 Welcome back to Think Back Hawaii with Dennis Isaki. Today we'll talk about politics and housing with John Wahey, the former governor built housing reforms in Hawaii. Where the mandate of 60% affordable for developers, that's by the legislature. We also have the active team, a fast track mandate for certain housing products. John, for the few that may not know of your accomplishments, especially the millennials and the Malihini, please tell us a little about yourself, what you have done and how this politics involved in getting things done. Yeah, I think a lot of people don't realize the politics involved in Hawaii housing or Hawaii issues, but mostly a lot of people talk about it. But when I was elected governor in 1986, at that time the state's position was generally that they should only be responsible for doing low-income rental house. And there were some programs like set out to do that, to blow money to developers. But there was also this growing need for housing in general. I mean, it was tough to buy a house. First of all, it was not necessarily available. And number two, it was expensive. And so the first part of the politics in housing is to understand why. And essentially the reason why housing was so expensive in Hawaii and so unavailable was because of monopoly. We essentially had three landowners, three major developers, and three suppliers. And everything was neatly done with the three of them. So if you're a landowner, the last thing you want to do is flood the market. If you're a developer, you want to make sure that your development sell out before you begin a new one. And you also want to develop for the part of the market that's going to pay you the most money. Now you couple these factors with the fact that everything had to come from the mainland. And hence the supply chain. And you really got a situation where housing would not be as available as maybe it should be. On top of all of that, what you had was at that time the Japanese bubble. So this is like the late 80s. I mean, middle 80s through. And so we had foreign money pouring into Hawaii, buying up a river state. So the first problem is, you know, something this is the political situation. So how do you deal with it? Well, the first step, obviously, is to find allies. You need to have people who are agree with you. We're going to help you. I mean, it's in a sense, the numbers game. And I was fortunate at that time. One of the first allies was the president of the Senate, Richard Wong. Now, prior to my election, Richard was an antagonist to the executive branch. So his politics was anti anybody with the executive. And so, you know, but then I got elected. And he and I, he actually campaigned against me. You need to know that he actually campaigned against me. A lot of people did. Actually, the second ally campaign against me as well, talking about politics. And because, you know, and so Richard and I worked out an arrangement. And basically what we did was I met and we looked at, you know, looked at each other and say, OK, the past is the past. So I asked him, I said, Vicki, what do you want to do? Why is it that you elected? And then he looked at me and he told me, you know, sincerely, he says, God, what I've always wanted to do is build housing for the people of Hawaii. And I told him, fantastic, help me, help me. You know, then the second ally was was at that time was called coming from representative call coming from Hawaii from your island. Richard. Richard call coming, you know, and Richard was actually at the time of my election involved with a political battle between him and the speaker of the house then Henry Peter. So I remember getting the two of them together at my house, which was Washington play, you know, and trying to bring about some kind of resolution which eventually happened. And again, Richard, what do you want to do? What do you think is the most critical issue? He said housing. No, I got the Senate, the two leaders, by the way, Richard, how are coming campaigned against me. He was, you know, I got everybody else on the Hawaii delegation, Hawaii delegation to support me. But Dennis Yamada was like campaign chairman, you know, and, and not well not a click ago click ago campaign chairman but Dennis was, you know, like he's helping me and so forth. And Richard was on the other side with my opponent starting anyway, make a long story short, we all agreed we all said that was the first step. The next political ally that we needed was somebody who might be already doing it. The third person on this triumvirate was Frank bossy. Bossy was the chairman, I mean was the mayor of Honolulu. And Frank had decided that government should never be restricted to only one kind one side of the street and if Hawaii need housing, he was going to start building housing in the villages. How did they ever. So he was starting the idea of working with develop getting all together, coming together the next thing that was needed the next political thing that was needed in this scenario was a private partner. You know, if you're going to have a monopoly with land, who it is, who is it that we could partner with that could break that monopoly that already had land. Campbell the state of a couple they have been trying to develop something out there for generation and nothing was happening. So, we went out and we essentially made a deal with with with with Campbell and said look, you give us the land will put up the infrastructure will put this together. The next piece in this whole political puzzle, where it started to get really interesting is at that point it became obvious that if we are going to build housing the way we should. We needed to have the ability within the state to actually do it. I think one of the first things that happened was that then we created at that time, the state as as it is now by the way, the state handle all of its housing initiatives with the same agency. That was H&K. And so these are the people that they, you know, these are the people who manage housing for people who essentially low income people who were renting houses for the state as well as supposed to be developing it. But what happens when you put both of these activities together is generally one dominates the other, and we never really developed housing because of the problems with having to