage on their property; parents would keep the mortgage on the other property; or it’s free and clear. Or they can sell it to their children, cousins, strangers, and you can basically transfer title to property.

So, in a way, it’s simple if you know what you’re doing. 

Akina: Well, Abe, you’re such a good teacher. 

Now, I asked you a little bit earlier if you’d had a chance to look at HB1630. Have you, and do you have any opinions on that? 

Lee: You know, I took a glance at it, but I’m not a legislator nor an attorney. But any way that you can reduce the time and speed up the process, I’m all for it. 

As long as, you know, people don’t think that there’s a violation of specific processes that have to go through, which a lot of people are opposed to, saying, “You can’t just rush this thing through and forget all about the environment, the archaeological studies, etc.” But if all things are equal, and you can get a permit, then why not speed up the process? 

Because you and I know, Keli‘i, we’ve got bottlenecks everywhere, especially in the building department. I mean, they were people waiting for the permits for one year, or two years for a house. I used to run it through a building department, walking through each of the departments in one week, and I got my permits.This is when I first started. Today, you can’t do that. 

Akina: That’s right, Abe. We could invite you back for an entire program on the Department of Planning and Permits. In fact, did you know there’s a play about that that’s been performed recently here in Honolulu? 

Anyway, let’s go back to the CPR question.

Lee: Sure. 

Akina: There’s advantages for homeowners of getting a CPR property, and there are advantages for homebuilders. How would you sum up the advantages? 

Lee: Well, first of all, as I mentioned to you, the lots that are too narrow to subdivide and to have two homes split with two different lot numbers. You can do that now with CPR, but you can’t do it for the zoning code. So, that’s certainly a big plus. 

Second, you can make the lots big or small in a CPR. Example: We have a 10,000-square-foot lot, and the dad says, “You know, I’d like a bigger lot.” And the kid goes, “But dad, I want a bigger lot.” And dad says, “Hey, I control here. I’m giving you 3,000, I’m going to keep 7,000.” 

You can’t do that in a subdivision, but you can in a CPR. You can make the lot size any size you want. And the city, they don’t recognize CPRs by the way, which is really interesting. 

State recognizes CPRs and allows the properties to be transferred on title and have separate lots of record as far as ownership is concerned. But the city recognizes a 10,000-square-foot lot with two homes. 

If it’s CPR or not CPR, they don’t care. The only department that cares is a tax office. They wanna tax the two separate CPR units, so they’ll recognize the CPR units. But the DPP, Department of Planning and Permitting, they recognize it as one lot with two houses.

Now, if you had a high rise of 500 units, they recognize it as one building with 500 kitchens. But they don’t recognize it as 500 separate deedable units. The state does, but the counties don’t. Which is a very interesting, you know, situation here.

Akina: Well, that is. It’s apples and oranges in one sense. 

Now, if you could just wave a magic wand and create CPR projects here in Hawaii on a much easier level, what would make the process easier? What could be done that would really help both the homeowners and the homebuilders? 

Lee: The problem is, the building permit lies with the [Honolulu] Department of Planning and Permitting. And that’s the bugaboo of: How do you speed up the process there? 

The CPR process will not speed up that process, unfortunately. But what they will speed up is you have a lot that can have two homes on one lot, but you can’t subdivide. But you can transfer title by virtue of the horizontal property regime, the 514B. 

So once we get the permits in place, then we can transfer title much faster and much easier. But the key is: How do we, you know, get through getting the permit process? And that’s at the city level and not at the state level.

Akina: Right. Well, that’s a great project for our Council people to be working on now. So, in general, what I think we’re talking about is what has sometimes been called “infill home building”. 

Lee: Yes. 

Akina: Constructing homes on lands that were already zoned urban or even residential. 

Another component of such housing are accessory dwelling units. What kind of experience do you have in helping people to acquire or to build their ADUs — accessory dwelling units? 

Lee: Sure. If we can go back in history a little bit. And Keli‘i, you might remember this, I’m not sure. But in 1982, the accessory dwelling unit law passed at the state Legislature to say that every county is mandated to allow two homes to be built on one lot, even if the zoning code does not allow it. 

