 politics and land in Hawaii with Dennis Isaki on Think Tech Hawaii. Today we'll be speaking with Ricky Cassidy, Hawaii Real Estate Specialist among other things. He's often called upon by the press and government officials and developers with respect to housing developments. He's a part native Hawaiian and attended Puneho White Prep Academy and other major colleges, although I didn't see any documentation. Ricky, welcome to politics and land in Hawaii on Think Tech. Please tell us a little more about yourself and your involvement with land and housing. Thank you Dennis. You and I have been friends for a while. You're always controversial and you always ask probing questions, so it's a pleasure to try and think on my feet. But as you look back over our relationship, it was based on land because as a surveyor you took good care of the land that my great-grandmother has up here on Kauai. Going back from that, which started in 2007, 30 years ago I started doing housing research for major developers, Castle Cook and Gentry and then went out on my own afterwards, hung up my shingle and 30 years of working for most landowners, most big developers, builders, public agencies and that includes the feds, HUD, that sort of thing. And then, yes, I've been a trustee for 35 years first for my stepfather, Henry Luce III, whose father started Time Magazine and then for Mary Lucas, who my dad formed this trust over 100 years ago. When I look back at what drives me, it is the case growing up here, I was a surfer and I just loved what was. Dad made sure that I left the islands one way or the other, actually it was my own choice, but it was a hard one because he said you couldn't understand Hawaii until you leave it. And so that's when I went to Washington DC, went to university, lived in London for three years, came back to DC, lived in San Francisco and then finally came back to Hawaii, where I scrambled to get a job, Gentry Holmes hiring me. That was right at the start of the affordable housing policy, which was, well I look back, I'd say it starts about 1980, which HHFDC, which in part was land reform, which as you remember had to do with land monopolies. My great grandmother did have a small land monopoly up in New, Leesold, Fee Simple. It wasn't Fee Simple, it started at Leesold and then dad converted it to Fee Simple in order to pay debt duties. So when my grandmother, great grandmother died, so I have some experience with Leesold, I have some experience with development. As I come to you today, what you really wanted to do is say, you know, hey Ricky, what is going on with politicians and housing through in land? Land you have to have because that's the basis of wealth. That's the start of any project because that's supposed to have value now in affordable housing. Land cannot have value if you want to build affordable housing. Ricky, let me ask the question. What is affordable housing the number one issue today? Politicians, they all talk about that. Is it business or policy or the market? Politicians want to get elected. They want to mirror what the concerns of their constituents are and over the 30, 40 years that it's been in place, they haven't solved it to the satisfaction of their constituents. They may never do that because land in Hawaii is limited. This is an election year, so they talk about it and they come up with solutions and you have a wide range of different types of solutions based on whether the person seeing it comes from a policy or political background in which they see things just as, oh, let's regulate it. Let's set up a set of rules and make them go. The other point of view is a profit. You can't make anything without profit. The government does take some of its revenues and cross subsidizes housing with our taxes. The way I look at it is it's a market. It has to function free market. Now housing is not free. It's the most over-regulated industry that I can think of. In regulation and in politics, you're always trying to balance getting the biggest bang for the buck as well as getting elected. You mentioned HFDC. It was on one of the original boards when they started Kapolei, probably the history of that. But I remember the market started at that time. They showed only several thousand demand, much lower than the actual demand. Kapolei is booming now. Were you involved with Kapolei development? Kapolei was a giveaway by dads. Dad was a trustee at the Campbell estate and gave it away in order to get the rest of the regulations for the city of Kapolei, the commercial and industrial stuff. It was a smart move for a landowner because they developed their property and upvalued it by dint of all of that. It was early days and some of the regulations on it were inexact. The one thing I want to mention to people is that when affordable housing started, and I wasn't at Campbell, I was at Castle and Cook, there used to be fights breaking out for people who got in line to buy a house because you could only have so many houses. You put out 60 houses and if you number 61 in line, your interest, which