COUNTY COUNCIL                                                                                                               OFFICE OF THE COUNTY CLERK

  Bill “Kaipo” Asing, Chair                                                                                                                

  James Kunane Tokioka, Vice Chair                                                                                     Peter A. Nakamura, County Clerk

  Jay Furfaro                                                                                                                              Ernesto G. Pasion, Deputy County Clerk

  Shaylene Iseri-Carvalho

  Daryl W. Kaneshiro                                                                                                                                           Phone (808) 241-6371

  Mel Rapozo                                                                                                                                                         Fax     (808) 241-6349

  JoAnn A. Yukimura

Council Services Division

4396 Rice Street, Room 206

Līhu‘e, Kaua‘i, Hawai‘i 96766-1371

County Council Chambers

Līhu‘e, Kaua‘i

 

 

TOWARD A SENSIBLE, EFFECTIVE AFFORDABLE HOUSING POLICY

FOR THE COUNTY OF KAUA`I

 

Councilmember JoAnn A. Yukimura

 

March 1, 2005

 

Introduction

 

This is a work in progress.  It represents careful, experienced thinking on the subject of affordable housing, but doesn’t purport to be complete or definitive.  It is presented to stimulate discussion and thinking, based on the premise that many people from a community who recognize affordable housing as a key pre-requisite to a vibrant and prosperous community and are willing to educate themselves, keep open minds and listen to each other, can come together and find a collective solution that will be in the best interest of the community. 

 

A Brief History

 

Whether our community is in the throes of a housing crisis (as we are now), or in the situation of a housing surplus (as we were several years after Hurricane Iniki), we tend to develop policy for the present moment, thinking that we will always be whatever phase we are presently in.  Especially because of the “boom and bust” cycles that our economy goes through, it is important to look at the history of housing on Kaua`i if we are to develop a long range plan that will sustain us over the years.  It is also important to look at our history when defining the problem, because it will give us information that will be helpful to defining the problem accurately.  As we know, if we want effective solutions, we need to define the problem accurately.

 

With this in mind I sent the attached letter to the Housing Agency containing eight questions about Kaua`i’s experience with housing over the past 20-25 years.  (See Attachment 1).   The letter includes questions such as, “How many affordable units have been produced on Kaua`i over the past 20-25 years?   At what subsidy cost?  How many are still affordable?  How did we use the $41,000,000 obtained by Kaua`i County after Hurricane Iniki? What did we learn from that experience?

Since I have not yet received answers yet from the administration, let me make some observations based on my personal experience of seventeen years in county government over a period of twenty-eight years, subject to modification and correction when we get the data from the Housing Agency.  When I became mayor in 1988, housing was a major problem.  Chris Hemmeter had opened the Westin (now the Marriott) on Kalapakī Bay, and rents in Līhu‘e were going for $1200 to $1500, which, at that time, represented an all time high.  My administration, through the leadership of Housing Director Peter Nakamura and then Chad Taniguchi, working with our excellent housing staff, embarked on an ambitious program to provide affordable homes through a combination of county developed and private sector sponsored housing.   During my 6-year tenure as mayor, and with the assistance of inclusionary zoning requirements and $41 million in post hurricane federal grants, we developed and/or supported the private sector in the development of approximately 1,000 affordable housing units, some of which were built out after my term, thanks to the fine leadership of Mattie Yoshioka under the Kusaka administration. (The last increments will be built out at Kalepa in the future.)

 

But the winds of Iniki brought radical change to the housing situation on Kaua‘i.  The number of visitors to Kaua‘i dropped drastically after Iniki.  While the island sought aggressively to woo back the tourists, many of the visitor units turned into long-term rentals in the meantime.  Thus, around 1996-1998, there was an abundance of affordable housing.  Most of the hurricane rebuilding was completed by then, but tourism hadn’t recovered completely, and Kaua‘i real estate hadn’t yet been discovered by the stock market/dot com investors.  Occupancy in the county housing projects at Pa‘anau and Kālepa dropped significantly (after all, why stay in a multi-family county housing project when you could get a 3-bedroom house in Wailua or Lāwa‘i

for $700-$800) requiring the County to infuse close to $1,000,000 in our rental projects to keep those units open. 

