 Think Tech Hawaii, civil engagement lives here. Aloha, and welcome to Hawaii Together with Dr. Kaylee Iaquina on the Think Tech Hawaii Broadcasting Network. I'm Joe Kent, executive vice president of the Grassroot Institute of Hawaii, and I'm filling in for Dr. Kaylee Iaquina. He's the president of the Grassroot Institute. And have you ever wondered why it's so difficult to afford a house in the islands? I'm sure everyone wonders this, and, you know, Hawaii has the least affordable housing of any state in the nation right now. Why is it so hard to build housing for local families? Well, today we're talking with Dean Uchida, president of the Building Industry Association of Hawaii. Thanks for coming on the show. Thanks for having me, Joe. Appreciate it. Well, first, before we get into the housing issue, why don't you tell us about your background? Sure. I worked for about 20 years with the State of Hawaii Department of Land and Natural Resources doing conservation land, figuring out what to do with all the sugar lands once the plantations closed. And in the last six or seven years, I was running the land division. We're responsible for all the state-owned lands in Hawaii. Then I worked for a national housing developer. I ran the Land Use Research Foundation, LERF, a nonprofit trade organization, and currently I'm working as a consultant or project manager with SSFM International. We do engineering and consulting work. And so if there's anyone that knows more about land, it's you, right? So what you've seen the lands in Hawaii over time, you have a broad picture of what's happened to land in Hawaii and housing. So what has happened over time? Well, there's been a lot of regulatory controls on basically urbanizing the land. There are a state of 4 million acres total, but half of the land is in conservation, half is in ag. Only about 200,000 acres total statewide is urbanized. So that's about 5% of the land statewide is zoned for housing, you're saying. But that means that it goes against the intuition of most people, which is to say, well, the reason that we don't have a lot of housing on the islands is because we're an island and there's no more room to build. Is there any more room to build? Well, we're kind of a victim of our own success, right? There's a lot of community outreach about developing agricultural lands, keep the country country, right? And so in Honolulu anyway, the solution was putting in the rail system and that would force all future developments and density to be packed along the rail transit quarter. So we wouldn't have this need to reclassify lands in the agricultural district. Right, right. That was the thinking. Right. I guess we're still waiting for that to happen, I guess. But you also mentioned that you watched the fall of the sugarcane industry and a lot of the plantation industry over time. And so saving lands as agriculture, as you said, about half the land in the state is preserved as agricultural land. The result of that has been the dying of the sugar plant here. Why did that happen? Well, sugar and pineapple are like monocultures, right, one-one crop. And we didn't have a robust ag economy behind it that could take up the lands in quantities that would be required to take down a plantation. You had the small mom-and-pop, one five-acre farms, but nothing on the scale that you need to take down thousands of acres at one time. And as time went on, all the infrastructures started falling apart, right? The plantation was essentially a city or village because it took care of its own irrigation, its roads, everything. Once it shut down, nobody took care of the irrigation it is. And so land has no value without water, right? So just preserving land and agriculture isn't enough to keep the gardens growing. You actually have to, economics plays a factor in this as well, right? And you mentioned earlier that regulations have also hindered the development of more housing in the state, which I know many local families want more housing. We all want more housing. Why can't we build it? Well, the state has like this, the land use commission and reclassifying land. So there's that whole land use entitlement process to be more. You've got the state land use commission, which is, which zones, you know, urban agriculture, conservation and rural, and it reclassifies the land. Okay, so that's a top agency, okay? So once that's done, then you go to the county and the county then rezone the land. If it's an urban now, you rezone for apartment, commercial, residential, right? So you have state zoning, you just said, and you have county zoning. So you've got the kind of layers of a cake here, okay? And like Coal Ridge, the most recent one that people are familiar with, that took 20 years to develop, right? To go through the land use commission and county zoning. There's a lot of litigation, a lot of challenges to the land use commission decisions, so that delay, you know, really speaks to the fact that developers need to have deep pockets. They need to be able to carry a negative for a long period of time in order to go through this long, you know, involved land use entitlement process. Every year, they have to pay money just to wait. Right, and they're not making any money. Right, the land is still out there in Ag or former Ag land. So there's that component. There's also the county governments tend