DEVELOPERS ARE LEVERAGING ANTI-TOURISM SENTIMENT TO FUEL A RUNAWAY BUILDING BOOM.
Limited Island Resources and Aging Infrastructure are suffering under the strain of a building boom in Hawaii. Maui’s second economy after tourism is construction and real estate sales. To feed the demand for luxury housing and real estate investment, builders are converging on the islands to cash in on the real estate gold rush.
The writing was on the wall when the largest agricultural land owner on Maui (A&B) announced that it was becoming a real estate development company. A year or two before finally closing the last Sugar Mill, they pivoted into real estate. They still maintained large land holdings, and control over all the east Maui water. They didn’t need all the water or land for sugar anymore but they weren’t ready to give it all back either. A&B has the largest commercial real estate holdings, and owns the majority of commercial properties on Maui.
Ever since then there has been a growing industry that consumes land, water, and resources, by selling homes, condos, and hotels. The hotel industry keeps building hotels, and the construction industry supports developers who are building houses and cashing in on the real estate boom. Mainland developers and local developers are cashing in on the housing market for huge windfall profits. And they are using every loophole and tactic to do so.
Developers are creating a myth that the tourists are to blame, and that tourism is bad, even though most of us depend on tourism in some way. Although many do not like it, we all benefit from it in some way. For example, the taxes alone are a significant part of the state budget that allows us to build roads and keep the wheels on our economy. But the real estate and housing industry only benefits the few, and not the many. The sad part is that while developers are actually building many of their hotels and condos for tourists, But at the same time they are building most of their new homes for investors and off-islanders.
The Hotel Industry has been blaming TVRs, B&Bs, and smaller vacation rentals: The Hotel industry had spent a lot of time and money campaigning against “Legal and Illegal” vacation Rentals and has even tried to get previously permitted vacation rentals shut down. Why? because they want permission to keep building hotels themselves.
In this “spin” on the anti-tourism idea, they are targeting the types of smaller tourism providers that compete with their business model. Keep in mind that Hotels are Corporate-owned mega-businesses. and the smaller TVRs are usually locally owned, or family-owned. So this campaign is intended to take the economic benefits of tourism away from the local economy, and give it to off-island enterprises. In short less money for the local economy and more money for wall street. Sadly local politicians and administrators allow them to do this. In Hawaii, the Hotel Industry owns many of the local politicians.
The main reason that many builders build affordable housing, is because the rules require it. The County rule in Maui is that they have to build one affordable home, for every four luxury/market-priced/homes. Keep in mind that market-priced is an average of one million dollars, and that most local families cannot afford a “market-priced” home. But these builders know this and they are building these houses for investors and mainlanders. This is at the heart of the housing problems because they are building off-islander’s vacation homes, and homes for new immigrants.
Mainlanders Moving to Hawaii: Don’t forget house prices on the mainland are also rising, and it is now far cheaper for someone from LA or NY, or San Francisco to buy a home in Hawaii than in their own cities. This house-building boom is driving many people from the mainland to move here. And among these well-financed mainlanders are many who can afford to buy more than one home here and become landlords themselves.
Locals Compete for Resources: Mainlanders moving here not only displaces locals, but it also makes locals compete with these new residents for all available resources. Everything from longer lines in the supermarket, at the DMV, more crowded restaurants, crowded beaches and hiking trails, parking spaces, worsening traffic, and the list goes on. When mainlanders move here they compete for rental apartments, or if they buy land or homes they compete for resources like “water meters”, land and housing. Some mainlanders will also compete with locals to get “affordable housing” and rental assistance if they qualify.
When locals see all of these new faces: Locals are feeling squeezed out at beaches and their local fishing spots, campgrounds, hiking trails, shops, and more, They get stuck in traffic with hundreds of vehicles displaying out-of-state license plates. and they think they are all “Tourists”, but what many locals do not realize is that many of these people are not tourists in the traditional sense, they are malahini, “Newcomers” and they are not going away any time soon.
Don’t blame the tourists, Blame the Developers and Politicians: Tourists come and go. They come here, spend their money, and then go home. And that makes them a kind of “renewable resource” for the local economy. Sure, too much of a good thing is also a problem, But where is this “overcrowding feeling” coming from?
Politicians are allowing Developers to Build at an unprecedented pace, and allowing them to cash in on the housing Boom. Why? because they pay their campaign contributions, and lobby them to do this. In turn, Politicians often give the developers sweetheart deals, on land, and help developers to cut through red tape and build pretty much whatever they like. Many will build luxury homes and mega condos that 99% of locals will never afford. They are building multi-million dollar luxury homes and condos for mainlanders.
But Construction, Development, Luxury Homes, and Hotel rooms, use up finite resources: Building is not a renewable resource because it consumes land, and takes water away from other users. many parts of our islands are used up for gated communities, and sprawling hotels and resorts, and even luxury golf course communities. And what makes it worse, is that locals will not benefit, (except for some short-term construction jobs, and a few maintenance jobs). And all these luxury houses, and condos, bring more outsiders to move here and live here. Even luxury Timeshares and High-end condos, vacation homes increase the local population, and drive more people here to live, even if it is part of the year.
How many tourists are there? On Maui every day there are already 1 in 4, up to 1 in 3 people walking around that are tourists. Every third or fourth person is a visitor. But this number does not include all of the mainlanders (and foreigners) that have recently moved here. Virtually every out-of-state- license plate you see was someone who shipped their vehicle here from the mainland, and presumably all their other stuff as well.