Hence, Mayor Eileen Anderson in 1982, proposed that they do what they call “ohana” homes. So ohana home history is very different from the ADU home, which is under Kirk Caldwell. 

So if you don’t mind, let me go back in history a little bit, because I’m old enough to remember all this. But in 1982, the mayor said we can have two homes on one lot. You have 50% lot coverage, and you can allocate either unit — the main house or the ohana unit — and have it equal or unequal. 

So, let’s say we take a 6,000-square-foot lot on R5 zone land. OK, residential lot is minimum 5,000, and you can’t build two homes. But with the ohana, you could. 

So you do 50% lot coverage, which would be 3,000 square feet under the roof on the first floor. Then you can build a second floor and possibly have five or 6,000 square feet of home. 

How the homeowner allocates the square footage to the ohana unit and the main house, it didn’t matter. And the other thing was you could CPR the unit and sell the unit separately. 

So that went along from ’82 to about ’88. And then the neighborhood boards went to the city and said, “You know, this ohana thing is killing our neighborhood. We’ve got too many cars in the street, and people are making money off of CPRing and selling ’em separately.”

So they had a size limit at that point with 700, 900 and a thousand square feet for the ohana unit. So that stopped ohana a little bit. 

Then, in 1992, came the clincher. And the City Council passed a law that said, from now on, ohana units must be rented to relatives only. They have to be attached, and you cannot CPR.

Well, at that point in 1992, basically, ohana stopped — because, no offense, but sometimes people don’t want to rent to relatives because relatives don’t pay rent. And you can’t kick your nephew out, you know, then your sister would get after you. 

So, they said that was the ohana law — until now. So currently, under 1992 and thereafter, you got a permit and you have to rent to the relatives only and you cannot CPR. And the size limit, by the way, was lifted. Somewhere along the way they lifted the size limit, alright? So that’s CPR.

Along comes Kirk Caldwell, and on September 14th, 2015, he puts into law the ADU law. Now, ADU is totally different. Concept is the same — you can put a second house on — but here’s the way they work:

3,500-square-foot lot minimum to under 5,000 square feet — so 4,999 square feet — you have to, you can build a 400-square-foot ADU with a full kitchen. And you only need one parking stall, whereas before with ohana you needed two parking stalls.

Then if a lot is more than 5,000 square feet, then you can have a second ADU unit, but it has to be no more than 800 square feet. So the lot size determines whether you have a 400-square-foot house or an 800-square-foot house, maximum. Still need only one parking and they don’t have to be attached, they can be detached. 

And you don’t have to rent to relatives. So there’s different nuances with the ohana versus the ADU. 

Akina: Abe, today, what are some of the major roadblocks at the state or city level for a person who wants to put an ADU in their backyard?

Lee: OK. Well, one again is the permit process. 

Akina: Right.

Lee: I’m not sure the ADU process has speeded up the permit process. 

Second, you have to have sewer adequacy. A lot of people don’t talk about this. But if you want to build a second kitchen on any residential lot or record, or anywhere else for that matter, you have to have the city wastewater department say that we have adequate sewage.

So they have a chart, I guess, and let’s say I’m in Nuuanu, because this actually happened recently. We have an R10 lot, 10,000-square-foot minimum lot size, our client has 20,000 square feet. So, in theory, they could have two homes, detached or attached and 50% lot coverage, and they could CPR. 

Except when we applied for the sewer adequacy form, we got rejected, and they said, “inadequate sewage.” So our client has this huge lot — what a waste — and they can’t put a second house on. 

Now in the old days, when I used to develop — I still do, but when I used to — we could put a holding tank in the ground, and the sewage would flow into this holding tank; at 2 a.m. in the morning, it would pump out automatically when no one else is flushing the toilet. Wastewater management did away with that holding tank. 

So now you can’t do a holding tank, and they won’t let you put up a second house — which I think is retrograding, and I don’t know why they did that. Because it’s in a holding tank, and they pump it out at two in the morning. And I did several homes that way when the sewage was inadequate. 

So that’s one drawback, plus of course, the building permit process. They also charge you fees to put the second house on. 

So, in a regular project that we used to do, it’d be six or seven thousand [dollars] for sewer adequate, sewer check and sewer hookup. Another six or seven thousand [dollars] for a water meter. So you’re out 12 grand to build that second unit.

