 housing, are we moving fast enough? Here in Community Matters on Think Tech, I'm Jay Fiedel and the handsome young man is Stanley Chang. You may call him Senator if you wish. And he's the Senator for District 9 in the Hawaii State Senate. Welcome to the show, Stanley. Thanks so much for having me again, Jay. We're going to talk about housing. Of course we're going to talk about housing. Housing is really, really important to keep our people here to make reasonable lives for them. And you know, over the past years since statehood seems to me we've lost a lot of ground on that. You are a beacon and a leading light in trying to come up with ideas and solutions and move the Senate and the state legislature and the governor through more enlightened approaches. And you've had tremendous experience running around and talking to people, hither and yon, including Singapore, where there's a very interesting creative housing program. So let's talk about the first thing is, what is the status? How are we doing? I mean, how many people are on the street and how many units of housing are being built right now to solve the problem? Well, unfortunately, Jay, we're not in good shape right now. As we all saw, even in the middle of the worst economic crisis, Hawaii is faced in generations and the highest unemployment rate in the nation during the pandemic. Housing prices in Hawaii did not stabilize. They did not go down. In fact, they skyrocket the upwards. And in three of the four counties of Hawaii, median home prices have exceeded $1.1 or even $1.2 million. And, you know, I like to tell the story of my father, who was an immigrant from China. He was a state employee, a UH professor with one income. And he was able to buy a home, have two kids, put us through school, college, grad school, and then retire comfortably. Today, if I were to buy that same house that he bought back in 1983, it would take me over 30 years of my entire state salary. And obviously, it's just never going to happen for me. So we're starting out from a baseline where we have a very severe housing shortage, where housing starts, housing construction is stagnant. We may need about 10,000 units a year in order to bring prices down from the stratosphere. The reality is we're getting maybe one to 2,000 units a year. And this year, the legislative session appropriated some funds to take us maybe a couple thousand higher. But the reality is every year that we're building less than, say, 10,000 units a year is a year that we're falling behind. And so we've made progress, but there's still a very long way to go, Jay. Well, you know, looking at it from, say, let's zoom back. Let's zoom back to statehood. We should have seen this coming, or am I right? We should have seen that more people would be here, that we would not have diversification in any meaningful way. We wouldn't have high-paying jobs. And that we should have planned better, I would suggest to you. And the question is, what should we have done at statehood to avoid this problem, to avoid the increases in demand over supply? What could we, should we have done if we look at it from that point of view? That's a great question. And I think to answer it directly, I think what we could have done is to find a more sustainable way of producing housing year after year after year. So what ended up happening was that at the end of World War II, Hawaii transitioned rapidly away from a plantation-based economy and started to develop tourism and other industries that were concentrated in the cities, particularly Honolulu. And in that immediate post-war era, the, you know, if you look at, you know, books like Land and Power in Hawaii, what you saw was a real, a growth spurt in development. And the way that development happened was in a fairly laissez-faire environment, where developers would buy large chunks of land or already have large chunks of land and develop California-style suburban sprawl. This is the era of the Hawaii kais, you know, this is the era of the Kaneohe's, where most of the housing stock of Hawaii gets built for these returning GIs and for people who are employed in the tourism sector and the rapidly growing economy of Hawaii. Now, what happens is in the 1970s, there's a backlash to this uncontrolled development. And it's a backlash that's nationwide. It's not just here in Hawaii, but one of the major outgrowths of that backlash was the creation of the Land Use Commission and that's a level of state regulation that restricts the city from expanding, basically. And it was, I think, rooted in the positive intention of preserving agricultural conservation land, the native habitats of our endangered species, what makes Hawaii Hawaii. So I think it started with very noble intentions. And in fact, if you look at the statutes they passed, they did make the state responsible for producing enough housing supply to meet demand. They did not want to cut off the amount of housing supply created. Unfortunately, that's exactly what happened. And so in the year 1973, 74, in just a few short years in the middle of the 1970s, housing production per year crashed 90% and has never recovered. So today, we build less than one tenth of the housing that was built back in the 1970s per year. And I am not advocating for a return to that uncontrolled suburban sprawl California Houston style model of growth, but we do need to pick up that pace in terms of the number of units, 10,000 units a year. And unfortunately, the generation of the post-war era did not create a model that would be sustainable for decades to come. And that, I think, was one of the big mistakes of that era. Oh, yeah. And then of course, since that 1983 benchmark year you used for your father by his house, things