 

Buyers couldn’t be found for the approximately 100 units built as part of Grove Farm’s 60% affordable housing requirement imposed by the State Land Use Commission, so the Couonty Council released Grove Farm from the additional 200-plus required.  Landlords started complaining to the mayor and the council that the county’s housing projects were competing with private units and forcing those rents down.  So, after the first phase of Kālepa Village was completed, Housing Agency efforts to develop housing were negligible. 

 

The Current Situation

 

However, just around the corner was the housing crisis that we are in today.  Around 2000-2001, investors who perceived that the hey-day of the stock market was ending and the nouveau millionaires from the high tech/dot com. culture collided with the discovery of Hawai‘i, especially Kaua‘i, as a place to visit and as a place in which to purchase magnificent, under-priced American soil.  The attack on the World Trade Center fueled the inward looking trends both for a place to visit and a place in which to invest. 

 

Harm to Families:  Increasing Rents, Crowding, Stress and Hopelessness

 

The result has been a spilling over of tourism into the single family residential areas of our island in the form of vacation rentals and bed and breakfast accommodations, which to a certain degree  have usurped housing inventory once allocated to long term residential living.  The result has also been a frenzy of real estate investment and speculation that has cut ordinary local citizens of Kaua‘i  totally out of the market.  It is true that some families have been able to benefit from the extraordinary rise in land prices; some have been able to sell their property at hefty profits or borrow money based upon high appraisals and low interest rates.  But for most local families, the real estate frenzy has meant rising rents, evictions, crowding, increased stress, and growing homelessness and hopelessness. For the ordinary families on Kaua‘i, there is diminishing hope that their children will be able to own a home; some are wondering whether their children will even be able to live on Kaua‘i.

 

Damage to Social-Cultural Fabric of Community

 

There are many worrisome implications to this situation.  The Kaua‘i Drug Response Plan, Prevention Section notes that the larger socio-economic issues, such as housing availability and cost and how those factors affect family stability and stress levels, have an impact on the vulnerability of families to drug use and addition.  There is also the socio-cultural issue of who will be living on Kaua‘i twenty years from now.  In our hearts, we all feel that the beauty and aloha of the people of Kaua‘i today are rooted in the history, hard work, creativity, diversity and cultural traditions that have been passed down through generations that have lived here.  Much will be lost if local families no longer have the choice to live here.

 

An Obstacle to Economic Development

 

The business sector has also recently become aware that the affordable housing crisis affects them.  It has become increasingly clear that the lack of affordable housing is a constraint on economic development.  In a full employment economy such as we have today on Kaua‘i, with unemployment hovering around 4%, the only way to get new employees is to bring them from off island, but the lack of housing makes that a difficult option.  Without employees, our businesses cannot grow and flourish. 

 

A Barrier to Excellence in Education

 

While not a business, the Department of Education is an employer whose mission is critical to our community. The DOE is anticipating massive retirements of principals and teachers over the next few years.  This will require, at least in part, recruiting of personnel from off island in a very competitive market.  Where will these new teachers and principals live?  How can the DOE recruit competitively if housing on Kaua`i is so expensive.  Other private and public institutions are similarly affected by the lack of affordable housing—institutions such as Wilcox Hospital and Kaua`i Community College.   

 

In summary, adequate affordable housing is essential to a good quality of life for our families and a key pre-requisite for a prosperous and vibrant community.   Whether or not one owns his or her own home, the lack of affordable housing hurts every person in this community in some way.   

 

 

Obstacles to Affordable Housing

 

In order to find solutions, we need to define the problem.  I have convened an affordable housing policy group whose goal it is to propose to the County Council for adoption in the next 2-3 months a housing policy and an implementing ordinance for Kaua‘i County.  In a recent meeting, we identified what we felt were the five biggest obstacles to affordable housing on Kaua‘i: 

 

1.      Lack of land

2.      Lack of infrastructure

3.      Lack of capital

4.      Lack of long term affordability

5.      Real estate speculation

 

There are two other possible obstacles, though I am not yet convinced that they are major obstacles:

 

            1.  Inefficient and ineffective governmental permitting

2.      Lack of good land use planning

 

 

The Solution:  The County’s Responsibility

 

In my opinion, eighty per cent of the solution lies at the level of local or county government. The fastest and most efficient way to produce affordable housing is through a well-crafted and fair inclusionary zoning ordinance. 

