Housing in Hawaii
Price of Paradise · Hawaii Public Radio · aired 1994-06-26
Guest host: Bruce Voss. Guests: Nick Ordway (Director, Hawaii Real Estate Research and Education Center)
Duration: 0:34:24

[0:00:00] Bruce Voss: Bruce Voss and I Roth this week as guest host of the price of Paradise Radio show. This week's topic is housing, affordable or otherwise as we head towards the new state administration. Well, the headlines are familiar and depressing, just last month, Baron's magazine called Honolulu's housing prices the most overvalued in the country and despite the sluggish economy, the median single family home sales price on Oahu remains around $350,000. But not all the news is bad, the administration did help develop several thousand new affordable housing units and this week's paper shows four new housing projects with homes or town homes priced below $200,000. We have an expert guest today to answer your questions and help us

[0:00:00] Bruce Voss: make sense of Hawaii's curious and much cursed housing market. Nick Ordway is an attorney, appraiser, author, director of the Hawaii Real Estate Research and Education Center at the University of Hawaii and one of the state's most respected authorities on our island's real estate trends. We welcome your comments or questions for Nick Ordway, our number here is 955-8821. Neighbor Islanders call collect. Again, the number here for the price of Paradise Radio show is 955-8821. Nick, one of the candidates for Governor last week made this flat sweeping statement, I quote, I sincerely believe that the largest contributor to the high cost of housing in this state is government itself. True or too easy a target?

[0:01:24] Nick Ordway: What's too elusive a target. A government is bifurcated, I was told to use a tough word initially, bifurcated into two parts. Uh the state approach and the county approach. I think what you will find is that some of the problems are clearly the fault of government by putting in unnecessary obstacles in delaying processing of uh permits, that's primarily a problem on the state level, um, as well as uh too rigorous enforcement of uh building code standards. Uh I understand that some of our standards allow uh require uh us to build water mains to sustain uh freezing temperatures uh below 30° below zero, uh which might be important to us a 1000, 2000 years from now,

[0:01:24] Nick Ordway: but that may be more of a standard than we really need. On the other hand, government has done some very good things. HFDC I think has been a very valuable uh organization under the leadership of Joe Conant. Uh we have some very sincere people in the legislature and in the county governments. So it's really kind of a, a balancing of problems and opportunities.

[0:02:44] Bruce Voss: Those of you in the listening audience who read The Price of Paradise book, uh may remember Nick's chapter on affordable housing and let me read a quote from that chapter. This is from the summary. Quote, affordable housing would be a mixed blessing. The probable consequences would be a larger population, greater pressures on our physical infrastructure and social services, an increase in state and county taxes, and a decline in the quality of life, the middle and upper classes. If they thought about it Nick, are people really willing to make that trade?

[0:03:13] Nick Ordway: We really are overpopulated in the state given the infrastructure that we've built. Our roads are too crowded, we do not have mass transit, our water system is in jeopardy. Uh we on the city and County Honolulu have a deferred maintenance of our sewer and waste water treatment program that will cost us over a billion dollars over the next 10 or so years to uh correct. Uh but we can't afford too much more debt. Uh Moody's, which is a very respected national bond rating service says that the state of Hawaii when you combine state and city debt, ranks second in the nation in per capita debt. Uh it's second in the ratio of debt to property

[0:03:13] Nick Ordway: values and first in the nation the ratio of debt to personal income. More importantly, uh we have been called a tax hell and pardon me for using that word on a Sunday. Uh but uh Forbes magazine and others have uh pointed out that we are the fourth highest uh tax uh jurisdiction in the United States, only, I believe Alaska, New York and Washington D.C. pay higher per capita taxes. So, we have a real problem and a lot of that problem is the fact that we have about 15% to 20% too many people living on the islands right now. Now I'm not saying that these people should leave, but what I'm saying is we need to

[0:03:13] Nick Ordway: recognize that we haven't invested sufficiently in the infrastructure to support these people to the level that they're entitled to.

