A national summit on affordable housing will be held in Honolulu next week and all the usual participants will be at the table trying to figure out how to increase the supply of affordable housing in Hawaii and around the nation.
No doubt, there will be the repetitive mantra that government needs to do more to encourage affordable housing — including mandating inclusionary zoning that requires developers to include a number of “affordable” units with their building projects.
This thinking dates back to the 1980s when administrative advisers laid down the law that any new development had to set aside 60 percent of its units as affordable. Even back then, government officials couldn’t put two and two together and realize that subsidizing the cost of building the affordable units had to come from someone, and it certainly was not going to come from the developers.
Thus, the great gap of the 1990s was created where those who could not qualify for affordable units because they made too much could not afford market housing that included the extra cost of building those affordable units and selling them for less than the cost of their development and construction.
Today, there are new challenges to building affordable housing — more hurdles created by government. Housing advocates cite the need for more land to be made available by government along with more subsidies, such as the rental housing trust fund. But, where do those advocates believe government will find these lands and money? An inventory of state lands that have been determined to be in excess of the state’s needs has already been made, and there aren’t a whole lot of available properties that would be suitable for housing.
On the money side, lawmakers increased the conveyance tax that is imposed on the transfer of real property and earmarked portions of it for the rental housing trust fund and the state’s trails program. Somehow, lawmakers felt there was a relationship between people buying and selling real property and building affordable housing and maintaining the state’s lands and trails. What they seem to have lost sight of is that the conveyance tax merely adds to the cost of acquiring that property. True, not all real property transfers are residential housing, but on the residential property transfers, lawmakers imposed even higher rates on property not destined to be owner occupied. And, of course, the more pricey the property being transferred, the higher the conveyance tax. Perhaps all lawmakers could imagine — and that says something for policymakers’ imaginations — were those ritzy, multimillion-dollar mansions on Kahala Avenue. It apparently never crossed their minds that a multiunit, affordable rental housing project could run into the millions of dollars and is subject to the highest conveyance tax rates — all of which have to be recovered in the cost of rents charged.
While the increase in the conveyance tax provided a source of subsidies for affordable rentals, it merely passed the cost onto prospective homeowners and renters of affordable housing. Did lawmakers even stop to think that a nonowner occupied unit would provide housing for a family that could not afford to purchase their own home? This is but one way government has intervened and increased the cost of housing in Hawaii.
But probably the worst hurdle is the county permitting process where projects can be held up anywhere from two to five years just waiting for some bureaucrat to approve plans that have been put together by professional architects and engineers. It is hard to believe that after plans for a development have been painstakingly put together by professionals who sign off as to their accuracy that a reviewer has to approve those plans — holding up the project yet again.
As many developers have bemoaned this process, it apparently does not seem to bother bureaucrats since they seem to fail to realize that time is money. Of course, they are getting paid by you, the taxpayer, and so what is yet another month to review a proposal? It doesn’t seem to concern the permitting departments that the cost of the delays just adds another cost to what should be affordable housing. If bureaucrats want to nit-pick, then the law should be changed, placing the liability on the professionals and skip the permitting process.
Lowell L. Kalapa is president of the Tax Foundation of Hawaii.