to use inclusionary zoning and exactions. What is the inclusionary zoning? What does that mean? It means like, if you're going to build a housing project, so you're going to put in 100 units. Okay. Most counties would require you to build maybe a percentage of that 20 to 30 percent, be affordable, price that 80 percent, you know, area median income. Okay, so I'm, let's say I'm, let's pretend that I'm a home builder. I want to build 100 homes. And you're saying that this inclusionary zoning says that I have to build a portion of that to be affordable homes. Is that right? Right. And it's different on every county. Right. Okay, so well, that sounds like a good thing. Yeah, the percentage of might change slightly, right? Right, but so that sounds like a good thing, but does that get in the way too sometimes or? Well, all it means is that in order to subsidize the housing at that lower income level, the prices or some of the prices of the other units have to be a lot higher in order to cover the costs, right? Okay. So it's a, you know, it's an economics game. The developers tell us to make money. They're not going to build it and, you know, not make any money. So if I have a hundred, let's say I'm building 100 homes, 30 of those homes are going to be below market value. That means affordable or affordable. And that means some of the other homes I build have to be above market value or what they would have been just so I can make up the difference in the cost. So that means the higher homes become even more expensive. Is that right? Right. Okay. And to subsidize the lowering. And that lowering is where you need the subsidy, that 80% and below, 60% and below area median income is where government needs to put all its resources, its money, its land, because the private sector, it's un-economical to do it, you know. But they were to do it and actually did it on a cost basis. The units would be really small, right? I mean. And so, you know, it's at that balance and government tries to require developers to do this as opposed to, you know, building it on their own and creating incentives to build those units on their own. So we just talked about, you know, maybe three layers of maybe a six layer cake of regulations that a home builder has to get through in order to build a house. And so what does that do to the home builder? How long does that take to get through that? Well, if you notice, the only two master plan communities on Oahu right now are Ho Peeli and Courage, and there's Castle and Cook and DR Horton. Gentry's finishing up, Hoseko's finishing up. You don't have a lot of medium and small-sized builders anymore. You have custom home builders, you have the one-offs, you know, they're doing one house at a time. But nobody to fill that gap that can do a hundred units at a time. A whole community, yeah, or a thousand maybe. Because there's no, there's no developable land. There's no land that's entitled already. And infrastructure costs are so horrendous that you're going to need to do things on a large scale in order to make up the money. Right. And now they are, at least the Honolulu County, has talked about adding more regulations onto the process. Right. Just, I guess, recently, there was a law passed that created new affordable housing rules. And those rules are now kind of clunking through different committees and departments and agencies right now as they're being implemented. So what do these new rules do? Well, I think Avalon Sky Project and Alamona was the first project that they actually imposed some of the new laws on. And they put a 30-year restriction on the affordable units. Okay, hold on. So 30-year restriction on an affordable unit. So let's say I am a low-income family. I buy into one of those affordable units. And what does that restriction do? The restriction requires you that if you sell it, you have to sell it at that same income level. So essentially, after 10 years with inflation and everything, you can sell it to somebody at that same income level that you had 10 years ago. But you're not building any equity. So at the end of the day, you're selling the unit pretty much for what you paid for it, right? So you can't make a profit, in other words. You may make a little bit, but no, I'm not sure if the law calls for a shared appreciation in that too, where the developer of the city gets some of the money. A small amount of profit, perhaps. But basically, it would be more or less, you buy it for a certain price, and even 30 years later, you would sell it at that same price. Based on the income, right. And a lot of people, when they buy property, they buy it to live in. But they also buy it as an investment to try to earn more money in their lives, right? And they're trying to get ahead, especially folks who are on low income when they buy a property. That might be the only capital that they have to invest. And 30 years later, what you're saying is that this restriction, it sounds like this restriction would rob them of the money that they'd be otherwise able to make. Yeah, it would really restrict their ability to build any equity over time. A healthy housing market allows people to buy in at a starter home. And as your income improves and your family need to expand, you can sell that unit and move up to the next one. Income changes again, you can move up to the next one. But this is constant