A couple of weeks ago, this commentary examined some of the hurdles that stand in the way of producing more affordable housing which, in turn, elicited a comment by a reader that what is described as “affordable” by developers and housing officials certainly doesn’t look “affordable” when the prices are advertised in the hundreds of thousands of dollars.
In fact, delegates at a recent conference on the mainland were astounded to learn the median price of a single-family home in Hawaii is $675,000. During the course of our discussion, one delegate said he could purchase a seven-bedroom mansion on a half acre in one of the pricey neighborhoods in Austin, Texas, for half that amount. While some of the price disparity is attributable to land being more abundant in Texas, the fact that someone could purchase so much more house raises the question: Why is housing so expensive here?
Much of the cost of building affordable housing lies in the fact that a developer has to maneuver through a labyrinth of zoning and permitting requests. This arduous process means the cost of the development and, therefore, each house, goes up as the cost of financing the capital to build grows day by day. The longer the permitting process takes, the more interest incurs, leading to an increase in the home’s eventual sales price.
With all the protests and public hearings a proposed housing project is subjected to, the cost of each unit grows. However, it is not just the cost of the permitting and zoning that increases the affordable unit cost. A variety of other requirements are imposed on the developer.
For example, developers are required to provide the infrastructure and land on which to build a school that will serve that particular development’s population. In the “old days,” schools were built and financed by local governments. The state took over this responsibility in 1965.
Schools were built using bond funds or borrowed money which was, in turn, repaid by the taxpayers of the county or the state. Folks who lived in Moilili were asked to pay for the school in Palolo or, for that matter, the school in Kahala. The cost of building schools was spread out over the entire community as education was seen as a benefit to the entire population, no matter whose kids or which neighborhood was going to receive the facility. In many cases, the land on which these schools were built was condemned by the county and the owner was compensated.
Such is not the case today when the developer is asked to set land aside and, in some cases, required to build the facility. While taxpayers who don’t or won’t live in the newly developed community may applaud not having to pay for someone else’s school, it makes you wonder where all the money that used to be allocated to building new schools is going today.
Do you think the developer is going to absorb the cost of building those schools or some of the roads that will serve the development? If so, we have a bridge in New York to sell you. Of course, the developer will pass those costs onto all of the units in the development — the affordable units included.
There is yet another cost in developing affordable housing in Hawaii, and that comes hidden in the form of possibly adopting the latest version of the International Building Code. This is the standard that all new construction must meet in order to be acceptable to the permitting department. Because Hawaii has so many of the climate categories from cold to temperate climates, the revised International Building Code, if adopted for Hawaii, will mandate adherence to a plethora of standards. For example, because there is always the potential for experiencing hurricanes, the proposed building code could require what would be bulletproof glass to be installed in a home, a costly alternative.
Because many of the professionals drafting these standards make the products that would be required in the extreme, they will make sure the standards mandate the use of their products — products that may be irrelevant for Hawaii but will certainly guarantee the cost of affordable housing is out of reach for most families.
Lowell L. Kalapa is president of the Tax Foundation of Hawaii.