daily manage housing. So we split it. And as a matter of fact, I think you got appointed to the board of the new development agency. Thank you for supporting my election. Anyway, yeah. And so we got that was the split. Another part of doing that was it became apparent that, okay, now we had people who were committed to development of housing. We had a landowner who was willing to play. We had a legislature who whose leadership was committing to see seeing this through. And all of these pieces were starting to come together. At that point, we needed a process that developers could go through. And that's when active team came about. And the rest of it, I should tell you that the relationship with the city sort of changed because what we what active team actually did was it bypassed its own. It bypassed it went straight. Basically, the state created its own rules for beginning the what is now called the villages of couple days. Another good thing about it was a fast track. So all the fast track was part of it. So you could move fast, right. So, all of this passing it though was a kind of a challenge, because the first thing was, I asked, I called the city council. And we presented this idea that we were going to be fast tracking we're going to be direct zoning and I asked actually asked them to participate in this. And see, and they were very upset. They left they walked out of the meeting and all of that and we had a, but you know, fine. We had to get it done. And Frank meanwhile was building his villages that ever. And in the process of doing all of that what Frank was realizing was that these types of housing initiative. Not only. They were being supported in terms of the infrastructure by taxpayers month. They were also being done at the time when housing prices were going through the ceiling because of artificial expenditures from foreign buyer, the essentially Japanese investors. So he decided that what he needed to do was to create what we call the extraction. So if a developer wanted to build housing on this kind of land in this type of project or in general, they had to meet certain price line requirement. He basically started the idea of extracting and when he started doing that with the city. I had our administration meanwhile had created the office of state planning with Harold Matsumoto, and we control the land use commission, just like Frank control in a sense with the city council is zoning that was needed, which we had bypass. So, but we have the land use commission. And I asked Harold and some of my cabinet members, I think Warren price and number of other people Warren was my very general. What would be a reasonable extraction. At that point in time, we looked up the existing law existing state law or state project. Was that the. There was going to be a 60% requirement that the number of units being built had to be for moderate and low income. And that began what you call the 60%. Yeah, I know that the developers weren't too happy with that. But the thing is that in with the act 15, we could pass try the different levels of housing in a modern income market. And you know, profits from that would help subsidize the lower income group, which was good. But like you said, the city and county, you know, wasn't too happy with the act 15. So, even on the inspection on a roadways and stuff, they didn't do that over here with the good at ourselves. Right. And they didn't even accept some other roles. I understand. Well, yeah, that's a that's a whole to clean you an issue. But what was interesting was, actually, it depended, you know, at first, but and subsequently, but initially, most developers went along with that, because there was enough money to be made on the market housing. Because the market was so intense at that time in the beginning in the early part of the 80s. And the last so we had the 60% 60%, which wasn't that easy to get people to accept, you know, initially, because people. Bank actually ended up adopting the same standard to both the state and the city were requiring 60% of the houses be made for made affordable. The last part of this whole scenario that had to be put together. So now we had a process we had a target. We needed developers, they had to get new developers in because I think outside of oceanic. Gentry and what I guess somebody else that there was only like three developers in the state. So the first developer that we had was we decided to see whether somebody from outside could help put together, because they have to meet the 60% requirement. And the person who actually found it was that I had a housing consultant, he was the former controller for the administration, his name was he deal more coming. And he did. And his bunch of staff, people that he worked with at HFDC found found this developer called what, which is still in Hawaii, what, what's house. And what we did was we had divided couple they are into, I think it was seven or eight different housing develop. And so the, we went out and invited people to bid for this with these requirements for the rights to develop. And the first village was one by by one, who met that we now had competition. What's interesting in this story is the fact that the second village, and I think the one after that was one by a young guy. I wouldn't call him a kid, but he looked like a kid back then from Maui. And he at that point in time, he had only built something like 25 houses in his whole life. And the theory was bidding to build over 1000 houses in couple days. And I remember meeting with Hideo and a bunch of the guys who were involved, Harold Mosomoto and a bunch of these guys who were involved in the housing initiative. And having them come to me and say, Hey, God, you know, this young guy, he's got a great plan. He looked at it and I said, Well, how many houses is he actually built? He said, Well, you know, less than 30. Are you guys nuts? We're going to bet our whole program on this young guy who's never built a thing. This is talking now this is straight out, you know, things how soft it just made. I said, you know, God, you keep talking about how we need new people in the system, how we need to support local people, you know, we can't keep bringing guys from the mainland. You got to start looking around. And I said, Okay, so finally I agreed with, I said, Fine. I gave