 

If you look at the list of obstacles above, the top three obstacles—the lack of land, infrastructure and capital can be addressed by such an ordinance.  An inclusionary zoning ordinance would require that every development proposed and approved on Kaua‘i would provide a certain percentage of their development as affordable housing.  The basic idea is that any developer who seeks the privilege of developing land on Kaua‘i must provide for one of the most urgent and important needs of the community: affordable housing.  Indeed, a core concept of zoning is that a zoning change should not be permitted unless it proposes to meet some need in the community.  Many residents of Kaua‘i would question whether the community really needs more luxury condos or country estates, but I know of no one who would say today that the community does not need affordable housing. 

 

Because affordable housing would be part of a larger market development, there would be land, infrastructure and capital available for affordable housing.  The advantages of an inclusionary zoning ordinance to the developer include the fact that all developers would be treated equally, and developers would have some certainty as to their requirements in place of the “Alice in Wonderland” circus that they now have to endure.  The advantage to the community is that there would be a constant supply of affordable housing as long as land is developed on Kaua‘i. 

 

If we include in the ordinance a requirement for permanent affordability for some of the affordable units, as does the City of Davis, California, which is a model that my committee is looking at, the fourth obstacle, lack of long-term affordability, will be addressed.  Permanent affordability is achieved either through rentals that are transferred to and/or owned by government or a nonprofit housing agency and by limited equity cooperative housing or community land trusts.  It is important that we insulate some of the affordable housing from the market; otherwise, its affordable status is short-lived, the public or private subsidy/investment that created it is of limited value, and one family will get a windfall at the expense of another family that qualifies for affordable housing but will be unable to access it.  This is not effective public policy.

 

In order to be effective and fair, the percentage of affordable housing required needs to be reasonable.  I am thinking in the order of 25-30%.  And there needs to be some incentives as well.  The Davis, California ordinance allows for in lieu dedication of land, bonus density for affordable units built onsite and some flexibility in affordable housing requirements.  These provisions help to make the law reasonable and practical.

 

 

 

In building or monitoring the building of affordable housing, the Housing Agency must ensure building quality, energy efficiency, location close to essential services or transportation thereto, and integration with the larger community because we are not just building affordable housing—we are building communities.

 

 

The Solution:  How the State Can Help

 

 

The following are the ways that the State can help:

 

  1. Stay out of county zoning.  Do not try to regulate the inclusionary zoning process.  Leave that to the counties as a matter of home-rule.  That will give the counties the flexibility to address any differences among the counties and to experiment with a diversity of solutions.
  2. Provide capital for county and nonprofit housing projects
  3. Provide capital for infrastructure (especially water, transportation (not just roads, but including transit) and sewer facilities that are done in accordance is sound county area plans.  For example, assuming the community of Kilauea on the north shore of Kaua`i comes up with a good community plan, which includes a good share of affordable housing,  provide some state grants or low interest loans to expand the water system which is presently at capacity or build a sewer system, which is presently nonexistent)
  4. Enact an aggressive anti-speculation capital gains tax which will heavily tax short term speculation, decreasing with the time that investors hold on to or improve the property.  This kind of speculation may make speculators and realtors rich, but it does nothing to benefit the community, and in fact, drives up the cost of land and housing to the detriment of people who live and work in the community.

 

Conclusion

 

The crux of an effective affordable housing  policy is a fair, well-structured inclusionary zoning law that ensures that a certain percentage of housing is permanently affordable, energy efficient, well integrated into the community, and close to needed services.  Unless we ensure a generous inventory of housing that is insulated from the market, we will be continually be playing “catch-up” and we will not have the resources to provide that housing that our community needs. 

 

Councilmember Iseri-Carvalho and I are working together on an affordable housing policy and bill that we hope to introduce in the near future.  (However, I take full responsibility for the aforementioned concepts and thoughts, as Councilmember Iseri-Carvalho has not reviewed this paper.)  We welcome your input and participation.  You can contact us at cokcouncil@kauai.hawaii.gov