have happened in the state. Can you describe what has exacerbated the problem in that period? So it's really quite simple, Jay. It's a simple issue of supply and demand. So every year, babies are born to local people. And every year, local people die. And so on average, about 18,000 people, local babies are born every year and about 10,000 people die in Hawaii every year. So that means there's net increase of 8,000 local people every year. Those 8,000 local people need homes. And we haven't even touched on the influx of residents from the mainland, from overseas and so on. We need to build for those 8,000 or we will fall behind. And the reality is we don't build for those people. We build maybe one or 2,000 units per year. So what happens to those other 6,000 or 7,000 people they leave? And who are the 1,000 to 2,000 people who get to stay the wealthiest? And if the market is only being supplied at one tenth the level needed to maintain health, then if I'm a developer and I'm not stupid, I'm going to build to the top one tenth of the market. Because every single year, there's demand for 10 times more. I'm going to, I want to maximize my profit. I'm going to build to the richest 10. And over the years, over the decades, this problem has gotten worse and worse and worse. Every single year, we have a deficit in terms of the number of homes needed versus the number of homes actually built until we end up today with such a severe housing shortage that for the last 5 straight years, we've had population decline. Where those young people are forced to leave, they cannot come back, they will never be able to afford a home in Hawaii again. And we're becoming the land of the very rich and no one else. And I think that's a real problem for our community. What happens in a society of the very rich and no one else? What happened? I think it means that we lose what makes Hawaii truly Hawaii. Now, we talked earlier about the native habitats and the agricultural land and the beautiful scenery and the vistas. We all cherish it. It does make Hawaii Hawaii. But I would say what makes Hawaii is the people. And if we have a Hawaii where all we have are the tech billionaires, the tech bros who are working remotely, and all of the local people who are born and raised here have to move to the mainland or elsewhere just to barely make ends meet. I think we've fundamentally lost Hawaii. I believe that every single local person and every single local family should have a home here. And one staggering statistic that I think gets talked about a lot is the reality that over half or over half now of all native Hawaiian people now live outside Hawaii. And I think obviously some have moved away by choice, but I think a great deal of them have moved away simply because they could not afford to live here in Hawaii. And I believe that every native Hawaiian person should be able to live in the homeland of their ancestors. So that's the fix we're in. What's the connection between... I know there's a lot of factors in play. This is a whole examination of our economy. But what's the connection between homelessness and a lack of housing? I mean, it seems like there are two problems, but maybe it's one. Yeah, so there's a direct relationship. We talked about the 8,000 new local people who are being born every year, of whom maybe the top one or 2,000 wealthiest are being housed by the existing private sector development market. The reality is most of the rest leave, but some are just not able to. And they're the ones who are forced into homelessness because they simply cannot afford rent. A few years ago, I met a family of three, a mom and dad and a nine-year-old daughter living in their van in Kapiolani Park. The mom and the dad both worked. In fact, the dad worked two jobs, and they simply could not make rent. And that's why they were living in their van. And it was a heartbreaking situation, but that's the reality we have. When we've been undersupplying the market for so long, we should not be surprised when the lower end of the social economic spectrum is squeezed out of housing altogether and onto the street. So we need to start by supplying the market with enough housing to meet demand, but we actually do need to take it a step further as well. Mental health services are on everyone's mind these days. And I think that's a crucial component because there are people who need help and who are just simply not in a place to be able to work and to afford rent on their own. They need help. And that's part of what some people call wraparound services, the social services, the social workers calling in, checking in, and so on to be able to have a pipeline so that if you are homeless or if you are at risk of becoming homeless, there will be services there to take care of. Yeah, we need that as a society and the community. But you mentioned that we have a lot of, you know, call them see-through apartments in Cacaaco, where nobody lives there. Very wealthy people own them. They use those retreats or flybys and so forth. They don't solve the housing problem at all. The problem, though, is that they're at a very high valuation. And the real estate community has done a great job in pushing the valuation, the appraisals up on this. Everything we do winds up pushing the values and therefore the prices of occupancy up on this. But they're there for the long term. The useful life of one of those big buildings hundreds of years before somehow it gets torn down and redeveloped. So much money went into it in the first place. And so even as we speak, Stanley, that is happening. Even as we speak, you know, that is standing in the way of doing affordable housing around the state. Do you agree with me that the development