[0:04:52] Bruce Voss: You're listening to the price of Paradise Radio show, our topic this week is housing, affordable or otherwise as we head towards the next state administration. Our guest this week is Nick Ordway, director of the Hawaii Real Estate Research and Education Center at the University of Hawaii. The number to call with your comments or questions is 955-8821. Neighbor Islanders call collect. Again the number is 955-8821. Well Nick, uh, it occurs to me that you talk about a decline in the quality of life of the middle and upper classes, if we do get affordable housing and um, frankly those are the people that wield most of the political power in this state. Uh is there truly when

[0:04:52] Bruce Voss: you get right down to the bottom line, the political will to make affordable housing happen?

[0:05:37] Nick Ordway: If you own a house, you might not want to have affordable housing built because as you create more affordable housing, this may cause the value of your house to drop. So if you are a middle class individual and you own your own house, there is an advantage to keeping housing prices high because your wealth is higher. On the other hand, if you're a college kid, uh and uh you've just graduated uh from high school and you're looking at the possibility of going to UH or to the mainland, um you may decide to go to the mainland. Uh because uh you've stayed in the state and you want some diversity. The problem is when you leave

[0:05:37] Nick Ordway: to go to the mainland, there's a 75% chance you will not come back to the state because of housing prices. And even if you go to UH uh because you recognize uh the fine educational experience there, and uh President Mortimer did not tell me to say that, uh there's still about a third of it uh there's still about a 30% chance that you're going to leave the state forever.

[0:06:44] Bruce Voss: Seems like we have a caller on the line. Uh Astrid from Kailua, uh what's your question, Astrid?

[0:06:49] Caller (Astrid): Uh hi. Um, the statement was made that we have no mass transit system here, and I would like to quarrel with that. We have a very large bus mass transit system, which is one of the biggest in the country, carries a quarter of a million people a day, which is more than most rail systems anywhere uh, carry. So, it's really not correct to say we have no mass transit system. Buses are a mass transit.

[0:07:14] Bruce Voss: Well let me ask you Nick, um, with regard to to transit or transportation problems, uh how important is it to either upgrade the bus system or get mass transit or some other solution, uh so that we can uh, so that we can build more affordable housing in the outlying areas?

[0:07:30] Nick Ordway: I, I think there is a strong case that our bus system is one of the uh finest in the United States. Uh you can travel all around the island for about 85 cents. Uh but uh if you look at what the costs of that system are, uh the fares that people are paying pay less than 20% of of that amount. But more importantly, the bus system is by itself insufficient. When I said we don't have a mass transit system, I really meant we don't have a comprehensive mass transit system uh that properly moves people uh in sufficient numbers to reduce the traffic congestion. Uh I live on the windward side of Oahu, and if I

[0:07:30] Nick Ordway: get up at uh 5:00 in the morning or 4:30 in the morning, I can get quickly to my office at the UH in about 35 minutes. Uh but if I uh leave at around 6:30, it could take me an hour and a half. Uh that's really a lot of congestion if people if uh colleagues of mine that live in Mililani, uh it takes them even longer uh uh during bad uh rush hour periods to get here. Uh I think the rail system that had been proposed rightfully was defeated, because it wasn't properly thought out. Uh I've often called that old system an intercampus transportation system, because it started off at Windward College and ended up

[0:07:30] Nick Ordway: at UH. Uh we really do need though to look at multimodal means of transportation, uh because that's part of the quality of life that's been deteriorating in the last uh 10 or 15 years.

[0:09:20] Bruce Voss: Um, agree or disagree, Astrid?