Well, if you’re trying to create affordable housing, that 12 grand could be a big number. 

Akina: Right. 

Lee: And I don’t know if they removed that fee or not — they did for a while, and I’m not sure they did away with it permanently, or they still brought it back. And so, you still have to pay those fees. 

So those are the kinds of issues that are still, I think, fronting the ADU and ohana.  

Akina: Well, you know, Abe, by dealing with some of those issues, we could readily increase the supply of housing without having to go out and actually build more housing, so to speak. 

But this is something we call upzoning, to some extent, and it involves different processes like greater mixed-use development, or adaptive reuse of older commercial buildings that were business buildings that can be turned down into residences. Or allowing more multifamily housing in neighborhoods and so forth.

So what are your thoughts about upzoning in general? 

Lee: You know, I think if they went back to the old ways of if you could have an integrated business use and residential use — like, you know, you have the store on the bottom, mom-and-pop store, and then they lived upstairs. 

But they don’t let you do that in a business zone anymore. Except there is a rule that says that you can have a living quarters for the caretaker or the owner in a business zone, but you can only have one unit.

Well, if the lot’s big enough, why can’t you have more homes and have a mixed use of homes on top and a business on the bottom?

Because, you know, I mean, that’s what we used to do in the old days. You know, you didn’t have to catch a bus or take the car and drive 10 miles. You could just walk around the neighborhood and get everything you wanted.

And I think if we could go back to those kinds of creative ideas and have more a merging of the two concepts of business, commercial and residential, that would certainly help. 

Akina: Right. In fact, right now, a great deal of telework is taking place inside of residences already. So the dividing lines between work and home are getting dimmer and dimmer.

Now, I want to go back before we close and mention the book you wrote, “How to Become a First Time Homebuyer.” That was back in 2018. 

What have you seen change in the Hawaii housing market, and is there anything you might revise or say differently than you did back then? 

Lee: Well, back then, the interest rates were a little lower than it is now. And so, we had higher rates went down during the, you know, I guess the COVID era. And then now we’re back up pre-COVID era. 

And we can’t control the interest rates, but, boy, that really helped the people be able to afford a house because if you had a million-dollar loan at 3%, interest is $30,000. Well, today at 6% is $60,000. 

So how do you control interest rates? You know, unfortunately, I don’t think we can, but that certainly would help if we could control the interest rates a little better 

And second, of course, we have to figure out how do you keep the prices down? And how do you limit the inflation rate?

And of course, the city is trying to do that with a buyback program with, you know, 50% of owner occupants or 60% — they cannot sell their house for 10 years. And I think that’s a good concept, because at least it keeps the housing market up to the affordable market, which we really do need, desperate. 

Akina: Well, Abe, I really appreciate your insights. As you know, at the Grassroot Institute we’re concerned about overall policy. But we’ve got 30 seconds left, and so I just want to switch gears. 

What do you tell the individual or couple in Hawaii who doesn’t have a home yet? What should they be doing in order to qualify for a home? 

Lee: OK, I tell people to look for a bigger lot — 7,500 square feet on R5 zone land — and you can put a duplex. Two people — friends or not friends — can actually buy the lot, build a duplex, split it, you split the cost of the land.

Akina: There you go. Or you have a rental unit to help you pay your mortgage. 

Lee: Correct, exactly. 

Akina: Well, Abe, I want to thank you so very much for being with us on the program today and for all you’ve done for people in Hawaii and helping them get into homes. I also hope our government pays attention to some of your ideas as well. 

Thanks so much for being here, Abe.

Lee: And thank you for your wonderful work. I have great respect for what you do and what your group does. Thanks. 

Akina: Very honored to have you on the program. My guest today has been Abe Lee, a Realtor and somebody who’s helped people get homes built over the last 40 years here in Hawaii.
You can see his book on Amazon or anywhere books like this are sold, “How to Become a First Time Homebuyer.”

Much aloha to all of you. I’m Keli‘i Akina with the Grassroot Institute for “Hawaii Together” on the ThinkTech Hawaii broadcast network. Until next time, aloha.