“The [Hawai‘i state] legislature pronounced that the problem of the critical shortage [of housing for low- and middle-income earners] was the high cost of housing. The causes of this high cost were said to be the ‘cost and availability of land, the cost of development, the cost and availability of financing, the cost added by government regulation, the cost and availability of labor and materials, the inflationary state of the economy that makes high cost housing more profitable to produce and more attractive to ‘risk’ capital.’”
-Lance D. Collins, “Fast-Tracking the Luxury Housing Crisis in West Maui”
While 50 years have passed since the state legislature made the above pronouncement, some things seem to never change. Half a century later, the Hawai‘i Housing Planning Study 2019 sings a familiar tune: Housing supply in the state continues to lag behind demand, “too expensive” is the number one reason interested residents can’t purchase a home, significant percentages of home sales go to out-of-state homebuyers who use property for investment purposes and vacation homes, construction of expensive homes outpaces that of the houses in the lower end of the market, and housing prices in the lowest priced segments rise faster than those in the costlier segments.
The explanations for these trends, too, have changed little. “It is widely accepted in 2018 that stringent regulation of housing production will result in high housing prices, decreasing elasticity of supply, and low supply, especially in high-priced, volatile markets,” states the HHPS, which was commissioned by the Hawai‘i Housing Finance and Development Corporation.
“There are a lot of elements that affect housing affordability, but much of it can be attributed to regulatory requirements that increase the cost of producing homes, and the fact that wages have not kept pace with the increased cost of housing,” explained Realtors Association of Maui government affairs director Jason Economou last week, when asked how the prevalence of out-of-state homebuyers impacts the market for locals.
Councilmember Alice Lee similarly placed the blame on regulatory burdens, pointing to a 2006 county ordinance that required 50 percent affordable housing construction in new developments, and later stipulations mandating construction of homes for those earning less than 80 percent the area median income. Lee claimed that the regulations had the opposite effect intended, instead causing less housing construction overall and encouraging the build-out of high-end homes to balance project budgets.
Challenging the “Widely Accepted” Explanations
A chapter in Social Change in West Maui, a book published in 2019 and edited by local attorneys and scholars Bianca Isaki and Lance D. Collins, challenges the oft-repeated conventional wisdom regarding the impact of regulations on the housing market. The chapter, “Fast-Tracking the Luxury Housing Crisis in West Maui,” written by Collins, argues that “There is no evidence to support the contention that government regulations are obstacles to the production of affordable housing in Hawai‘i.”
The prevailing attitude against regulation comes from a simple syllogism, writes Collins: “Regulation raises transactional costs; transactional costs increase the price of houses. Therefore, regulation increases the price of houses.”
But, he adds, “The problem with this simple and elegant theory is that it is not supported by historical or contemporaneous evidence.”
Take the 2006 county ordinance that coincided with less housing construction. Was the downturn because of the stringent requirement of 50 percent affordable homes?
“The problem was not the county’s new affordable housing ordinance,” said UH Maui College professor emeritus of economics Dick Mayer, who wrote the preface for Social Change in West Maui. “The collapse of the whole national and local housing market caused a lack of any new housing being built anywhere.”
While Economou stated that out-of-state buyers are not a root cause for lack of affordability, Mayer was direct about a connection. “Out of the many million tourists who come to Maui every year, there are many who wish to move here,” he said. “Unfortunately and obviously, this results in a number of problems. These mainland and foreign transplants are generally more wealthy. They are able to outbid local residents and drive up the price of homes.”
If anything, Mayer’s proposed remedies would seem to side with further legislation – ie, “regulation.”
In addition to ongoing property tax reform, he added that “We also need: a county-maintained, fair, and open list of local residents seeking affordable housing; affordable housing projects that keep the homes affordable in perpetuity or at least 30 years; establishment of impact fees on McMansions and commercial and industrial projects; and increases in the significantly under-assessed hotel properties. These efforts will provide the county with funds to get affordable units built for our local residents on the list.”
Collins explained his position toward regulation in an email Tuesday. “As long as there has been ‘regulation’ of housing – building standards, subdivision standards, planning and zoning laws – there have been express provisions in state law to exempt affordable housing projects from any of these regulations that may facilitate the building of affordable housing,” he said. “In Hawai’i specifically, the law for 90 years has been exempting affordable housing construction from building standards, etc. Because this exemption has existed, it can’t be true that these laws which can be waived by the government are an obstacle.”
Instead of viewing regulation as the problem, as has been the prevailing view among industry interests and policymakers in the state for at least half a century, Collins explained that the cause for the housing shortage is more fundamental: the commodification of housing.
“[A]s housing has been transformed from a social good into a commodity on global markets, the government has also withdrawn from providing housing and surrendered to the private market. Now, the lack of housing has become an individual’s responsibility and instead of seeing the commodification of housing as the problem, regulation of health and safety standards is seen as the problem.”
In the end, Collins explains in his chapter, the scapegoating of regulations is all part of a long con by developers, landowners, and capital holders who consolidated their power in the islands long ago: “[T]he long monopoly of control over land by the sugar plantations has been reproduced by their successors, the developers and speculators who presently control the plantations’ former lands and restrict its availability for use by the workers to satisfy their housing needs.”
What do you think?
Should the county government be more involved in building, renting, and managing housing as a public good?
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