Hawaii Government Impact: the High Cost of Land Use and Housing

From www.ConforHawaii.com (excerpt)

The June Forum for the Conservative Forum for Hawaii focused on Hawaii Government Impact: the High Cost of Land Use and Housing. Initial remarks were from President Walter Moe, an owner-builder consultant and former HPP Owners Association president on local building code requirements, followed by our featured speakers Big Island real estate broker David Turner on permitting and process problems, and UH law professor David Callies, author of the definitive work “Regulating Paradise” on law effects on housing in “the most regulated state in the nation”. “Ownership of private property is considered a constitutional civil right”, he stated, but “Hawaii and California are the only states in the nation where land use is regarded as a privilege to be bestowed by government”

Mr. Moe opened with comments on how there are 4,800 Big Island families on the affordable housing waiting list, while the Hawaii County Office of Housing and Community Development signed a $34,000 consultant contract to study the mystery of why affordable housing is becoming less available. “We all know why affordable housing isn’t available. Government regulations are preventing it.”

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Prof. Callies spoke next.

“Hawaii is the most regulated state in the nation.” He described that it takes about 10-14 years to get a project in Hawaii from green field (non-urban designation) to completion. He seconded David Turner’s concerns about “time is money”. “Every delay adds to the cost of housing, as projects are all financed and the cost of those loans keeps accruing even though no development has actually taken place.” We all end up with higher housing costs as a result. “The market can continue to absorb that, up to some limit, but at some point things come to a stop”. (What comes to mind also is the Super Ferry going in to bankruptcy because they could not afford the 2 years further delay to complete an EIS.)

He commented extensively about several aspects of land use law.

Presently, the state Land Use Commission required all residential developments to have 25-30% of all units “affordable’. In addition, the counties had their own “affordable” unit requirements as well. He also commented on such requirements around the country. “In Massachusetts (pop. 6.6 million), in 14 years of such requirements, they built only 1400 units by set-asides. ” It is a miniscule contribution to the housing markets, and just not worth it.

On Maui the present requirement is 50% affordable units for all new developments. He predicted that all such would come to a halt. “The LUC tried a 50% requirement 15-20 years ago, but no development could afford that. If it doesn’t pencil out, the projects come to a halt, or just don’t even get started” until the requirements are changed again.

He mentioned the very recent case of Kona’s Bridge Aina Lea development, who filed suit against the state LUC just this month. They had purchased the project from prior owners, and had already completed 30 - 40 affordable units when the LUC decided it had taken too long (it was supposed to be completed in 2010) and so voted to revert their boundary classification from urban back to agriculture. This was despite the finding of the LUC 13 years ago that it was impossible to grow anything on the property, and it had no agricultural possibility. They had approved the classification as urban and the present project which proved its viability. All testimony was against this recent decision, except for the State Office of Planning. They wanted to reclassify as agricultural, and so get a different developer on board who would complete the required “affordable housing” on the time line specified. The suit claims that the reversion to agriculture now denies all meaningful use of the property, constitutes an illegal taking under both state and US constitutional law. LUC had indicated their intent because they stated “regulations don’t mean anything if not enforced”, illustrating how the actual definitions of the classifications were in effect meaningless to them.

(Some LUC commissioners are now being sued both individually and in their official capacity)

There was a time the LUC made sense, as it was instituted to protect the state’s interest in land use. When there were large plantation landowners, this made some sense, but it no longer did today. The state no longer had any need for statewide protection. The counties had the need. If the counties wanted to prevent sprawl, they could do so. If they wanted some sprawl, they could do that also. The state should not have a say in the matter.

There had been an attempt to end the LUC some years ago, headed by former House speaker Harold Matsumoto. “He told me it was the only time he had been blind sided”. He had lined up all the votes, but forgot that the unions had a seat on the LUC, and were unwilling to give up that influence, especially as their influence had been declining for 30 yrs. He lost the vote because of that. “It may still happen. The environmentalists will all be against it, because they tend to win at the state LUC and tend to lose at the county level.”

Another related point was concerning the mandates for affordable housing. No commercial developments in the state had such requirements, only residential ones. In actuality, there were even requirements for “work force housing” for such developments, but he stated that “no court in the country would hold a work force requirement for a residential development”. Residential developments do not drive the need for increased infra structure for a “work force” that does not exist.

