 your piece of the rock on Think Tech Hawaii. I'm your host, Abley. I have been a real estate licensed agent since 1973. I'm the owner of Century 21 I Properties Hawaii and work with close to 100 wonderful agents in real estate sales. I started Abley seminars in 1980 and I've taught over 11,000 students to help them to get their real estate licenses and have taught continuing education classes for many more. Our show is dedicated to helping buyers and sellers understand the process involved in a real estate transaction. Our special guests will talk about legal issues, escrow, title, getting a loan, surveys, home inspection, insurance, contracts, wooden trust, and much, much more. And today we have a really special guest, Peter Saville, who is no stranger to you because we had him on another show before and we ran out of time. So I said, Peter, we're going to bring you back at least once more and probably two more times. So Peter, he needs no introduction, but he's one of the best real estate developers in town and really is concerned about the welfare of the people and trying to create affordable housing, which I think Peter is an expert at. So Peter, thank you so much for being here with us today. Well, thank you for having me come back. Yeah, that's great. So for the sake of those that were not privy to see the first video, give us a little background about where you grew up and your experience and your family and all that stuff. Well, okay, I'm a local boy. I was born in Hilo, raised on Oahu, went to St. Louis High School University of Hawaii, bought my first property at about 15 years old, have been in real estate pretty much all my life. My mom was a realtor, very prominent realtor for us old timers, Mary Saville. And I kind of picked up my knowledge just from helping her in real estate and going to meetings with her in open houses. And real estate's always made sense to me, absolute sense. And I think that's one of the reasons I tend to be as successful as I am just because I've been in it since 1965-66. So old, old timer. Well, you're great at a breath of fresh air, Peter. So today, I'd like to focus on a topic that you started to talk about, which is what are some of your thoughts on what needs to be done to create affordable housing? Now, basically, all the guys that asked you the question and let you run. So go ahead and give us your thoughts on how you think we should proceed and what you do in your affordable housing projects. The answer to that question is maybe three or four hours long. So we've kind of split it up into little bits and pieces. You know, I think the first thing is we all have a misconception about our market and what the problem is and what the solutions are. And I think that's why for 60 years, we've been able to solve the problem. We keep on failing. It doesn't work. Our market tends to run away from us. So the first thing we need is an anchor. And if you think about it, the anchor should tell us where should the market be? Not where it is, but where should it be? And the simplest way to that is just use the definition of what a local real estate market is. And a local real estate market is a market that builds homes that people in the community can afford to buy. Now, what that's really saying is you build homes based on the income that people get paid in that community. You got to realize in Hawaii's market, we're talking about a market now with no outside influence. And what will happen is housing will come in where affordable homes houses should be like $400,000 as the average price. So you'd have from $200,000 to $500,000 maybe affordable would be the price range. You look at our market and the prices are $700,000, $1,002,000, $1,003. We're completely out of the ballpark. I mean, it makes no sense. What that tells you is our market's distorted. And the distortion is outside buyers. Mainland buyers, foreign buyers, military, even Section 8, because the rents for Section 8 tend to be above market. So it all distorts our market. And that distortion has been going on for like 60 years. So everyone who looks at our market today and says, oh, this is Hawaii's market, they should say this is Hawaii's market completely distorted after 60 years. So if you try to find the solution using today's market, you're never going to find the solution because it's buried somewhere in the distortions. So you got to go back and look at, okay, how do we get housing in the price range we need? And I think a lot of that is in my lifetime, we have built 400,000 new units. Half of those units were built for under 100,000. Another 25% were probably built under 200,000 or 300,000. The majority of the houses that were built in my lifetime were absolutely affordable. I bought my first home in the 60s or first apartment in the 60s for $15,000. And it was expensive back then. You know, today that same unit would be three or 400,000. So our problem is not building affordable. Our problem is how do we keep it affordable? Because our problem is the outside buyers, the wealthy from the mainland, the wealthy from the rest of the world, the retirees who've made more money, own properties on the mainland can sell them and move here to retire because we're a beautiful place to live. And they can pay more money than us. So the first thing is to realize if we make our market so affordable and everyone can benefit from it, we're going to attract just more mainland buyers. So you have to have some kind of control on the market. And if we can build homes in that 400,000 range, we have to create a local market, sort of a government controlled market, where these prices will be tied to owner occupants, residents of Hawaii, long-term residents, people who work here, not necessarily sold to people who just arrived from the mainland to retire. So the solution is possible. And to me we could solve our housing crisis probably in a 10-year period if we come up with a complete solution. And I'm going to give you an example of why we fail. The governor came out with a housing solution. The mayor came out with a housing