was a monetary benefit of $100,000, would be to cut in line and take 59 and make them 60, that sort of thing. That's the basic reality of affordable housing. There is a benefit. What is it? How do you generate it and how do you share it? Because housing in Hawaii is such a profitable, put it another way. Because there's such a big demand for land in Hawaii on which you can enjoy one of the highest quality of lives in the world, you got just tons of people crowding in here to buy. At the same time, you have locals feeling crowded out by all these other people buying, including themselves because lots of locals are investors as well as homeowners because it makes them money. Still sticking with that time with original HFDC, the legislature mandated the land use commission. 60% affordable for the developers getting land use change approval. They went in for Act 15, which is a fast track for affordable. But that thing included the low income, but it had market homes too. So I think that they now expedited some of the market homes, which we don't have today. Do you see anything like that, profitable? No, there's a couple parallels. One would be why did you choose 60% because other times it's been 70%. It was like the way they chose which of the vacation rentals, how many there should be. It wasn't based on data and that's often the case. It was guys getting in a room and saying, we've got to pass something out. So that's number one. Policy at the start was not data driven and it's not that much anymore, although there's a lot more to it. The other thing is that 60-40 split would mean is that the 60% sold at market would have to subsidize the 40%. And usually you lose money on your 30%. You break even on your 60% and you kind of make a little money, but not a market return on your 80%. Now, these are all the different flavors of affordable housing, which makes it a hard thing to talk about. But if you just follow the money and say, how much money do you need to produce the most affordable housing? Then that's a good basis for setting policy because the private sector is going to say, this is how much it costs and we're not going to lose money. And the public sector is going to say, well, this is how much we have and it can't solve the whole problem. So let's negotiate over a term sheet that includes shared appreciation buyback and that sort of thing. Now, all the early stuff in the early days has been evolving as anybody of regulations does in a political context, so that the next year you tweak it this way, tweak it that way. Up until a couple years ago, it had gotten tweaked so bad by just an onerous level of regulations and regulators that it was very hard for affordable housing really wasn't doing very well. And then I think EGAY came in and part of the problem was that recession we had the Lehman thing where the legislature rated all the money in the housing fund to pay for other social services. Never really recovered that until just, you know, last five, 10 years. And then now it's flipped around so that now we have a ton of money and what do we do with it? So my fear is we're not going to be judicious and not get the best bang for a buck, meaning the most amount of affordable housing for the most amount of people. The income class that's really hurting is the workforce guys because they don't get any subsidies. Yeah, well, you know, I call it the middle class. We had like with that split that and one quote, like you say, subsidizing the other. I think that worked a little bit. I think the big issue is the government regulations and the time it takes, you know, like we just worked on one project, you know, the Kapakai analysis. We had what, the 180 page report in the summit on top of everything else, you know, it takes a lot of time to the developers, you know, for housing. Time is money and, you know, during that time people are out of houses. And the cost goes up and up, like Oakland, it takes four months to go through the process in San Francisco, 23 months and Hawaii is one of the most regulated. And the problem there is there's so many layers and it's hard to get down to the actual part of that organization that's doing it and get them to change because most organizations like to regulate, it gives them something to do, their reason for being. And the other problem is that whoever's doing it is being seen to take away something that was supposed to be good. It's pretty easy to show it's bad to increase the cost of housing. But a lot of times what happens is that the idea that has a negative impact, impact is the new word that I'd like everybody to use because every time you propose or look at a regulation or propose it, you ought to ask what the impact is. And for instance, there's a piece of law passed this session saying that all affordable housing parking should be fully wired for electric cars. And the parking, as you well know, is a huge cost of affordable housing and prevents a ton of more affordable housing. And if you give up a little parking, you get a lot more units at a lot