of these very expensive see-through apartments isn't really helping? As a matter of fact, it's making it more difficult as we speak. You know, Jay, that's one symptom that's very obvious in our structural under supply of the housing market. As we've discussed, because we only allow, you know, maybe one to 2,000 units to be built per year, private sector developers are going to build to the top one to 2,000 of the market, even though the demand might be 10,000 deep. As a result, they're building these very expensive units that are affordable only to the very rich of whom some might be local residents, but many of whom are not. And so I think the good news is that we can have our cake and eat it too. And I often use analogies here to explain what I'm talking about. So one analogy that I often use is that of school, public school and private school. Imagine what we currently have, the current private sector housing development model is pretty much like private school. It's for the few, it's very expensive, and it's out of reach for most local people. The answer is not forcing private schools to give scholarships, which is what a lot of essentially our housing policies are doing, forcing these private sector developers to sell below market units. The answer is to create public school, a large scale, low cost, mass option that allows every family to have access to a good quality education. Another analogy I use is like the car market. So right now, because we're only allowing a certain few number of units into the market, it's no surprise that the builders of those units are, they're basically selling Mercedes, right? And most people will never be able to afford a Mercedes. So the answer is not to ban Mercedes. The answer is to allow Toyota into the market as well too, to allow for a low cost mass option that takes care of the great majority. And I don't mind private schools operating, I don't mind Mercedes operating as long as there's a public school or a Toyota option that takes care of the needs of the great majority. Just for a moment, I mean, we're getting now to the core of what could happen, what may happen, what hopefully will happen. But I would like to make you king for a moment. And I'm going to give you all the power that a monarchy can provide. And I'm going to, I'm going to agree with you, there's a real problem. I agree with you that, you know, we need to take dramatic steps to correct the problem. And we should take those steps soon, because while we speak, we're losing ground. So if I make you the monarch, family, what do you do tomorrow, Thursday? What do you do to fix this in rapid order? You know, even a monarch would need time. So you know, this is, this is a plan that will take years to come to fruition. So let's start at the beginning. So like I said, we probably need about 10,000 units per year just to stay afloat. Okay, so how are we going to build those 10,000 units a year? Well, we have a couple of options. We can do it the way that we did back in the 1950s, 60s, 70s, which is to allow private landowners to do whatever they want on their land, which is to build suburban sprawl on formerly agricultural and conservation land. And the reality is, I don't think the people of Hawaii want that. I don't think the voters of Hawaii want all the agricultural and conservation land to be paved over with suburban sprawl. Okay, so that leaves us with a high density model. All right, we have to build high density towers so that we don't just sprawl over the entire island. Okay, so how do we build those towers? Well, again, we have a choice to make. Do we build those towers through the private sector, such as what we've seen in Kakaako, a profit maximizing private sector that has the chance to make unlimited profits? And so we'll build to the very top of the market, including those who might not be resident homeowners but simply investors. I don't think people in Hawaii want that. I think people in Hawaii would prefer greater restrictions. They don't want empty, vacant, dark units. They want those units to actually be occupied by Hawaii residents who own no other real property, so they're not investors. All right, so that's one significant restriction. I think that they would want these units to be located on the rail line because they don't want 10,000 units a year dumping 10,000 or 20,000 new cars a year onto our already extremely congested highways. Okay, so then they have to go on the rail stations and be primarily reliant on walking and on public transportation. Well, guess what? The state is the largest landowner on the rail line and because the state is not a profit-making institution, doesn't need to charge more money than the cost of building these new units and it doesn't have an incentive to maximize its profit. And it can impose restrictions like you have to be a owner occupant, you can't own any of the real property, you have to be a Hawaii resident. And the state is a large organization. It can facilitate the building of thousands of units a year, which even at a low subsidy level or a no subsidy level, you still need an organization with the substantial capacity to carry these large hundreds of millions or even billions of dollars of construction, whether you finance it through bonds or other types of borrowing. And so what we've ended up at is basically the Singapore model, where the state takes state-owned lands, near rail stations, builds very high density, sells those units at cost to the local people as owner occupants, not as investors, and just doesn't stop building. And Jay, we do have enough land for that. If you look at the existing state portfolio of lands, we have lands for centuries worth of housing development if we're building at