solution. And I used to use the example of a grandfather clock. And I was using it this morning when I was talking on this subject and I realized the person that doesn't have a clue what a grandfather clock is, which tells me by age, because to them a grandfather clock happens to be a digital clock with no moving parts. So it was a lousy example. So I came up with another one. I'll try it today. Imagine the governor owns an 18-wheel truck, one of those big trucks that travels and transports goods all across the United States. And the mayor owns an 18-wheeler. And they're not working. And they're not working because they all have flat tires. Every tire is flat. The mayor comes in and says, I'm going to repair the front tire. I'm going to fill it with air. It's going to be solid. And the mayor says, I'm going to repair the front wheel on mine. I'm going to fill it with air and it's solid. Guess what? It won't work because all of the other problems have not been solved. We tend to look at singular solutions rather than multiple solutions. The only way that truck is going to work, the only way our real estate economy is going to work, we have to correct all of the problems that exist. We have to set up a market that can operate independently of our present market. And we have to set up a market that is local in nature. And it actually involves probably about 15 or 16 different things that need to be done, but absolutely doable. We should be able to build 100 homes within probably a 10-year period. So, Abe, I mean, it can be solved. It's just that we need to really identify the problem and then identify the solutions. And it's interesting too, because I think once you look at the market this way, you start to come up with different ideas about how to make it happen. And all of a sudden, you realize there is a solution. So, Peter, let's go deep into this thing. Let's say an 18-wheeler or whatever number of components you've got. What are your major components that you're looking at to create this affordable housing? Okay, there's a whole bunch. The first one is you have to have the government's commitment. And the government says they're committed. And I would like to prove basically that they're not, because I think that also explains why we have a high cost of living and why we're struggling as a state. But we talk about all the great things we do, and a lot of times we are doing great things, but we have these unintended consequences. And they don't look at the unintended consequences. You know, mass transit is an example, right? Mass transit is costing $13, $14, $15 billion, and our kids and grandkids will be paying it. The reality is it could have been free. It shouldn't have cost us anything, because we could have charged all of the landowners around the mass transit stations for the cost of building the system. Why should the taxpayers pay to build a system where a few thousand landowners will have their value go from $150 to $300, $400 a square foot for free? They didn't do anything to get that appreciation, okay? So again, we should have had a system where we had impact fees, and then the system would have been paid for by the taxes on the property owners. Same thing with the operation. It could have been covered by the impact fees. And even with mass transit, it goes one step further, because the city then said, oh, we're going to give all kinds of benefits to make housing affordable. We're not going to require parking. We're going to give you additional density. And they told me where they were going to do this. And I said, no, don't do it, because once you do it, you add another $100 or $200 to the price of the land. You're making it more expensive. You're not helping. You're making it worse. The concept is a good concept, but the way you're applying it is creating value for a landowner. So they listened, and what did they do? They went out and announced it, that they were going to give all these freebies, and then the land value went up another $100 and $200. So they raised the value of land, probably $300, $400, $500 a square foot by doing all of these things. And they're telling you they care about affordable housing. They could have done it in such a way that the land value would have not had that. We wouldn't have that huge impact. Land values would have held. But all of those benefits, all of that value would have gone to the people of Hawaii in the form of affordable housing. I'll give you one more example. I actually have six or seven, but I don't want to take your whole show on examples. The other one is photovoltaic. Great program. We're going to get rid of fossil fuels. We're saving the environment. I think everybody supports it. But basically, photovoltaics for the wealthy, because you have to own a house. So everyone who rents is eliminated. So what happens then is they go out and they allow all these mainland companies to come in, build huge photovoltaic farms, and sell the power to the electric company. But what happens is all of that money leaves the state. It actually increases the cost of electricity by 20, 30%. So we're going photovoltaic. Everybody thought it would reduce the cost. For the guy who has a house and has the panels on his roof, it does. But for everyone else, it doesn't because they allow the mainland companies to own the photovoltaic farms. Yet we have community solar. If they had required all solar farms to be built under community solar, hundreds of millions of dollars that are shipped out every single year now would have stayed in the state and subsidized everybody's electric bill. So I want the people to think about this. We're selling our soul to save the environment. We're increasing our cost of liberty to save the environment because our legislature and our city council and our PUC didn't think through the financial side of photovoltaic. So all of this money is getting paid out. Most of these large solar farms are mainland owned. None of the money stays here. It all leaves. So again, they have a commitment verbally for housing, yet everything they do tends to