[0:09:22] Caller (Astrid): No, I quite agree with most of what he said. I was only quarreling with the statement that we had no mass transit system. Now there are ways of improving and extending the bus system as he suggests, which have been done in many other cities. There are bus ways, there are transit ways, there are high occupancy vehicle lanes, we need to add several hundred buses to our system. All of these things have been recommended and the city does not move on them because the city wanted to have a rail system. Uh and and he quite is correct that we need to greatly improve our bus transit system and this can be done.

[0:09:56] Bruce Voss: Let's elect Astrid uh to the City Council, that's a very very fine statement and I agree with everything she said. Thank you very much for your call, Astrid.

[0:10:05] Caller (Astrid): Thank you.

[0:10:06] Bruce Voss: Let's go to uh another caller uh Mary from Kani Ohe. What's your comment or question?

[0:10:11] Caller (Mary): Oh good morning. I'd like to know how we balance this uh demand for more housing with our already overpopulated uh situation and the transit situation, as you were talking about, and the inters infrastructure and all of that.

[0:10:26] Bruce Voss: Well, this is the ultimate question, Nick, how do we do it?

[0:10:28] Nick Ordway: I don't know. Unfortunately, uh that's uh because uh the problem, if you look at it as a comprehensive whole, may seem unsolvable. Uh but there are some very um positive things happening on the neighbor islands. Uh for example, I wrote a column about a year ago where I equated homelessness with hopelessness. Well, my eyes have opened up uh when I was um when I had a chance to go to Maui and look at a homelessness project uh uh uh that was partially funded by the Weinberg uh foundation, uh but was also contributed to by various other groups and they have come up with a solution that partially solves the homelessness problem on Maui in a

[0:10:28] Nick Ordway: way that may be a uh landmark approach uh national nationwide. Um, what they have come up with is a program that if you're homeless, uh you can get into their program, and if you stay in their program uh for 5 years, you will have accumulated $30,000 for a down payment for a house. Uh they're they're helping about 1,000 people a year on Maui. Uh no other island is doing that, and it tells me that although right now the problem may seem very complex, if we break it into sub problems, and start solving those sub problems, we will ultimately solve the overall problem.

[0:11:58] Bruce Voss: Mary, just from your perspective, I'm curious of the many facets of the overpopulation problem, uh transit or water or sewers, whatever, um what do you think is the biggest uh barrier to to putting more affordable housing or housing in general on the island?

[0:12:14] Caller (Mary): Well, I feel that we're getting ourselves into a position of not being able to enjoy our island because it's just too crowded. And I hate to see that happening to all the islands because it used to be at least you could go to one of the other islands and find some space, and children are growing up with no space around them, and and it's just we're just cramming people in and I don't know if we should want to do that.

[0:12:37] Bruce Voss: I think that's a good point, Nick. Uh the overcrowding uh people feel it, I mean not only in the statistics, but physically. Um is there any way that can be addressed?

[0:12:46] Nick Ordway: Oh, I I think Mary uh partially had the solution or implied the solution and that is maybe we shouldn't be growing as fast as we have been. Uh if we had had housing production um at the same levels as we had in the 1970s uh through the 1980s, we would have about 150,000 additional people living here in Hawaii, creating even a more distressful situation. Um, I think we right now have too many people living on Oahu. Uh we really have too many people crowding Maui. Uh the other islands haven't quite experienced the um overgrowth uh that these two have, uh but unless we recognize that one of the solutions is to discourage growth, our problems

[0:12:46] Nick Ordway: may become worse unless we're willing to become even a worse uh tax burdened state than we are now.

[0:13:44] Bruce Voss: Well, thank you very, very much for your call, Mary.

[0:13:46] Caller (Mary): Thank you.

[0:13:47] Bruce Voss: Um, you're listening to the price of Paradise Radio show. Our topic this week is housing, affordable or otherwise as we head towards the next state administration. Our guest this week is Nick Ordway, director of the Hawaii Real Estate Research and Education Center. The number to call with your comments or questions is 955-8821. Neighbor Islanders call collect. Again the number here at the price of Paradise Radio show is 955-8821. Well Nick uh beginning with the Mililani Mauka project, all major developers seeking state approval have been forced to sell 60% of their homes at uh so-called affordable prices, that is affordable to people who earn 140% or less of the state's median income. I guess there's two

[0:13:47] Bruce Voss: parts to this question. First, has this really encouraged production of affordable housing, and second, has it discouraged total production of housing?