the right high level of density. It will take some getting used to. Now, the biggest, I think, change that people will have to accept is that we will no longer be building single family homes. Instead, our development will be clusters of high density towers. People won't be driving. They'll be living in, let me say, 100 towers, 200 towers at the Aloha Stadium site, each 50 stories tall. There won't be broad boulevards and huge setbacks. The streets and sidewalks will be narrow. There will be ground floor retail. There won't be setbacks at all. And they will be quite high density. So if you can think of, say, a Waikiki or a downtown Chinatown or a Ginza in Tokyo or a market street in San Francisco or a Greenwich Village in New York, it would be that really lively, pedestrian activated, walkable community that human beings had lived in for thousands of years before the advent of the automobile. And which many of our existing most beloved communities in the world today are still remnants of that pre-automotive age. And I think a government that did this would really strike a new social compact in Hawaii, a new social contract, which is to say, if you're here, if you're a full-time resident, if you are a full-time worker, you will have a home. The government will provide a home for you. We will sell you a low cost home. Now, you will also be free to buy in the private market if you so desire, but we can all agree that the private market is not going to get any cheaper over the years. And so the private market would still exist, but public school would exist too in a manner of speaking. We'd have a low cost mass option for housing that would welcome all full-time residents of Hawaii, including as many of the native Hawaiian community, the diaspora that's around the world back home to Hawaii. And I think that would be, ultimately, if I had to discuss this vision or describe this vision in one sentence, it would be one job should be enough. If you're working a full-time job, you will have the means to live here, to have a home, to raise a family, and to have a good life. And I think that the lack of affordable housing is the single most important missing component from one job being enough. You talk about Manhattan, and I just came back from Manhattan. I came back from the, I'm sure you know the neighborhood, the West Village, which is, it's out of Peter Bruegel, you know, it's out of a lot of people in a small area, but with lots of services and goods and stores and community activities. It is a joy to watch this neighborhood. We could have neighborhoods like this. I don't know if Hawaii people realize how valuable life is in a neighborhood like this. You actually have friends that you stop and talk to on the street. You chitchat everybody. You are a coming together kind of society. We would benefit by that. There's nothing in, you know, the Hawaiian tradition that stands in the way of that. Everybody would love that. That's my perception of having just returned from New York. But the other thing I wanted to ask you is, you know, how far down the pike are we? I mean, you've painted a swell picture as the monarch. I might add that the only thing that really differentiates that picture from, you know, the realization of that picture under our existing system is bureaucracy, is the problem of getting permits. I remember Castle and Cook was building a project way out in Mililani. It took them decades to get all the permits then start construction. Then the same thing would happen with high density buildings the same way. And that the permits would take so long that it would be, you know, while we wait for the permits, our children are leaving town, you know, that sort of thing. And how do you fix that as monarch or otherwise? Yeah, so the good news is, Jay, that we do have significant progress to show after this legislative session. We passed a number of bills that would enable two key state agencies, the Hawaii Public Housing Authority and the Hawaii Housing Finance and Development Corporation, to build these units and to sell them. And so we have funding available to both of these agencies through bills that were passed this session, $300 million in the rental housing revolving fund that can be used for these types of leasehold units for HHFDC, $10 million to HPHA to start on its first project at the Mayor Wright site. And so because these bills passed, for the first time, I'm cautiously optimistic. The governor has the tools in the toolbox and all the governor needs to do is to pick them up and start working on them. So we have a gubernatorial election coming up this fall, as we all know. And I have confidence that the next governor will want to make a mark, will want to tackle this issue head on, and now finally has the tools in the toolbox to move the needle on it. You mentioned before the show that there were four significant bills. Have you covered them all or are there one or two more that you want to mention? Those are the main bills that I think take us the farthest. I think additional legislation will be needed in the future. One thing that I've been a proponent of that works in Singapore is an automatic savings program to help pay for your housing costs so that every working Singaporean has a nest egg ready for a down payment when the time comes. I think that would be a really great advance. And I think more flesh on these proposals, clearly restricting them to Hawaii residents or owner occupants and so on will be needed to improve them in the future too. Okay, so we have the framework or we could even this session have a working framework and hopefully this will be a platform issue for the campaigns now to follow and that we will see commitment ultimately by the