movement. They call it a housing ladder. So you can move up the ladder, right? And then when you hit a certain point and you're an empty nester now, so you and your wife don't need such a big house. You can go back down the ladder and buy a smaller unit. But that's kind of how the normal typical housing market works on the mainland. Hawaii, you buy a starter house and you probably can die in your house, make your add-ons and everything. But there's not a lot of opportunity for people to move up because we have such a constricted supply at all price points. That's interesting. So you're saying there's a housing ladder. People can move up and down the ladder, just like I used to rent. And now we're thinking of buying another house. I mean, a new house and moving out of our house that we have and selling that and so on. So we can kind of move up the ladder. But what you're saying, though, is some of these restrictions put glue on the ladder and you're stuck on the rung or something like that. Because when you sell your place, you have some equity in it now. And the market value will reflect that. So that allows you to buy into a bigger house, a more expensive house basically. So you just kind of move up the ladder. And every point along the ladder, if that happens, you continue to have that opportunity to move forward. By restricting it, you're not allowing the equity and becomes almost like an apartment after a while. You're just basically getting the same amount of money at the end of the 10-year period or 30-year period that you put into it. Right. So why rent, then, if when you buy, you don't get anything, any benefit extra out of that. So it remains to be seen how this thing is going to play out. Like I said, Sky was the first project that they imposed this condition on. It's a new law, so the market still hasn't responded yet. I'm anxious to see what other projects, how the law is applied to other projects going forward. Right. And well, when we come back, we're going to talk about a few more well-intentioned regulations that sometimes get in the way. But you're watching Hawaii together on the Think Tech Hawaii Broadcasting Network. I'm here with Dean Uchida, president of the Building Industry Association of Hawaii. Don't go away. We'll be right back. I'm Jay Fidel of Think Tech. Think Tech loves energy. I'm the host of Mina, Marco, and Me, which is Mina Morita, former chair of the PUC, former legislator, and Energy Dynamics, a consulting organization in energy. Marco Mangostorf is the CEO of Provision Solar in Hilo. Every two weeks, we talk about energy, everything about energy. Come around and watch us. We're on at noon on Mondays every two weeks on Think Tech. Aloha. Aloha. I'm Wendy Lo, and I'm coming to you every other Tuesday at 2 o'clock live from Think Tech Hawaii. And on our show, we talk about taking your health back. And what does that mean? It means mind, body, and soul. Anything you can do that makes your body healthier and happier is what we're going to be talking about, whether it's spiritual health, mental health, fascia health, beautiful smile health, whatever it means. Let's take healthy back. Aloha. Welcome back to Hawaii Together on the Think Tech Hawaii Broadcasting Network. I'm Joe Kent, executive vice president of the Grass Street Institute of Hawaii. Today, we're talking with Dean Uchida, president of the Building Industry Association of Hawaii, about affordable housing. We all want it. How do we get it? We're talking with Dean Uchida. And we left off. We were talking about a kind of a regulation that is really thick. Like, I got the whole regulation right here. And it's pages and pages of more information and more rules that home builders have to deal with. So, and what does that do? Did you say to the market here? Well, it's actually a recurring theme. The same type of government approach to trying to build more affordable housing. I was done in the 90s, and they had what they called buyback and shared appreciation, where they would try and control how the unit could be sold in the future. Oh, it's similar to what we just talked about. So, if you buy into an affordable unit, when you sell it, it has to be pretty much the same price. And then you don't get any appreciation on your back. Well, they had shared appreciation. So, the county would take a portion of that. You would get a percentage. The county would get a percentage. So, any kind of appreciation. But you don't get the full equity, right? Right. But while it looks, these... And you're saying they tried that before back in the 90s? Right, in the 90s. And it usually is a resorting of a market, a housing market that's going in an upcycle, right? The housing market is a cyclical kind of market. And as soon as things turn down, what happened was some of the non-affordable units, the market or the higher price ones, in a down economy, the prices started dropping. And the price of the market unit was almost equal to the price of the affordable unit. And so buyers, given the choice between a unit that had no restrictions and an affordable unit that had restrictions, would not buy in the affordable units. I see. So, you've got a market that goes up and down. And when it goes on the downswing, the price of the house matches the same as the affordable unit. So, then why would anyone buy an affordable, you're saying? And that's what