raise the cost of living or increase the cost of housing because they don't believe there's a solution. The key is if they don't have the commitment, it never gets solved. So the first thing is we need the commitment from our legislature and our council that every decision is going to be made in terms of how do the people benefit, not the developers, not the mainland companies. How do the people benefit? How does the average guy improve his chance of buying a home? How do we get that home affordable at 400,000 for the average guy? And the reality is, it can be done. It can be done. But again, you can see so the commitment is missing on the part of the government. Okay, what's next Peter? We've got mass transit. You got photovoltaic. Well, there were six of them. I don't want to go through all the mistakes they make because it only gets the politicians upset. So I think the first thing is they don't have the commitment. They tend to make decisions based on lofty goals, environment and getting rid of cars, but they do not look at the flip side of where's all the money going? And the money is not going to the people. The money is going to the mainland, to the contractors, it's going out of state. And that's what they have to stop. So all future photovoltaic farms should be community solar owned by the residents of Hawaii. And our electric bill should go down. If everything I said they should do our cost of living would go down by two to $3,000 per month. Just on those six things I had. But you know, so the point and that's only six. I'm sure if we go all the way back to the 60s till today, we can come up with hundreds and hundreds of mistakes we've made on the unintended consequences. The key is we can bring our cost of living in line and we can structure a program where we can build affordable. So the second step would be, okay, how do we have affordable housing without creating a problem in the existing market? First thing, we change nothing in the existing market. We leave it alone. Let the developers build their million dollar units. Let them sell them to the mainland guys if they want. Let them sell them overseas. We don't care. Because now we're going to have an alternate market, which is a local market. So all affordable housing going forward will be developed and we'll go into this local market. And the local market will have restrictions on resale, restrictions on who can buy. The price will always be tied to wages. So if wages double, the price of the house doubles. If wages go up three or four times over your lifetime, the price of the house goes up three or four times. The reality is that house that we're paying our money, government tax money to help reduce the price on will now stay affordable forever. Now, Abe, it's important to realize everybody thinks you buy a house for appreciation. You don't. Appreciation is an only a small part of the value that's created. The greatest wealth created in real estate is locking in a 30-year mortgage or a constant monthly payment. You'll notice I didn't mess with that. I'm leaving that huge wealth creator to benefit the community. So if you bought a house in the 60s and you paid 25,000, which was a high price back then, your monthly payment was like $250. Okay. And people couldn't afford it. They needed their parents to co-sign. They had to borrow money. Today, those people would own that house and it'd be worth, let's say, a million dollars. But they only paid $39,000 in interest to buy it. If they had rented from then until now, they would have spent a million to a million five. So buying a home is not appreciation. It's locking in the monthly payment for 30 years. After 30 years, you have no payment. What happens is every time there's a pay raise, you get to keep it. Now, if you're smart, every time you get a pay raise, 50% will go to pay off the debt. Every time you get a bonus, 50% pays off debt. Guess what? In 10 to 15 years, you pay off your loan. Now you have all this extra money coming in every month. What do you do with it? Some people will go to Vegas, buy a car, buy a vote. I suggest you take that extra money and enjoy part of it, but invest it by stocks, by bonds, by additional real estate. Invest in real estate investment trust, whatever. If you do that, that million dollars you would have paid in rent would probably be worth 10 to 15 million dollars today over your lifetime. So somebody who bought a home in the 60s should absolutely be a multi-millionaire day, not because of appreciation, but because they locked in a monthly payment. The one that's the first mistake we make because everybody gets hung up. Don't control the price. Oh my God, I'm losing my appreciation. They should be willing to give up appreciation. As long as they get that constant monthly payment, they save money and they can reinvest. Now in our example, they get appreciation, but it's tied to wages. So the house will always be affordable. You'll be able to sell it to your kids or your grandkids. If you're leaving the state, you can sell it to another local family who wants to stay. So it will always be affordable. Outside buyers cannot influence the price. So Peter, what you're saying is that great affordable housing at a certain price, have them qualify for a 30-year mortgage, the monthly payments don't go up, and supposedly the appreciation will make them millionaires. Not appreciation, the savings. Yeah, yeah, but the value of the property will go up. But you're going to limit that. Yes. Yeah, you limit what they can sell it for, basically. Right. In my example, the house was 20,000. Today it's a million. Yeah. If you limit it to wages, it would have gone from 25,000 to probably four or 500,000 today. So you've got some appreciation. You lost maybe three or 400,000 of appreciation, but if you've been investing the money all those years, you're way ahead. Right. So you've led a good life, your kids have a good life, and you're helping the community as a whole survive. So I think people would be willing to do that. So you're suggesting a second tier market or three tier