different price points. So for the benefit of forcing you to wire the whole parking line for what, 2%, 3% of the cars may be electric. I mean, how many Teslas are there going to be an affordable housing project? Don't do that. Rather, you put it next to public transportation on the premise that people making $50,000, $60,000 a year and sending their kids to school for $10,000 or whatever. They just don't have that kind of money. And if they were to take that, what they earn and buy a car, then they can't afford regular housing, which actually is a better deal for them because then they could build equity. And so certain regulations are bad, but so a lot of the politicians this time around are just running on the campaign of cut red tape, cut red tape, blah, blah, blah. I'm happy to do that. But I would be, I would counsel them, you know, hey, what makes a democracy great is when people have a goal. And if your goal is affordable housing, you ought to figure out how to increase the supply. Yes, regulation will help it. But you ought to do something that lowers the cost, makes more event, more land available, and is sustainable, you know, because in 30, 40 years, you know, you don't want to be stuck with something like a field of affordable housing parking when instead of electric cars, we now have helicopters. So are you saying that you're in favor of more housing in Kakaako, you know, the dense element there as opposed to a new Kapolei? Yeah, good question. Here's my spin on that. I want as much affordable housing next to the rail stations along the whole rail line that then gives the people living there a cheap, easy transportation all over the place, and it cross-subsidizes rail because you're going to get ridership. And, you know, it will build out the rail. The rail needs to go to Koalina because a ton of people working in Koalina needs to go a little bit further, blah, blah, blah. Kakaako is set up to do that, but Kakaako is in the area where it costs a ton of money just to put a shovel in the ground, and therefore any little inch is look at the impact. You know, my cost-effective solution is run the rail to Koalina where everybody goes to work. They can go from Kalihi or Kakaako rather than take it, you know, at 10 times the price to Alamoana and beyond. So that's one. So the people working at Koalina going to be living downtown and catching the train out there? Well, if you put in the two more hotels and then another 4,000 homes on the resort itself, and then on top of that, Kalailoa has all that land that's empty. Okay, that's low-cost land, and that equates to affordable housing, whether it's regulated affordable or just affordable market housing. But that's what I'm saying, you know, you can build something, you can put a shovel in Kakaako if and when the rail gets built. It's much easier to make a case for the rail to be built going past these Kapolei when you have, you know, jobs and people living there. You want them to go both ways. So yeah, you asked a good question. Is it Kakaako or Kalailoa Kapolei? I'd say both. Yeah, okay. That's a good answer, I think. We got, you know, now in Kauai, we see a lot of billionaires put it bluntly buying large parts of the land here. Some of them buy whole subdivisions and unsubdivided, getting less for the locals. Do you see Kupnup, I think it was in the 80s, at Kinshore, Kawamoto came here and bought a whole property. Everybody was up in that uproar, but yeah, you know, now all the realtors are jumping for joy, you know, get big bucks, anything to say about that. Yeah, I'd probably upset a bunch of people because it's easy to do. The truth of the matter is, again, going back to the desirability, Hawaii is a magnet for wealthy people, the crowd locals out. And the mechanism by which you take the benefits or the reality of that, but also the benefits of tourism because it's the same thing. How do you judiciously give a great visitor experience in the hotels as well as support the second home owners and get the biggest bang out of them to give to locals for affordable housing school, all the good things. Rich people usually are pretty generous, but their problem is they set themselves apart from everybody else. And that isn't the local experience. I mean, the more the merrier. We have a group Thursday-Thursday where we all sit and talk and yell at each other. And what you want going forward is venues like that where rich people at Kikuyu will look and share with local halos or whatever. And it's not going to happen if locals are suffering poor quality of life and feel it. So the market reigns in free land. Politics can take political land, government land, like under the schools. I mean, like Kalee has three schools on mayor right. And nobody's living there. There's a bunch of agencies, counties, that just hold on to their land and don't share it. No, you can't use it. It's just sitting fallow and it looks like, looks like, looks like, and it doesn't serve anybody. So going forward, yeah, I need a mechanism to take the benefits. Do an impact analysis. Where's