[0:14:39] Nick Ordway: Unfortunately, the 60/40 plan has created a situation that is worse than before we had the 60/40 plan. Uh as far as I can estimate, we've had a displacement of normal housing production by government-induced housing production. Uh furthermore, uh we now find many developers uh who have built so-called affordable housing, finding this housing is unsaleable because the people who meet the income qualifications set by the state and county regulations find out they cannot qualify for loans with banks and do not have sufficient down payments. So what's happened is as a result of government intervention, we have this bulge of housing uh that was designed for specific income classification group and these people can no longer qualify

[0:14:39] Nick Ordway: to buy these houses, and at the same time, uh we have discouraged the development of housing for people um in what we call gap groups, that's the difference between the so-called affordable group and the market price group. And so what we've done is we've created a real market failure that's been induced primarily by government intervention.

[0:16:01] Bruce Voss: We have several callers on the line now, let's first go to uh Ron from uh Lanai, Ron?

[0:16:07] Caller (Ron): Good morning, how are you gentlemen?

[0:16:08] Bruce Voss: Oh, this must be Ron McCumber.

[0:16:09] Caller (Ron): Great, how are you?

[0:16:10] Bruce Voss: Good, good talking to you again, Ron. What's your question?

[0:16:12] Caller (Ron): Well, um first question is I understood that Tom Lepart was going to be on the program this morning, and then he had a conflict or something and he couldn't make it?

[0:16:20] Bruce Voss: Uh yes uh and uh we don't know precisely uh why. I I I I believe it's because uh Mr. Murdoch was in town this weekend.

[0:16:27] Caller (Ron): Yeah, he's still over here. He's still on the island so. Um, you know, it was too bad because he needs to answer some of these questions of of affordable affordability. He's had several programs here on Lanai, and they have not met the criteria. I mean, I think what we're looking at here is a perception of what is affordable. And when you take the medium income of Maui County and you place that restriction on Lanai as as a as a rule of thumb, I think you you missed the boat because the the medium income of Lanai is even dropped further since Pineapple has left. And so when you talk affordable housing for Lanai, you cannot take

[0:16:27] Caller (Ron): the medium income of Maui County and I think that's what they're one of the problems on Lanai we're having. The second thing is certain lands were given to the Lanai community or the county for affordable housing, and the hard part of this is, without infrastructure money and the county's right now coarse to scrap for money and and the state scrap for money, those lands are going to sit almost like Hawaiian Homestead lands until we can get infrastructure money to do a self help program. I'd like to see more self help programs on in this state and have the state help with infrastructures and let people carry the ball on these self-help programs.

[0:17:42] Bruce Voss: Well let me ask you about that Nick, uh self-help programs, there are a couple um uh programs that involve with that I believe the Ecumenical Housing Corporation does some of that work. Um, uh given our needs and given our our resources, um is self-help housing a viable alternative?

[0:17:56] Nick Ordway: I I believe it is. I really do, because self-help programs give base two things. It gives a affordable house to people, plus it gives these people [unintelligible — audio glitch] esteem, the self-esteem to take care of those properties. Uh if you're just handed somebody something and give them credit, give them a house and let them move into it, it's not the same or that they get in there and build them. The self-help programs that I've followed in Maui County for instance, people are just tickled to death. I mean they've they self-esteem is built up, they've get a house that they can afford for $40, $50,000, which is not an impossibility, as long as you take

[0:17:56] Nick Ordway: the profitability out from that from the contractors making the building the homes.