happened in the 90s. Right, and the council had to go back in and suspend some of those conditions in order to make the units price the same. I mean, more competitively price the affordable units. So, you're saying that there might be a glut of affordable housing, let's say if the market goes down, as many people might think that it will in the future. It'll be the buyers making the choice, right? Do you buy a unit with the restrictions or you buy one without restriction? And so, if you remove the restrictions, you've got more affordable units in the market. So, that's what happened the last time when the council removed some of the restrictions. So, when governments are making these rules and regulations, are they trying to get in the way or do you think it's well-intentioned? No, I think everybody understands that we really have a housing problem in Hawaii. And I think the counties are trying their best to come up with ways of trying to figure out how they can build more affordable housing. I think, at least from my perspective, Hawaii is at this inflection point right now where we have an opportunity to be proactive and do housing the right way. Or we can continue doing it where the counties wait for individual projects to come in and basically do their inclusionary zoning as the projects come in. I think DBA did a study a couple of years ago where 66,000 units short given natural population growth over a 10-year period up to 2025. You say 66,000? 66,000 units will be short. And so, knowing that, sitting kind of for a little bit like 25,000 over the 10-year period. So you do the math and you say, then they should be putting out 2,500 new building permits starts every year. And but we're only building, what, 1,000 or two every year? I think it was about 800, 900 new starts last year. So we're way below what that could reach. Yeah, we keep falling farther and farther behind. So when you have a supply that's restricted and you have the demand just seems to keep going up, then the price is gonna go up. So I guess we predict that prices won't get any better anytime soon. Well, we just hit like $812,000, I think, for a median price home on Oahu, right? But if we can shift, like this inflection point, shift government's thinking into being more proactive, right? What would proactive mean? When they're doing their community plans in their reclass, I mean, they're identifying where growth's gonna be in the future, commit to that growth, put in the infrastructure necessary, and the market will respond, right? I see. You get developable lands out there with infrastructure. You know, and if you just restrict it to workforce housing, you know, 140% AMI and below, that's where the sweet spot is. That's where the huge demand is. That's where our workforce is, basically. Right. So provide for that market. You're saying that, let's say there's a garden and we want to till the soil, we want to get the, you know, get it fertilized and so we can watch it grow. Well, in the same, in a similar way, if government put the entitlements in place for developers to build on the land that we have, then we could just sit back and watch it grow. And it wouldn't necessarily be high-end housing that they build there. You're saying there's a market for the mid-range and the low-range housing, too. And the price point's gonna, you know, basically reflect that. The type of product you get will reflect that. You know, you're not gonna be building a lot of amenities on this workforce housing. They want bedrooms, they want area, they don't want pools and spas and all of this stuff. Right, right. So you can kind of tailor what you're offering in the community to that price point at your targeting. That's interesting. You know what I was looking for to rent a house recently? I saw some houses that had pools and stuff. I get, I'll go to the beach, right? So because for me, you know, what's important to me is the square footage of the space. Right, shelter, right, right. And so I think a lot of families are in that position. They're gonna look at this thing and say, I don't want all of that stuff. I just want a shelter. I want a decent living area. I want a good location. And you can let the price dictate that, right? Right, what are some other solutions that you have to help free up the market for affordable housing, would you say? Well, I think there needs to be a recognition that government and the private sector have to partner on the housing issue. The government can't build the way out of the problem themselves and neither can the private sector. You need government to assist at the lower like we talked about. They need to provide land and funds to build at the lower end for the lower income group. They also need to lead the charge on infrastructure. We need to have infrastructure capacity, investment, investment in infrastructure capacity throughout the state or else, you know, these projects are gonna be faced with huge infrastructure costs on top of the entitlement, on top of the actual cost to build the housing. If you wanna, you know, that's where this partnership comes in is, you know, the city, the county's gonna realize increased tax revenue from the real property tax from all this improved property, right? So it's not like they're investing in infrastructure, not getting anything back. There's gonna be return based on the real property