the biggest benefit? The biggest benefit comes out of tourism and second home owners. That's our industry. You know, if you want to diversify, you do something off of that kind of like movies. But whatever the benefits you can get, you can see tax propositions on this island and saying let's let's up the tax on these guys, which is a good idea. But then at the same time, if you then run around and say cut the number of vacation rentals like they're doing on a while, you lose that tax income. And you don't have the gasoline to run a good policy. Do you see any downturn in the future? Yeah, I see inflation interest rates jacking on up. Russia and China are showing, you know, they can be crazy. If they don't go crazy, you know, the world can moderate. We printed money to get out of the COVID. And now that we're on the other side of it, we have all these asset bubbles and housing is one of them. So housing is the topic of, you know, the day because of interest rates going up and the prices going up. Now, if I wanted, if I could play God, I'd say let's do a sustainable housing policy. Let's look at what you where you can have an effect. One of the effects is they gave all the money to DHHL. And my hope is that that is used in a way that you look out through three or four generations and you say what we do now will benefit those people. You deal with the declining blood quantum of the constituency. So you're going to have to lower that. You have to deal with taking the money and putting it in DHH land that will earn a return like they have out in Kampalei with the Bartolo shopping center. It's the only one they have. They're starting someone something in town as well. My fear is that all that money is under the guise of we're doing something will not be vetted for its cost effectiveness. Now, having said that, if you want to get elected, my premise is that people will support a positive goal like putting a man on the moon, America got behind and the same can be done here. But we have a skeptical public. We look at politicians. We look at landowners. We look at tourists and we go out. I just look at the history. I don't feel like things have gotten better, which is why usually big changes happen when things get worse and then radical things happen. You mentioned China and Russia. Recently, there's a Chinese developer. They're selling their property. Is it Makar? Yeah, they sold it to Stanford or they sold it. Stanford car was developing it now. Now that they have a replacement developer. Makar is a good place to live. I think that's it. I like that place. Okay. And you're saying because of inflation and all that, but then what about the other hand, the stock market goes down? So won't they be investing in real estate instead? Well, yeah, when all the asset classes from stocks bonds go up, usually real estate gets put into it now. When stocks and bonds go up, what you usually see is the real estate that appeals to the emotions for rich people getting snapped up. When the market goes down, they go to real estate for income. So industrial properties in a good industry. So that's what makes real estate just interesting because it lasts forever and it can generate a different income stream depending on the use and depending on the age. But yeah, people are trying to buy industrial land like crazy for the income. Yeah. It's keeping you busy on your marketing side. Yeah, we are running out of time. We got about a minute left. You got any famous last words? Well, I want people to be thoughtful, not just the politicians, but people voting for them. I'll look at the character of the politicians, their orientation, their effectiveness. They ought to think in the long run because clearly the tide goes in and out, but those of us who are in Hawaii want to be here forever. I want our kids to be here forever, and we want a quality of life to last forever. If we don't take care of that, then yeah. So if I was a politician, I'd shoot for the moon, but I'd make it cost-effective, check the impacts. So you're running for office end of time soon? If I did, I would support the middle class and I would say these are the guys that need help, and then I'd rationalize a bunch of government land ownerships and policies, including the one you mentioned about regulation. I have made a lot of people laugh when I told them I was going to run for OHA, and that my intent was to run, but not get elected because I'd probably be a bad administrator, but the attractiveness of talking policy, which you've seen me do now for 70% of this program, is great, and I do it because I think about this on one other people to think. Okay, thanks for your insight there. Mahalo to our wonderful guests, Ricky Cassidy, and Mahalo to the viewers on Think Tech Hawaii. If you like the Think Tech pre-media shows, please help support this nonprofit platform with a donation. Thank you so much for watching Think Tech Hawaii. If you like what we do, please like us and click 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 ThinkTechHawaii.com. Mahalo.