Residents leaving to the mainland: Even before the COVID-19 pandemic, residents were relocating to states like California, Texas, and Washington. However, there are thousands of mainlanders who are moving to the islands, willing to pay the price of paradise. Between 2018 and 2019, an estimated 49,000 people made that decision. https://www.khon2.com/hawaii-travel/top-20-people-from-these-states-are-moving-to-hawaii/#:~:text=Even%20before%20the%20COVID%2D19,49%2C000%20people%20made%20that%20decision.
In 2020 alone 67K Hawaiians moved to the mainland: https://uhero.hawaii.edu/aloha-oe-population-migration-between-hawaii-and-the-u-s-mainland/
We cannot build our way out of a housing crisis: The misguided zeitgeist mantra is that “we can build our way out of our housing crisis”. But Houslessness and lack of affordable housing are not about lack of houses, it is about the inability of the average person to afford one. This is due to the cut-throat local economy, low wages, and high cost of living for Maui locals. The housing crisis is also a symptom of housing being converted into income-earning investments for the wealthy.
For every affordable home you build, there are four luxury homes being built for investors. For every local person who successfully buys a house, there are many more who simply do not qualify to get a mortgage. And no matter how many houses you build, they will be snapped up by the people who can most easily afford them.
Living in the islands is a special situation because we cannot simply move over to find cheaper homes in another city. We have a certain number of houses needed for a given population, but in Maui, there are more houses than people. But many people are hoarding real estate, and buying second and third homes, or more. Some off-island real estate investors own multiple properties here, and rent them out for vacation rentals.
Many homes are converted into vacation rentals. And many homes are built to be vacation rentals and never intended to be part of the residential housing inventory. Maui has more vacation rental properties per capita than Oahu.
There are strong forces at work that are driving our housing crisis. Private land ownership is the root cause of many problems. Large amounts of agricultural lands, are for the most part unproductive and are being hoarded. Ranchlands are dirt patches that are bad for the environment and overrun with feral deer, pigs, stray cattle, and goats. This overgrazing leads to stripping of the ground cover, and soil loss results. Ranches that have been family owned for generations are failing, and owners are looking for a way to cash in and get out of ranching, While they keep a token number of cattle on their land, they are piecemealing away their agricultural land and looking for ways to convert it into a more lucrative residential or commercial property.
Converting ag land is a huge financial windfall for property owners. However, they have to jump some regulatory hurdles. And find loopholes in the land use rules. There are several pathways to convert ag land, including converting it into light-industrial industrial, industrial, or commercial. Another pathway is breaking up larger ranches and farms into smaller farms, fake farms, or “gentlemen’s estates”.
Real Estate flipping and Investments: the real estate industry is driving the house-flipping mentality, using local families to sell their homes, so that they can flip them to new owners, the more times that the agent can flip the same home, the more commissions they make. Real estate agents are helping just as many people out of their homes as they are helping people get into them, it is a zero-sum game. However real estate agents love it when developers build another housing estate with a few hundred new homes. And they especially love it when they build new luxury homes.
1750 Real Estate Agents: On Maui in 2019, there were over 1,750+ licensed real estate agents who sell the dream of owning on Maui. https://mauinow.com/2019/08/20/july-2019-ytd-maui-statistics-and-mauis-top-3-realtors/
According to the DCCA, in Hawaii, there are 17K licensed Real estate agents in the state: There are about 17.183 real estate licensees. 12,327 have an active real estate license while 4,856 are inactive. A breakdown by license type shows that there are about 3,774 brokers, 10,851 salespersons, 1,625 corporations, partnerships, LLC’s, LLP’s, and 966 sole proprietors.
Real Estate commissions are driving House Flipping: When a real estate agent sells a 3-5 million dollar luxury condo in Wailea (*average price) their sales commission is up to 6% or $300K And even when they sell an average market-priced home for 1 million dollars they still get 60K. However, they can sell a home to “flippers” and get them in and out quickly. And earn 60K every time they flip the home. In Hawaii, there are no restrictions on how many times you can sell the same house. So it benefits the agent to find someone looking for a short-term investment, rather than a local family looking to settle down. Real estate agents will also always favor the clients with better credit scores, this helps guarantee the sale and assures them of getting their commission. Also, people with multiple homes will more easily qualify to get a mortgage, so real estate agents and lenders will favor the investors over genuine residential buyers.
First-home buyers do get an incentive: They qualify for special conditions, but they are still paying the maximum that they can afford, and often have no reserves left for any unforeseen circumstances, such as job loss, sickness, or disaster. Many families that move here can qualify to purchase multiple “first homes”, between all of their children and siblings.
Affordable Homes are being sold to off-islanders. People who move here can get affordable homes intended for local families. They can qualify as soon as they move here, and get a “job”.
What can we do? Knowing the real causes of these problems is the first step in combating them. We need to realize that our Local Developers and Politicians carry much of the blame for our worsening living conditions, overcrowding, and our housing crisis. All of this stems from the love of money and greed.
They can build thousands of luxury homes and huge hotels, but they still cannot properly pave our roads, or provide essential services or adequate infrastructure. We need to put infrastructure first, and put housing for locals first. fortunately, things a starting to slowly move in that direction. New rules are coming online to give priority for long-time local residents, to get in the front of the line for affordable housing.
We need to demand much more from our politicians and rulemakers. We need to demand that Affordable houses remain affordable in perpetuity and that tourism is managed properly, and that we do not incentivize more mainlanders to migrate here.
How do we do that? We can tax vacation homes and Luxury homes. And we have the power to do this. We need to raise taxes much higher on the building of Luxury homes, to slow the demand. And also so that the local economy gets at least some benefit from this industry.
We need to show up and Vote: We all need to Vote and become politically active, or pretty soon there will be no Hawaiians left in Hawaii, and only a bunch of rich mainlanders living in gated communities, all across the Aina.