tax they're gonna get. I see. We need some leadership to show that, you know, there is gonna be a partner that we need to understand roles and responsibilities and move forward with the idea of trying to set some, maybe production goals for housing by county, right? Right, right. Unless we start looking at the numbers and really committing to building, we're never gonna build our way out of 66,000 units, right? So, and why are you involved in this fight? You've been working in the land use area for a long time. Is this something that you see a lot of families want in Hawaii and so why are you involved in this? Well, it's about living in Hawaii. It's about, personally, I got two kids that I wanna get them out of my house, but we have my wife for emptiness just for awhile, but they came back. They can't afford to buy a house in Hawaii, right? And I look at that in the future, and you know, if we wanna keep the best and brightest kids in Hawaii, we're gonna need to provide them housing opportunities. You wanna attract employers to bring knowledge-based jobs to Hawaii. You're gonna have to retain an educated workforce. You're gonna have to house them someplace. So, housing is, to me, a critical component of our overall economy, and if we wanna grow, we need to really think long and hard about how we're gonna fix our housing problem. Would you say that housing also has a factor in agriculture is something a lot of people want. You know, let's bring agriculture back, but where are they gonna live? Right, and you need to attract, you know, we don't have a very good business climate here. You need to attract those middle-sized farmers that, you know, wanna farm land. We got a lot of land, we got a lot of water, but no farmers, right? So, opening up opportunities on the ag side. I mean, looking at different markets, instead of just the West Coast market, maybe looking at Asia as another market, right? And doing value-added to just don't grow stuff and ship it out. Right. So you're saying that, you know, opening up more regulations for housing would help agriculture, it might help tax revenue, it might help just the economy boom as a whole. Well, it'll help families get started. I mean, you need to have built communities, right? And then you get a lot of, all of the bad stuff kind of goes away. You know, you don't get as much homelessness. You get a lot more people caring about one another. You build communities, right? Instead of just individual dwellings. Right. Young people need to get out there. They need to have a stake in the community. You get better schools. You get better programs, sports, everything, right? Right. So it's kind of the solution to a lot of the problems in Hawaii. Well, it has the potential to do that. You know, it's gonna play a role, but it plays a large role the way I see it. Now, the affordable housing problem in Hawaii is kind of a hard thing to just fix with one thing. Here today we're talking about this rule at the Honolulu Council level. Is the rule done? Is it all finished? Or is there a flexibility to perhaps make the case that there might be better solutions to housing? I think the law, the law's on the books. You know, the ordinance has already passed during the rulemaking stage on the implementation side. I think it's gonna take a while for us to work through the problem and maybe see there's unintended consequences from this rule being passed. It's kind of like what we talked about earlier, Maui passing that 50% affordable housing requirement. Right, right. They thought they were doing wonders for the industry and what happened, it just shut it all down. What about monster houses? You're mentioning that, you know, regulations sometimes have unintended consequences. Now we've got these monster houses. Is that just the market behaving badly or where did that come from? Monster houses is a symptom of our lack of supply of housing. They're not houses, they're apartments in residential neighborhoods and that's what people are objecting to. You know, you see a lot of multi-generational housing in Hawaii and that's where you're gonna run into problems is you try and limit the size of the house by trying to go after monster houses. You're also hurting local families who are trying to provide shelter for their loved ones. Yeah, it's interesting that we have a diverse community in Hawaii, many of which have a culture of having large families in their house and a lot of kids can stay home and grandma can stay home and take care of baby and so on. So you have this culture and I don't really see them as monster houses so much as this is a cultural outcome to some extent but also you're saying it's a regulatory outcome as we squeeze the balloon on one side it kind of pops out the other side. I mean families, young people, who can afford a $800,000 mortgage? I mean, I don't know any young people that can't so they're forced to stack on top of each other. You're saying that's the median? That's the median price on Oahu. Well, that's a lot for us to chew on, a lot for us to think about and hopefully we can all one day afford a place in Hawaii. My name is Joe Kent. I'm the executive vice president of the Grassroot Institute of Hawaii. You've been watching Hawaii Together and my guest today was Dean Uchida, president of the Building Industry Association of Hawaii. Thanks so much for joining us. Aloha.