The famous Kona side Hokulia case was also mentioned in that as a result, only the possibility of large luxury homes were ever likely to built as developments on agriculture land, and certainly not affordable housing.

This illustrated how the problem of these mandates is at both the local (county) and the state level. “No wonder the cost of housing goes up, with these layers of requirements.” “There is a real risk that developers will leave or cease developing.”

He also commented on “public takings” and eminent domain.

The US Supreme Court has ruled that any regulation that takes away all meaningful economic use from a property constitutes an illegal taking, requiring compensation for the legal entity responsible for the regulation. No defense, no excuse, no justification would prevail. Currently, 2 of the 5 LUC conservation land designations (40% of all land) eliminate all meaningful economic use. All such lands held by private owners are therefore covered by the US law, and “in Hawaii we have a huge bulls-eye on our back” as a result.

The Kelo vs. New London case on the mainland, where the US Supreme Court found in a 5:4 decision, resulted in the legality of a government condemning one person’s private property for the use of another private citizen, if it had even the chance of an economic benefit for the community as a whole. This was actually a re-statement of another Supreme Court case that came out of Hawaii (Hawaii Housing Authority vs. Mitkiff) in 1984, which allowed the condemnation of land in leasehold for the tenants to purchase the land in fee. This was a unanimous decision, authored by Justice O’Connor, with the public benefit being the break up of land oligarchies such as Bishop estate. However, Kelo resulted in a nationwide sweep of “redevelopment agencies” condemning private property so that other private developers could use for their projects, and was widely abused. However, the Supreme Court did state that states could “raise the bar” if they so chose.

Ownership of private property is a civil right, and increasing the protection of a civil right is always constitutional.

There was a resulting backlash for further private property protection laws against eminent domain in 47 of the 50 states, and resulting in 25 successful states’ law changes. Hawaii is not one of them.

He commented also on impact fees for development. “Impact cost should be shared by the development, and when done correctly, in theory this is one of the few areas that is defensible” For decades, State and local governments have not used property taxes for infrastructure, and developers frequently completed them on their own. The government might then maintain them, but not initiate them. Somehow, they never quite got around to it. This is clear with commercial development, which can require worker housing and the infra structure for such. The US 9th circuit court determined this, but in Hawaii, in all four counties only residential projects are so required.

On Environmental Impact Studies, there have been two volumes of laws regulating such. However, the State Supreme court has managed to create their own interpretations from the bench. Currently, their ruling is that if any state land is affected in any way by a private project, an EIS is triggered. A recent case was where a $200 million project that required a culvert underneath a state highway to connect two parcels triggered an EIS for the entire project, even though state land involvement was nearly nothing. “We do need the EIS law, but what we don’t need is another one (from them)”. “The EIS law desperately needs amending by the legislature.”

On private access issues, he clarified that there is NO right for public access across private property, which is correctly called “common law trespass”, even if the land is not developed. “The right to exclude others from one’s land is a fundamental attribute of ownership, and has been held to be a US Constitutional right on 3 Supreme Court rulings.” There are only two exceptions.: if such access has become customary for an extended period of time (20 years) to have become an “easement of prescription”, and in Hawaii, for Native Hawaiians who can show they have access for a traditional rite or custom and not where substantial development already exists. There is presently a related case before the state supreme court, for a Mr. Pratt who lives in a state park on Kauai, claiming he tends to heiaus. The issue was not access, but living in the park, and a significant ruling is pending.

On Hawaiian issues, he comments this is the “third rail” which prevents the usual meaningful discussion of laws and regulations among legislators. The issue of Hawaiian remains is one example. Presently, the State Burial Council only allows two possibilities if native Hawaiian remains are found on a property: remove them, or keep them in place. Ruling for remaining in place but not allowing them to be covered over and developed upon is frequently the result.

There needs to be another alternative. “I know myself of several cases of native Hawaiian remains on this island that are covered over with concrete”.

He also commented that among his law school students were Big Island figures Billy Kenoi, Brian DeLima, and BobbyJean Leite-head Todd, among others. He has taught most of the active environmental attorneys in the state. Currently, cases brought before the state supreme court by entities such as the Sierra Club, Life of the Land, Earth Justice, and Native Hawaiian groups were winning 90% of the time. These cases also involved reversal of lower court findings about 65-75% of the time. It was commented that if large developers with skilled attorneys and deep resources could not predict the land use laws effectively, with odds like that the only rational decision was not to play at all.

And that costs everybody.

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