winning candidate for governor or lieutenant governor about housing, about these projects. What needs to happen? In other words, that governor hits the ground running as soon as he or she is elected. So what happens then? What does that governor do on day one to get this moving? So the first thing that governor needs to do is to agree that we need to build 10,000 units a year and once that happens, I think the rest will follow in pretty short order. I think the next step would have to be identifying the sites and then beginning the environmental review process to determine which of these sites are suitable or unsuitable for this type of high density development. I think the governor would then put out RFPs to contract with developers to on a fee basis or on a limited profit basis to start delivering these units, say putting out an RFP for 50 towers or parceling that out into 25 RFPs of two towers each and saying, okay, you have to build this many units. You can charge no more than X dollars. They have to be this minimum size. They have to have this many bedrooms and so on and just start putting out these contracts to bid and I think that there will be enough work for everybody to be busy for a very long time. And then in the meantime, you would open the sales for say the first unit. Maybe that's a HPHA tower at Mayor Wright Holes. I think a product, you know, a two bedroom condo selling for $400,000, which is kind of the range that we're talking about would be would fly off the shelves and there would be lines around the block for it, which would I think provide the political momentum necessary for a second project, a third project, a fourth project and so on. And so I think by the end of four years, you know, four years, it's not a long time, but it's also not a short time. I think by the end of four years, you'd really have a lot of momentum going to, you know, to scale this to the appropriate level that would actually end the housing shortage. You talk about Mayor Wright and I think of, you know, Chicago projects that are not really places you want to live. How do you make sure that these places are livable, that they're, they feel like middle class and not a Chicago project? How do you do that? Two main ways, Jay. The first is the way that you've already discussed the urban planning that you saw in the West Village of Manhattan. And actually, we don't have to go all the way to New York City. If you take a walk down the street in Waikiki, it could be late at night. You might be a visitor who speaks zero English, you might be an older person, a senior citizen, a retiree. Even, you know, a retired person who speaks zero English feels entirely safe walking down the street in Waikiki at 10 p.m. at night because there's so much pedestrian vibrancy. And the reason there's that pedestrian vibrancy is because of what we talked about earlier, not just high density, but also narrow streets and sidewalks, ground floor retail and no setbacks. That's what creates that incredible, you know, ground street level vibrancy. Because if someone snatches your purse, you scream and, you know, 200 people will immediately stop and see what's going on and apprehend the thief if there is one. So I think that's one. I think another critical piece is a piece that has been hiding in plain sight for a long time. So basically, all the housing that the government has built since probably the New Deal era in this country, so decade, 80 years for generations, we've had two components of government housing. One is a low subsidized price. The other is a low income resident. So the the reality is those two don't need to go together. We can have a low price, but not restrict the incomes of the residents. Because as we've seen with the New Deal era, the Great Society era of public housing in this country, those all had income restrictions, which meant concentrated poverty. And there were many social consequences of concentrated poverty, including cyclical poverty, drugs, gangs, so on. And so if you have a socio economically integrated unit, a building with people of all incomes, then we're really talking about a unit that doesn't that is more resistant to these social problems that developed with concentrated poverty. And I think once you put those two components together, walkability in the urban planning, as well as mixed income, a socially integrated community, I think that that's how you get a really successful neighborhood. And the West Village is actually a perfect example of that because the West Village, well, now it's quite expensive, but it hasn't always been. It was once a fairly affordable place to live. And but it was safe, it was successful. And that's why it attracted this concentration of the wealthy over the years. I'm so glad I asked you that question. And I love your answer. So, Bailey, I would like to offer our viewers a vision, an opportunity to examine neighborhoods in which this might happen, this magic might happen. And what comes to mind, aside from Mayor Wright, which it could be done, there's Mo'ila'ili, which is really old and it needs redevelopment, I think, maybe parts of Waikiki for the canal, maybe they could use that, you know, the old jungle, remember, the old jungle in Waikiki. We can't do much with Kakaako because it's going to be there for a while short of condemning it, which I don't think that's going to happen. I don't think Kakaako is really available for this, but what about Kalihi? People have been talking about redeveloping Kalihi for a long time. And there are other neighborhoods too, I'm sure you've looked at them, but can you give our viewers a vision of where this might happen? What neighborhoods might they see into the future where they might want to