him the first village and Stanford car was one of Hawaii's premier developers came out of nowhere from Maui and built the first of the second village in Kapolei. And not only did he build the village. He won an award. I think it was supposed to be like the third best development in the country. Yeah, I believe he had a partner was that Franco Mola or he had a number of people and financing and the financing and all the rest of it which goes into a housing project. Okay, which is that and then but in the second village that he put together which he felt what was in effect the third village of Kapolei people you go out there now it's a city. Back then when all of this started, as you know, it was all feel just vacant land, because the sugar industry that had been all the sugarcane fields that closed down. And Campbell, well, Oahu fact the entire state was on its way out in terms of I mean sugar was on its way out of the industry. And, you know, so here you go Stanford though he wins an award. And you see this, all of these things have a relationship to what was the car. What was the cause of housing being as tight as it was in the state. You needed political will to get it done. You needed all of these things and. But most of all, you needed some new blood. You needed some new players. That's why guys like you came from Hawaii to work on projects over here. We needed to also support local businesses. So if you hired the people you develop the programs, you're not only reducing costs to the consumers, you also giving engineers architect. Everybody else, a chance to, to prosper and to keep the industry strong. So yeah, politics in Hawaii was, this is the, this is the big picture politics in Hawaii, the bad part of politics in Hawaii is sometimes this whole system can get misused and end up with driving cost up instead of, you know, helping people. It's just like the industry. Okay, we used to be number one in Hawaii in the world for production of sugar cane. Number one in the world for production for pineapple and the rest, you know, and nobody could compete with us, even with sugar in Hawaii. Because on a fair basis, without subsidization. So people used to talk about how, you know, these agricultural industries are being subsidized like sugar was 18 cents a pound. What it meant was that you couldn't buy sugar internationally. So Coca Cola, Pepsi Cola, the rest of these cola companies couldn't buy sugar internationally that cost less than 18 cents a pound. Why was that necessary, because everybody else in the world was subsidizing sugar. Yeah, this is kind of a long start to make a point, but the point is, for example, my wife's relatives in Okinawa was getting 50 cents a pound from the government to do the sugar. Okay, so we maintain 18 cents. All of a sudden, to come in and the pineapple industry don't pineapple, which is now oceanic comes in. And into the trade negotiations, which are taking place with on the national level, and which the state of Hawaii had always supported our industries, our delegation, all of this. Though had been sold to a gentleman called Hertha, and they come in and they all of a sudden says, we don't want any terror. We're not going to take any subsidies. And they refuse. What they didn't tell people was that gold had bought all these land in the Philippines and in Thailand, and they were starting to plant Hawaii pineapple. And they didn't want any tariffs bringing that pineapple into Hawaii. So they were closing down their property. And in closing down their properties, their choice was, we got to build houses. We're going to build houses out at Mililani and elsewhere, instead of raising pineapple. You see, this is the switch. And that happened. They came in and asked the state for zoning. They wanted zoning changes, they needed zoning, they needed to be going from agricultural land to not. What is the politics of all of this politics is this big cooperation, who had just gotten bought out, wanted to grow cheaper use cheaper labor and cheaper land elsewhere and didn't want a pair of bringing things in. See, at that point, the land use commission said that they were the first, they were the first coming up on this issue. If you are going to build housing, fine, but your housing has to be for the people of Hawaii, which means you now have 60% requirement. See, the transition of industry was also a political issue that had to be dealt with in the housing business. Because all of the lands that we are now having for housing used to be in a different industry. Used to create jobs and that family. Okay, we're wrapping up with a one minute left that kind of leads to government involvement. And in housing, you had the dwelling unit revolving fund, you get the home revolving fund. Later it was defunded. They're trying to put it back now, but I think that led to less housing. Well, what they did was they did a lot of the projects that we did. You know, and unfortunately, some of my successors, both at the city and at the state level, decided that housing was not their business because at that point in time by the time you get well. And you get through the 90s when you get into the 2000s, what happened was there was this deliberate attempt to say that, you know, housing was pretty much satisfied, not the market to get rid of the program. Yeah, you get in the last comment from. Not for me, except that I think that what we need is we need to get serious about housing again and a lot of the same reasons why housing prices, but it has to do with the same factors that we just discussed. Especially now instead of Japanese buyers, we got foreign buyers from elsewhere driving up the cost of housing. We got the new against vertical motors. Yeah, they come from other countries. Yeah, and at that time we had the HFDC 30 years ago, you had a billion dollars in assets, you know, you don't have that much in a way. Thank you. You've been watching politics on Hawaii and think back away with John Wahey, former governor. Thanks for letting me do this because not now I'm the host and I don't get a chance to talk. And I really overdid it. No, no, it's great. We started running out of time. We could spend another hour on this and mahalo to our viewers between again. I'm Dennis Esaki. We'll be back in two weeks with another edition of politics in Hawaii. Aloha.