[0:18:38] Bruce Voss: Well I think Ron said it better than I could. Maybe we can get Ron to take Tom Lepart's place on on the show.

[0:18:44] Caller (Ron): I'd love to come over.

[0:18:45] Bruce Voss: Well thanks a lot for your call Ron.

[0:18:47] Caller (Ron): Thanks a lot guys.

[0:18:48] Nick Ordway: I I agree with a lot of what he said. I think one of the real failures of government has been in the way it's handled Hawaiian homes lands.

[0:19:00] Nick Ordway: And you look at the fact that we've had many generations of native Hawaiians on waiting lists with generations dying out and their progeny succeeding them. And the fact that the problem could be solved through a self-help program, I think is very clear in my mind. The restriction on self-help is that our state has one of the most onerous contracting licensing law systems in the United States, and it's very difficult for people who want to build their own homes to do so affordably without bringing in licensed contractors, unless they're willing to go through some of the real problems that HRS 436B has created for unlicensed contracting situations. And furthermore, if you take a look at our

[0:19:00] Nick Ordway: building codes and our subdivision regulations, we have cases where a person who has wanted to build housing has had to go through 30 different sets of permitting regulations, making it very difficult for anybody other than the most sophisticated person to go through the system. To give you a case in point, in this state, there are only three major housing developers. For single-family homes, Gentry, Schuler, and Castle and Cook represent 91% of housing production. There's no other jurisdiction in the United States that has this kind of concentration of development, but the reason that we have to have very large developers is because our regulations are so complicated that you have to have a staff of lawyers

[0:19:00] Nick Ordway: working for you as a developer to figure out the restrictions.

[0:20:54] Bruce Voss: Yeah, I know that for a fact that all those people do have staffs of lawyers. We have several callers on the line and please hang on. We'll we'll get to all of you. First, let's go to line number three, David from the Big Island. David, what's your comment or question?

[0:21:08] Caller (David): Yeah, comment. A previous caller mentioned, and, and this your guest also mentioned that we're already overpopulated. And um, I, I just want to push that a little bit further. We are a tiny isolated speck of land in the middle of the Pacific Ocean, totally dependent on a barge coming every day. And I think it would be prudent if we would do a carrying capacity study to find out how many people could be self-sufficient out here, if the barge stopped coming, for whatever reason. Uh, and then I think when we saw those numbers, we would be shocked probably at the risk that we're taking already. Uh, and the, the program of trying to put more and

[0:21:08] Caller (David): more housing here, uh, ultimately is headed for a catastrophe, I think.

[0:22:02] Bruce Voss: Well Nick, you're the numbers, man. Has such a study ever been done?

[0:22:05] Nick Ordway: I don't think so, but I think they should. I'd love to see it done. I mean, we should know where, you know, what we're doing. I, I agree with the caller. Uh, what's even more frightening is the fact that, uh, the sector that is self-sufficient and leads to self-sufficiency is agriculture. And agriculture employment has dropped to, I think, about the two or two and a half percent level. Uh back in the 1930s, 61% of our employment was agriculture. And, uh, we've been losing more and more people, uh, as we found that our agriculture is, uh, too expensive because of the high land costs. And so, uh, we are importing, and I get this. This is

[0:22:05] Nick Ordway: kind of a weird figure, but it's scary. Uh, 85% of our fish products are imported into Hawaii. And here we are surrounded by an ocean.

[0:23:00] Bruce Voss: Yeah. And the, the point very well taken. Thank you very much for, for waiting David and, and thanks, thanks very much for your call. We have, uh, one other caller on the line, um, Julie from Kaneohe, are you still there?

[0:23:13] Caller (Julie): Yep, I'm still here.

[0:23:14] Bruce Voss: Thank you very, very much for waiting. Um, what's your question?