market or whatever it happens to be. Well, it's actually, I see it as bifurcating into two markets. Yeah. You have a free open market and you have a free controlled market. That's contradictory, but it's free in the sense it's not tied to, we're going to let it go up only 5,000. It's tied to market forces, but the market force is wages. So as wages go up, prices go up. I want you to think what would happen if we had a real estate market with no outside influence, no mainland buyers, no Japanese buyers, no foreign buyers, no military. What do you think houses in Hawaii would sell for? They'd sell at prices tied to our wages. All we're doing in this market is creating a market that doesn't have the outside pressures distorting it and raising prices and putting the local guys at a disadvantage. So all we've done is we've gone back to the 1950s or the early 60s where the mainland buyers had very little influence, right? And if you understand that section, all of a sudden you realize, yeah, our problem is not building. Our problem is not price. Our problem is mainland buyers, outside buyers. If they weren't here, the million two house would sell for 400,000. All we're doing is correcting the distortion. So the local market will correct all the distortions. Okay, we have five minutes left. So here's what I want to hear from you, because I heard you at another speech that you gave. It was talking about how you save development costs. And how would you or what would you do to keep the costs down? Again, that's one of the steps in this 18-wheeler truck. So you're going from the front two wheels now to the back two. When you're building, a lot of times they want the developer to pay for all of the extras, the sewer line, the water line, a school apart. When you're doing affordable housing, those costs should be paid for by the community as a whole, not by the affordable buyer, because it defeats the purpose of doing affordable, because you're adding hundreds of thousands of dollars in cost, and you're making it unaffordable. Okay, so when you're building, you don't always need sidewalks and gutters. You know, you can do the old like old Kaimuki, old Kailua, old Kahala, and you can add the sidewalks and gutters later on. The schools should be paid for by the state, not by the individual affordable buyers. So I mean, it's just common sense again, if we make the commitment to affordable, every decision we make is about how do we keep the price affordable. Okay, but you also had other things that you're talking about. So just really, the government should be paying for some of this infrastructure costs, right? And the community as a whole would pay for it. But isn't that what the consumer would have to pay? The taxes, okay, part of my program is tax reform. And maybe we can do that in another show. Like I say, we filled the front two tires, we need to fill the other 16 now to get our 18 wheeler up and running. But again, if you have tax reform, the local guys aren't going to pay for it. The mainland buyers are going to pay for it. Okay, so you had, if I remember on another talk that you had, it was about Singapore. And I know that's a topic unto itself. But what do you see in a short summary? How did Singapore create 95% owners? Basically, Singapore came to Hawaii to understand what we were doing in the 50s and 60s, because we were so successful at building housing. And they went back and did everything we did. They did leasehold, they used concrete, they used pillars, they took our concepts and ideas. They basically changed it a little bit, maybe the feet Singapore, and they succeeded. We continued on our path and got lost in the distortion. And we've crashed and burned. I mean, it's funny, because everyone talks about the Singapore example. The Singapore example is Hawaii in the 60s. They copied us. They came here and studied our market, met with our realtors, our developers, our attorneys, our planners, and said, what are you guys doing to be so successful? And here we are looking all over the world for the solution. We are the solution. We need to get our act together. Okay, Peter. So we're really almost out of time, but what's your last minute advice? We need three more shows. Okay, let's do it. And really, I'd like to talk about the photovoltaic community program that you have, because I think that's fascinating. And the other is, of course, this bifurcation of the local market versus the outside market. How would you handle that? So we've got at least topics for two more, because I know you have one about how to become wealthy in real estate investments as well. Right. When it comes to real estate, I got all kinds of ideas. I never run out of ideas. I can keep you going for a month. I can imagine. We should also talk about your planting program with the native Hawaiian plants and trees and stuff. Oh, yeah. At some point, we can talk about that. That's fascinating. My hobby. Yeah, I know. My hobby. Yeah. So I've known Peter for a long time, and I know he is maybe outspoken at times, but he has really good ideas and a good heart. So if you need more information, and by the way, he's doing the Wailua Ag Project, and he's almost sold out, but go to Savio.com and you get more information if you really truly want to farm and be able to have affordable housing. And if you want more information on the real estate school, go to ablyseminars.com, because we have a brand new website that we've modified and made it so much easier to navigate now. And we're doing a lot of shows like Think Tech Hawaii, and I have a YouTube channel now for a pre-licensing course and the content of it. So we'd love to have you join us for any of these. And of course, go to Think Tech Hawaii and look at the archives and look up Think Tech Hawaii Peter Savio. And then we'll catch a lot of shows that Peter's done with other people too. Peter, thank you so much. Really appreciate it. Thank you. Thank you for having me. All right, take care. All right, we got two more shows coming up, buddy. Okay, at least. I'll see you. Okay, thanks Peter. Bye.