live in this kind of community that you were talking about with affordable housing? Right. So you already mentioned several of them. Remember, we are moving away from car-based transportation. We don't like cars, the emissions are changing our climate, the traffic is choking our roads and just eroding our quality of life. We want to move to a model that is primarily based on walking and also on public transportation, which means that we would be starting at the neighborhoods near the rail stations that are currently being built. You mentioned Kalihi, that's actually a great example of a neighborhood that has a lot of underutilized land that has rail stations in it where you could build very high density walkable communities where people would never need a car. And if you just keep following the railroad from Kalihi, if you go east towards Alamoana, I don't think that Kakaako is actually sort of a done deal. If you look at the location of the rail stations in Kakaako, there's still quite a lot of undeveloped land in the immediate surroundings of those rail stations. On Queen Street, for example. Exactly, J. And where we could start with a blank slate and really make those roads a lot narrower and make them a lot more walkable. And if you go in the other direction, you'll see communities like Waipahu, communities like Pearl City that are really car-centric today. But at least those parcels near the rail station really don't have to be. You could really have a much more walkable community. And the terminal on the west side of the rail line is actually at the largest state-owned parcel of them all, which is the UH West O'ahu parcel, which is, I think, 600 or even more than a thousand acres of state-owned land that's prime for development. Not all of which is needed for a university, obviously, but which I think much could be developed as a true second city that is walkable like a Ginza, like a Greenwich Village, like a London, and so on. And with hundreds of acres, you could put hundreds of thousands of housing units there. You could accommodate Hawaii's population growth for a thousand years to come on just that one parcel if you build at the right level of density. What about the stadium area? You mentioned that earlier. That's right. That's an example of a 98-acre parcel. It's directly on top of a rail station. It's slated for redevelopment. I think a lot of the models that have been previously been proposed with a retail-type situation supporting the operations of the stadium itself are no longer viable in the age of the pandemic, in the age of online retail. And I think that there are many successful examples all over the world, whether it's the Staples Center in downtown Los Angeles, whether it's the Happy Valley Racecourse in Hong Kong, where a stadium itself would only need a very small footprint, and you can surround it with that type of high-density walkable development. And just on that one parcel alone, you could easily get 100,000 units of housing there and wipe out the housing demand of the state of Hawaii for 20 years on just one parcel. It's really quite extraordinary. And quite important. The whole thing is quite important. We really have to move down this path as soon as possible. We have to start getting it done, not only for the housing and to help the homeless, but also to give us confidence to keep our kids here and to know that we can. This is really one of the most important initiatives, if not the most important initiative for state government. And I hope, Stanley, you give me encouragement. You give me optimism, and I really appreciate talking to you about it. I'd like to follow it with you. And I hope you stay on it, because your vision, as and when it comes into a reality, will change the state in more ways than just brick and mortar, for sure. And I would urge you to stay on it for as long as it takes. I appreciate that, Jay. I really appreciate the chance to share our ideas on your ThinkTech program. I really think that the only way we're going to tackle this problem is by talking about solutions that actually will move the needle and not just band-aids here and there. And I think that, as you pointed out, this will mean significant changes for the whole state. And I think we need to really start talking about those implications sooner rather than later, because it will be a new social compact. And for me, I think the bottom line, Jay, the reason I'm so grateful for this opportunity is because this is a life and death matter. What we're saying right now to the vast majority of our students, let's say those graduating from our local high schools, is that it's great that you were born and educated and raised here, but now that you're an adult, you have to leave and you can't come back. Hawaii is not your home and will never be your home again. And that breaks my heart, Jay. I never want to say that or, in effect, do that to the future generations of Hawaii. I believe that everyone who was born and raised here deserves the opportunity to live in this incredible place, this magical, special place that we call Hawaii. And this is our chance to make that happen. So it will take some time. It will take some elbow grease. But if we make that happen, we will be able to assure a good life to every single future generation of local people to come, Jay. And that's incredibly exciting. So again, thank you for this opportunity. Senator Stanley Chang, thank you and thank you for your commitment to the issue and for your service to the community. We really appreciate it. Aloha. the subscribe button on YouTube and the follow button on Vimeo. You can also follow us on Facebook, Instagram, Twitter, and LinkedIn, and donate to us at thinktecawaii.com. Mahalo.