[0:23:17] Caller (Julie): Well, my question was, um, I've been following the water problems here on Oahu. And of course, they're very linked with development. I mean, there's just no way around it. And I was wondering if he would like to comment on the basically what I consider to be the development of Central Oahu. And I would pretty much say that it most likely will be urban development. So they're now saying diversified ag. And I think that to some degree, it's really that particular specific situation is has a lot to say about what you're saying, too, because it seems to me that the status quo, or whatever you want to call the people that are within the trust, etc.,

[0:23:17] Caller (Julie): that want to develop this land, um, that they don't seem to understand about things like carrying capacity and things like that, because that will affect their bottom line. And so, there's probably very little political will to change that particular direction going on now. And why Kaneohe/Water situation only illustrates this very strongly in terms of something we can look at right now.

[0:24:13] Nick Ordway: Without a doubt, uh we have a serious, uh, water problem in Central Oahu, which is probably going to get worse rather than better unless we find ways of, uh, making water usage much more, uh, efficient. Uh, it's important to recognize that each of our islands sits on what is known as a water lens, and this water lens is being depleted, uh, even as we sit here this morning, uh, talking about it. Uh, at a some point in time, and I have not seen, uh, scientific studies that tell me when that point in time is, uh, we will start seeing significant problems of saltwater intrusion into the water lens creating a potentially irreversible ecological disaster for

[0:24:13] Nick Ordway: our islands. Um, and I think that this problem has not been studied enough, uh, and the information of the studies that do exist, and there've been some very good studies at the UH, uh, these studies have not been properly communicated to the public and to our policymakers.

[0:25:25] Caller (Julie): Yeah, could I say one more thing, though?

[0:25:26] Bruce Voss: Oh absolutely, Julie.

[0:25:27] Caller (Julie): Um, the other thing I want to bring out as well, and of course these are things that are happening right now, so there's people are listening, they they should know that this is going on if they're not familiar with it. Um, we have a project too at the Eva plane that Hasiko wants to build an internal marina. And of course as part of the ES or EA or whatever it is, AIS, um they said that it will crack most likely the aquifer in that area where we talk again about greater intrusion of of salt or salinity into the area where basically it was only brackish water before. And I'm I really am beginning to feel

[0:25:27] Caller (Julie): more and more concerned about our exchanges for things like clean water or clearer water, etc., um for high-cost real estate developments that will basically do nothing for our, um, problems with housing on one end, because of course, these are not going to be people that are very poor that are going to be purchasing right on the marina. But at the same time, we're exchanging our natural resources that we probably won't be able to get back. We cannot heal a broken aquifer or you know, into the that the the, um, what do they call the cap rock? When they crack the cap rock, we don't really get to heal that. There's not a lot of things

[0:25:27] Caller (Julie): we can do about it. It's just another place where water just flows out into the ocean. And at some point that balance will be created and we'll have a problem. But I think what I'm really concerned with is our attempt to basically mortgage all these areas on Oahu per se. I'm not sure about the other islands because I'm not following that, but we're mortgaging all these things in one level. We're getting money for them, when in actuality, maybe money is not a correct exchange, and that's my concern. So I if you have more comments on that, that'd be great.

[0:27:03] Nick Ordway: I I think that's a a very, uh, pertinent and very knowledgeable, uh, observation. Uh, I have not looked at any studies with respect to the Haseko Marina project, but uh from what I know about marinas is, uh, these have great potential for ecological damage, uh, more so than any developments on the land, uh, itself. Uh, primarily because of leakage of oil and other chemicals from, uh, boating activities. Uh, one one example or illustration of this is the biggest polluter, uh, or biggest toxic waste, uh, developer in the state is the US Navy, because that's just the nature of marine-type activities. in the state is the US Navy because that's just the nature of marine type

[0:27:03] Nick Ordway: As you have more marine-type activities using engines, machinery, and refueling of this nature, you can really cause some serious problems.

[0:28:06] Bruce Voss: Thank you very much for your call, Julie, I appreciate it very much.

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